<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number:
INSILCO HOLDING CO.
(Exact name of registrant as specified in its charter)
Delaware 06-1158291
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Metro Place North
Fifth Floor
Dublin, Ohio 43017
(Address of principal executive offices) (Zip Code)
614-792-0468
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (X) Yes ( ) No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. (X) Yes ( ) No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of November 12, 1998,
1,384,614 shares of common stock, $.001 par value, were outstanding.
<PAGE> 2
INSILCO HOLDING CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
- September 30, 1998 (unaudited)
- December 31, 1997
Condensed Consolidated Statements of Operations 4
- Nine months ended September 30, 1998 (unaudited)
- Nine months ended September 30, 1997 (unaudited)
- Three months ended September 30, 1998 (unaudited)
- Three months ended September 30, 1997 (unaudited)
Condensed Consolidated Statement of Stockholders' Equity (Deficit) 5
- For the nine months ended September 30, 1998 (unaudited)
Condensed Consolidated Statements of Cash Flows 6
- Nine months ended September 30, 1998 (unaudited)
- Nine months ended September 30, 1997 (unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements 7
Independent Auditors' Review Report 13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSILCO HOLDING CO. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,659 10,651
Trade receivables, net 84,167 67,209
Other receivables 3,651 3,477
Inventories, net 60,989 60,718
Deferred taxes 4,622 277
Prepaid expenses and other current assets 4,135 2,716
--------- ---------
Total current assets 162,223 145,048
Property, plant and equipment, net 114,131 113,971
Investment in Thermalex 10,556 9,736
Goodwill, net 13,219 13,408
Other assets and deferred charges 23,063 20,510
--------- ---------
Total assets $ 323,192 302,673
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 15 1,684
Current portion of other long-term obligations 2,104 5,393
Accounts payable 36,624 39,757
Accrued expenses and other 45,424 58,706
--------- ---------
Total current liabilities 84,167 105,540
Long-term debt, excluding current portion 383,923 256,059
Deferred taxes 2,627 --
Other long-term obligations, excluding current portion 45,171 43,402
Preferred Stock 32,722 --
Stockholders' deficit (225,418) (102,328)
--------- ---------
Contingencies (See Note 9)
Total liabilities and stockholders' deficit $ 323,192 302,673
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at December 31, 1997 has
been derived from the audited balance sheet as of that date.
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
INSILCO HOLDING CO. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 422,388 407,609 135,065 131,394
Cost of products sold 298,743 283,203 98,072 93,250
Depreciation and amortization 15,787 14,353 5,144 4,749
Selling, general and administrative expenses 74,698 70,289 23,995 22,432
Merger expenses 25,529 -- 24,188 --
--------- --------- --------- ---------
Operating income (loss) 7,631 39,764 (16,334) 10,963
--------- --------- --------- ---------
Other income (expense):
Interest expense (21,840) (13,460) (8,035) (5,698)
Interest income 94 2,808 22 770
Equity in net income of Thermalex 2,144 2,154 693 607
Other income, net 2,430 188 405 120
--------- --------- --------- ---------
Total other income (expense) (17,172) (8,310) (6,915) (4,201)
--------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes and extraordinary item (9,541) 31,454 (23,249) 6,762
Income tax benefit (expense) (467) (11,571) 6,027 (2,447)
--------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary item (10,008) 19,883 (17,222) 4,315
Discontinued operations, net of tax:
Income from operations, net of tax of $1,037 -- 1,170 -- --
Gain on disposal, net of tax of $37,213 -- 57,788 -- --
--------- --------- --------- ---------
-- 58,958 -- --
--------- --------- --------- ---------
Income (loss) before extraordinary item (10,008) 78,841 (17,222) 4,315
Extraordinary item -- (728) -- (728)
--------- --------- --------- ---------
Net income (loss) (10,008) 78,113 (17,222) 3,587
Preferred stock accretion (673) -- (673) --
--------- --------- --------- ---------
Net income (loss) available to common $ (10,681) 78,113 (17,895) 3,587
========= ========= ========= =========
Basic earnings (loss)
available per common share:
Income (loss) from continuing operations $ (2.90) 2.41 (6.53) 0.77
Discontinued operations -- 7.15 -- --
Extraordinary item -- (0.09) -- (0.13)
--------- --------- --------- ---------
Basic net income (loss) per share $ (2.90) 9.47 (6.53) 0.64
========= ========= ========= =========
Diluted earnings (loss) available per common share:
Income (loss) from continuing operations $ (2.90) 2.34 (6.53) 0.74
Discontinued operations -- 6.94 -- --
Extraordinary item -- (0.09) -- (0.12)
--------- --------- --------- ---------
Diluted net income (loss) per share $ (2.90) 9.19 (6.53) 0.62
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
INSILCO HOLDING CO. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
For the Nine Months Ended September 30, 1998
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Retained Other Total
Par Value Paid-in Earnings Treasury Comprehensive Stockholders'
$0.001 Capital (Deficit) Stock Income Equity (Deficit)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 5 -- (82,756) (16,268) (3,309) (102,328)
Net income (loss) -- -- (10,008) -- -- (10,008)
Cash merger consideration -- -- (180,241) -- -- (180,241)
Issuance of Common stock 1 56,007 -- -- -- 56,008
Issuance of warrants -- -- 4,969 -- -- 4,969
Issuance of equity units to management -- 2,659 -- -- -- 2,659
Issuance of Insilco shares upon exercise
of stock options -- 3,281 -- -- -- 3,281
Tax benefit from exercise of Insilco
stock options -- 939 -- -- -- 939
Merger Eliminations (5) (4,220) (12,043) 16,268 -- --
Amortization of warrants -- -- (673) -- -- (673)
Other comprehensive income -- -- -- -- (24) (24)
-------- -------- -------- -------- -------- --------
Balance at September 30, 1998 $ 1 58,666 (280,752) -- (3,333) (225,418)
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
INSILCO HOLDING CO. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (10,008) 78,113
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 15,787 14,353
Deferred tax expense (268) 7,672
Other noncash charges and credits (1,295) (42)
Change in operating assets and liabilities:
Receivables (16,665) (17,432)
Inventories 27 3,050
Payables and other (13,822) (2,461)
Discontinued operations:
Gain on disposal of segment -- (95,001)
Deferred tax expense -- 25,687
Depreciation -- 194
Change in operating assets and liabilities -- (2,512)
--------- ---------
Net cash provided by (used in) operating activities (26,244) 11,621
--------- ---------
Cash flows from investing activities:
Capital expenditures (15,714) (15,022)
Other investing activities 711 3,437
Proceeds from divestiture, net -- 112,610
--------- ---------
Net cash provided by (used in) investing activities (15,003) 101,025
--------- ---------
Cash flows from financing activities:
Proceeds from sale of 14% Notes and warrants 70,205 --
Proceeds from revolving credit facility 56,684 87,038
Issuance of common stock 56,008 --
Issuance of preferred stock and warrants 35,000 --
Proceeds from stock option exercise 3,281 4,618
Issuance of equity units to management 2,659 --
Cash merger consideration (180,241) --
Debt issuance and tender costs (4,559) (11,126)
Payment of prepetition liabilities (2,735) (2,811)
Retirement of long-term debt (1,171) (117,071)
Purchase of treasury stock -- (1,887)
Repurchase of shares -- (220,000)
Proceeds from sale of 10 1/4% Notes -- 150,000
--------- ---------
Net cash provided by (used in) financing activities 35,131 (111,239)
--------- ---------
Effect of exchange rate changes on cash 124 (259)
--------- ---------
Net increase (decrease) in cash and cash equivalents (5,992) 1,148
Cash and cash equivalents at beginning of period 10,651 3,481
--------- ---------
$ 4,659 4,629
========= =========
Interest paid $ 23,722 10,635
--------- =========
Income taxes paid (refunded) $ (3,592) 6,683
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE> 7
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all determinable adjustments
have been made which are considered necessary to present fairly the
financial position and the results of operations and cash flows at the
dates and for the periods presented.
(2) THE MERGERS
On August 17, 1998, the Company completed a series of transactions.
These transactions included, among other things, the formation by
Insilco Holding Co. ("Holdings" or the "Company") then a wholly owned
subsidiary of Insilco Corporation ("Insilco") of a wholly owned
subsidiary ("ReorgSub"), followed by the merger of ReorgSub with and
into Insilco Corporation (the "Reorganization Merger"), pursuant to
which each stockholder of Insilco had his or her shares of Insilco
converted into the same number of shares of Holdings and the right to
receive $0.01 per share in cash, and Holdings became the parent of
Insilco.
Promptly following the Reorganization Merger, a second merger took place
pursuant to which Silkworm Acquisition Corporation ("Silkworm"), an
affiliate DLJMB, merged with and into Holdings (the "Merger," and
together with the Reorganization Merger, the "Mergers") and each share
of Holdings Common Stock was converted into the right to receive $43.47
in cash and 0.03378 of a share of Holdings Common Stock. Thus, as a
result of the Mergers, each stockholder of Insilco, in respect of each
of his or her shares, received $43.48 in cash and retained 0.03378 of a
share of Holdings Common Stock.
Following the Mergers, (i) Insilco's existing stockholders retained, in
the aggregate, approximately 10.1% (9.4% on a fully diluted basis) of
the outstanding shares of Holdings Common Stock; (ii) the DLJMB Funds
held approximately 69.0% (69.8% on a fully diluted basis) of the
outstanding shares of Holdings Common Stock; (iii) 399 Venture Partners
Inc., an affiliate of Citibank, N.A. ("CVC"), purchased shares of
Silkworm which in the Merger were converted into approximately 19.3%
(17.8% on a fully diluted basis) of the outstanding shares of Holdings
Common Stock; and (iv) management of the Company purchased approximately
1.7% (1.5% on a fully diluted basis) of the outstanding shares of
Holdings Common Stock.
Immediately prior to the effectiveness of the Reorganization Merger,
each outstanding option to acquire shares of the common stock of Insilco
granted to employees and directors, whether or not vested (the
"Options") was canceled and in lieu thereof, each holder of an Option
received a cash payment in an amount equal to (x) the excess, if any, of
$45.00 over the exercise price of the Option multiplied by (y) the
number of shares subject to the Option, less applicable withholding
taxes (the "Option Cash Payments"). Certain holders of such Options
elected to utilize amounts otherwise receivable by them to purchase
$1,009,000 in equity and $2,659,000 in equity units of Holdings.
The total amount of cash required to consummate the foregoing
transactions was approximately $204.4
7
<PAGE> 8
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
million. This amount was financed with (i) gross proceeds of
approximately $70.2 million from the issuance by Silkworm of units
(which were converted into units of Holdings (the "Holdings Units") in
the Merger), each unit consisting of $1,000 principal amount at maturity
of 14% Senior Discount notes due 2008 (the "Holdings Senior Discount
Notes") and one warrant to purchase 0.325 of a share of Holdings Common
Stock at an exercise price of $0.01 per share, (ii) the issuance by
Silkworm to the DLJMB Funds, CVC and certain members of management of
Insilco, for an aggregate consideration of approximately $56.1 million,
of 1,245,138 shares of Silkworm common stock (which was converted into
Holdings Common Stock in the Merger), (iii) the issuance by Holdings to
the DLJMB Funds, for an aggregate consideration, of $35.0 million of
1,400,000 shares of Holdings' 15% Senior Exchangeable Preferred Stock
due 2012 of (the "PIK Preferred Stock") and the DLJMB Warrants to
purchase 65,603 shares of Holdings Common Stock at an exercise price of
$0.01 per share, and (iv) approximately $43.1 million of new borrowings
under the Company's existing credit facility (the "Existing Credit
Facility").
In the third quarter and first nine months of 1998 the Company incurred
$24,188,000 and $25,529,000, respectively, of costs related to the
merger.
(3) 1997 TRANSACTIONS
In 1997, the Company completed several material transactions affecting
its ongoing operations and debt and capital structure (the "1997
Transactions") as described more fully below:
- On July 3, 1997, the Company refinanced its existing debt under a
new six year $200 million amended and restated Credit Agreement.
- In the third quarter of 1997, the Company purchased an aggregate of
5,714,284 shares of its common stock in two transactions using the
proceeds from the sale of its traditional office products business
( the "Rolodex Business") within the Office Products/Specialty
Publishing Group of $112,610,000, net of transaction costs, and the
proceeds received on the issuance of the $150 million aggregate
principal amount of 10 1/4% Senior Subordinated Notes due 2007 (the
"10 1/4% Notes").
Insilco remains a separate reporting entity under the Securities
Exchange Act of 1934 because the 10 1/4% Notes are registered debt
securities under the Securities Act of 1933.
(4) DISCONTINUED OPERATIONS
On March 5, 1997, the Company completed the sale of its Office Products
Business (consisting of the Rolodex Business, Rolodex Electronics and
Curtis, each as defined below) within the Office Products/Specialty
Publishing Group with the divestiture of the Rolodex Business for
$112,610,000, net of transaction costs, resulting in a gain of
$57,788,000, net of taxes of $37,213,000. The divestiture of the Rolodex
Business was preceded in 1996 by the divestiture of the Rolodex
electronics product line ("Rolodex Electronics") and the Company's
computer accessories business, Curtis Manufacturing Co., Inc.
("Curtis"). The proceeds from these sales aggregated $21,818,000.
On July 7, 1998, the Company amended its Form 10-K for the year ended
December 31, 1997 and its
8
<PAGE> 9
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
Form 10-Q for the quarter ended March 31, 1998 to account for the sale
of the Office Products Business as a discontinued operation and,
accordingly, the accompanying consolidated statements of operations and
cash flows for the periods prior to the sale have been reclassified.
Revenues associated with the discontinued Office Products Business for
the first quarter of 1997 were $10,797,000.
(5) INVENTORIES
Inventories consisted of the following at September 30, 1998 (in
thousands):
Raw materials and supplies $27,848
Work-in-process 19,134
Finished goods 14,007
-------
Total inventories $60,989
=======
(6) RELATED PARTY TRANSACTIONS
In connection with the mergers, the Company paid Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") an advisory fee of $3,500,000.
Donaldson, Lufkin & Jenrette Capital Funding received $1,750,000 of fees
from Insilco to secure a backstop credit facility in the event that the
Company's Existing Revolving Credit Facility required refinancing. DLJSC
also received from the Company the gross spread of $2,456,000 related to
the Holdings Senior Discount Notes and $1,100,000 of fees related to a
bridge loan facility commitment. In addition, the Company reimbursed
DLJSC $110,000 for expenses related to the merger.
(7) COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted the Financial Accounting
Standards Board ("FASB") Statement No. 130 ("SFAS 130"), "Reporting
Comprehensive Income". SFAS 130 establishes standards for reporting and
display of comprehensive income in the financial statements.
Comprehensive income is the total of net income and most other non-owner
changes in equity. This statement expands or modifies disclosures and
has no impact on the Company's financial position, results of operations
or cash flows. Comprehensive income (loss) for the third quarters of
1998 and 1997 totaled ($17,336,000) and $3,403,000, respectively,
including other comprehensive income consisting of foreign currency
translation adjustments (losses) totaling ($114,000) and ($184,000),
respectively. Comprehensive income (loss) for the first nine months of
1998 and 1997 totaled ($10,032,000) and $75,279,000, respectively,
including other comprehensive income consisting of foreign currency
translation adjustment (losses) totaling ($24,000) and ($2,834,000),
respectively.
(8) EARNINGS PER SHARE
In 1997, the Company adopted Financial Accounting Standards Board
("FASB") Statement No. 128 ("SFAS 128"), "Earnings per Share", which
simplifies the computation of earnings per share ("EPS"). All prior
period earnings per share amounts have been restated to conform with
SFAS 128 requirements. Under SFAS 128, the Company computes two earnings
per share amounts - basic EPS and diluted EPS. Basic EPS is calculated
based on the weighted average number of shares of common stock
outstanding for the period. Diluted EPS is based on the weighted average
number of shares of common stock outstanding for the period, including
potential common stock which reflect the dilutive
9
<PAGE> 10
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
effect of stock options granted to employees and directors.
The components of basic and diluted earnings per share were as follows:
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (10,008) 78,113 (17,222) 3,587
Preferred stock dividends (673) -- (673) --
----------- ----------- ----------- -----------
Net income (loss) available for common $ (10,681) 78,113 (17,895) 3,587
=========== =========== =========== ===========
Average outstanding shares of common
stock 3,677,306 8,251,332 2,738,775 5,626,656
Dilutive effect of stock options -- 251,189 -- 172,816
----------- ----------- ----------- -----------
Common stock and common
stock equivalents 3,677,306 8,502,521 2,738,775 5,799,472
=========== =========== =========== ===========
Earnings (loss) per share:
Basic $ (2.90) 9.47 (6.53) (0.64)
=========== =========== =========== ===========
Diluted $ (2.90) 9.19 (6.53) (0.62)
=========== =========== =========== ===========
</TABLE>
(9) CONTINGENCIES
The Company is implicated in various claims and legal actions arising in
the ordinary course of business. Those claims or liabilities will be
addressed in the ordinary course of business and will be paid as
expenses are incurred. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity.
(10) ESTIMATES
In conformity with generally accepted accounting principles, the
preparation of our financial statements requires our management to make
estimates and assumptions that affect the amounts reported in our
financial statements and accompanying actual results may ultimately
differ from those estimates.
(11) CONTINGENCY GAIN
On January 14, 1997, the Company's subsidiary, Taylor Publishing Company
("Taylor"), sued one of its principal competitors in the yearbook
business, Jostens, Inc. ("Jostens"), in the U.S. District Court for the
Eastern District of Texas, alleging violations of the federal antitrust
laws as well as various claims arising under state law. On May 13, 1998,
a verdict was rendered in favor of Taylor and on June 12, 1998, the
judge presiding over the litigation in the U.S. District Court rendered
a judgment in the amount of $25,225,000 plus interest at the rate of
5.434 percent. Jostens has announced that it will seek to overturn the
verdict in post trial motions or on appeal and accordingly the Company
has not recorded the gain. There can be no assurance as to the actual
amount, if any, that Taylor will recover from Jostens. In the third
quarter and first nine months
10
<PAGE> 11
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
of 1998, the Company incurred legal fees in connection with the Jostens
lawsuit of $132,000 and $900,000, respectively.
(12) DIVIDEND RESTRICTIONS
The Company is a holding company and its ability to make payments in
respect of the Holding Company Senior Discount Notes is dependent upon
the receipt of dividends or other distributions from its direct and
indirect subsidiaries. Insilco and its subsidiaries are parties to the
Existing Credit Facility and Insilco is party to the 10 1/4% Note
Indenture, each of which imposes substantial restrictions on Insilco's
ability to pay dividends or make other distributions to the Company. Any
payment of dividends or other distributions will be subject to certain
financial conditions set forth in such indenture and is subject to
certain prohibitions contained in the Existing Credit Facility. Under
the most restrictive covenants, $4.25 million was free of limitations on
the payment of dividends or other distributions at September 30, 1998.
(13) SUBSEQUENT EVENTS -THE REFINANCING
As a result of the Merger, the Company was required to make an Offer to
Purchase (as defined in the indenture relating to the 10 1/4% Notes (the
"10 1/4% Note Indenture") for all of the outstanding 10 1/4% Notes at
101% of their aggregate principal amount, plus accrued interest. The
Offer to Purchase expires on November 16, 1998 and the Company intends
to repurchase all 10 1/4% Notes validly tendered and not withdrawn as
promptly as practicable following acceptance of the 10 1/4% Notes. There
is an aggregate of $150 million principal amount of 10 1/4% Notes
outstanding.
On November 9, 1998, the Insilco completed the sale of $120 million of
12% Senior Subordinated Notes due 2007 (the "New Notes") with warrants
to purchase 62,400 shares of Holdings common stock at $45 per share. The
net proceeds from the offer and sale of the New Notes was approximately
$116.0 million after payment of $3.6 million in underwriting fees to
DLJSC and other expenses. These proceeds will be used to fund the
repurchase of the 10 1/4% Notes validly tendered at a purchase price of
101% of principal amount plus accrued and unpaid interest.
The Indenture relating to the New Notes (the "Indenture") provides for a
mandatory special redemption at par plus accrued interest to the extent
that less than $120 million of the 10 1/4% Notes are tendered in the
Offer to Purchase. The Indenture also provides for an 1/8% increase in
the interest rate on the New Notes if the holders of the 10 1/4% Notes
do not consent to an amendment to the 10 1/4% Note Indenture to permit
the Company provide subsidiary guarantees to holders of the New Notes.
DLJ Capital Funding Inc. ("DLJ Capital Funding") has committed to lend
up to $300 million to the Insilco (the "New Credit Facility"). The New
Credit Facility will be used to refinance the Existing Credit Facility
and to fund a portion of the repurchase of the 10 1/4% Notes. The New
Credit Facility will include a term loan facility (the "Term Loan
Facility") and a revolving credit facility which will provide for
revolving loans and up to $50 million of letters of credit (the
"Revolving Credit Facility"). The Term Loan Facility will have a
maturity of seven years. The Revolving Credit Facility will terminate on
July 8, 2003. DLJ Capital Funding's commitment, however, is subject to
significant conditions. The New Credit Facility together with the sale
of the New Notes will be referred to herein as "The Refinancing".
11
<PAGE> 12
INSILCO HOLDING CO. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1998
(14) PRO FORMA RESULTS OF OPERATIONS
The following financial information presents 1998 and 1997 pro forma
consolidated net sales and results of operations as if the mergers
including the merger refinancing (see Note 2) and the Refinancing (see
Note 13) had occurred as of the beginning of each respective period. The
1997 pro forma consolidated net sales and results of operations are
presented as if the 1997 Transactions had occurred at the beginning of
1997, exclusive of nonrecurring items directly attributable to the
transaction. The pro forma results of operations are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------ --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 422,388 407,609 135,065 131,394
Loss from continuing operations
available to common (1,771) (77) (2,952) (1,491)
Basic loss per share available to
common (1.08) (0.05) (1.79) (0.94)
Diluted loss per share
available to common (1.08) (0.05) (1.79) (0.91)
</TABLE>
12
<PAGE> 13
INDEPENDENT AUDITORS' REVIEW REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
INSILCO HOLDING CO:
We have reviewed the condensed consolidated balance sheet of Insilco Holding Co.
and subsidiaries as of September 30, 1998, the related condensed consolidated
income statements for the three-month and nine-month periods ended September 30,
1998 and 1997, the condensed consolidated statement of stockholders' equity
(deficit) for the nine months ended September 30, 1998, and the condensed
consolidated statements of cash flows for the nine-month periods ended September
30, 1998 and 1997. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Insilco Corporation and
subsidiaries as of December 31, 1997, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended (not presented herein); and in our report dated January 30, 1998, except
as to Note 21, which is as of June 8, 1998, and Note 2, which is as of July 7,
1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1997, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Columbus, Ohio
November 13, 1998 KPMG Peat Marwick LLP
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is a diversified manufacturer of automotive, telecommunications and
electronics components and is a publisher of school yearbooks and other
specialty publishing products. The Company's Automotive Components Group
manufactures transmission components and other stamped automotive components and
subassemblies at the Steel Parts unit, heat exchangers and heat exchanger tubing
at the Thermal Components unit, and stainless steel tubing used predominantly in
non-automotive applications at the Romac Metals unit. The Technologies Group
manufactures wire and cable assemblies for the telecommunications industry, high
performance data-grade connectors, precision metal stampings and power
transformers through its Escod Industries, Stewart Connector Systems, Stewart
Stamping, and Signal Transformer operating units, respectively. The Specialty
Publishing Group, which consists of Taylor Publishing, produces student
yearbooks and other specialty publishing products. The Company completed the
divestiture of its Office Products business with the sale of the Rolodex
Business in the first quarter of 1997. The Office Products Business is being
accounted for as a discontinued operation and, accordingly, the consolidated
statements of operations and cash flows for the periods prior to the sale have
been reclassified.
Summarized sales and operating income (loss) by business segment for the nine
months and three months ended September 30, 1998 compared to the corresponding
periods in 1997 are set forth in the following table (in thousands) and
discussed below:
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
SALES
<S> <C> <C> <C> <C>
Automotive Components Group $ 185,710 171,912 61,945 55,646
Technologies Group 144,756 148,063 45,739 50,102
Specialty Publishing 91,922 87,634 27,381 25,646
--------- --------- --------- ---------
$ 422,388 407,609 135,065 131,394
========= ========= ========= =========
OPERATING INCOME (LOSS)
Automotive Components Group $ 15,809 17,211 4,338 4,611
Technologies Group 14,183 17,326 3,593 5,955
Specialty Publishing 3,222 5,535 (59) 421
Unallocated corporate costs (54) (308) (18) (24)
Unallocated corporate merger expenses (25,529) -- (24,188) --
--------- --------- --------- ---------
$ 7,631 39,764 (16,334) 10,963
========= ========= ========= =========
</TABLE>
14
<PAGE> 15
SALES. Total net sales from continuing operations of $135,065,000 for the third
quarter of 1998 were up 3% or $3,671,000 over the corresponding period in 1997,
due to increased sales of automotive tubing at the Automotive Components Group
and increased sales at Taylor Publishing, due to the timing of yearbook
shipments. These sales increases were partially offset by a decline in the
Technologies Group caused by the continued weakness in the electronics market.
In the first nine months of 1998, net sales from continuing operations of
$422,388,000 increased 4% or $14,779,000 from 1997 primarily due to increased
sales at the Automotive Components Group of automotive tubing and industrial and
off-road radiators, and, to a lesser degree, increased sales at Specialty
Publishing related to the timing of yearbook shipments, partially offset by a
decline at the Technologies Group.
The Automotive Components Group's sales increased 11% or $6,299,000 and 8% or
$13,798,000 in the third quarter and first nine months of 1998, respectively,
compared to the corresponding periods of 1997 due to increased automotive tubing
sales in both the quarter and year-to-date periods. In addition, sales for the
first nine months of 1998 improved over the prior year due to increased sales of
radiators to OEMs serving the off-road and industrial equipment markets. These
increases were partially offset by a significant decline in sales at the
Company's heat exchanger capital equipment manufacturing division, McKenica,
which continues to experience a substantial decline in order backlog. Sales of
transmission and other stamped automotive parts at Steel Parts and of stainless
steel tubing for non-automotive applications, were both up slightly in the third
quarter of 1998 and were relatively flat on a year-to-date basis.
The Technologies Group's sales decreased 9% or $4,363,000 in the third quarter
of 1998 compared to the corresponding period in 1997 due to declines at Escod
and Signal Transformer primarily due to the weakness in the electronics market
which has continued in the third quarter. These declines were partially offset
by increased sales of Stewart Connector's modular data interconnect products due
to increased demand from a major telecommunications customer. Sales in the
Technologies Group decreased 2% or $3,307,000 in the first nine months of 1998
compared to the corresponding period in 1997 due to the weak demand in the
electronics market in the second and third quarters of 1998. These sales
decreases were partially offset by increased sales from Stewart Stamping and
increased sales of Stewart Connector's modular data interconnect products.
Taylor Publishing's sales of $27,381,000 and $91,922,000 for the third quarter
and first nine months of 1998, respectively, increased 7% and 5% compared to the
corresponding periods in 1997 primarily due to timing of yearbook shipments.
OPERATING INCOME. In the third quarter of 1998, the Company had an operating
loss of $16,334,000 compared to operating income of $10,963,000 in the prior
year period primarily due to $24,188,000 of expenses related to the merger. In
addition, the Company incurred $1,258,000 of expenses related to management
severance, the consolidation of two facilities and a noncompete infringement
lawsuit filed by the Company. The Company also experienced an operating loss at
its McKenica business unit due to a lack of available order backlog, lower
operating margins at Signal and Escod due to the weakness in the electronics
market and lower margins at Stewart Connector due to a less favorable mix of
products and price degradation on certain mature connector products.
For the first nine months of 1998, operating income decreased to $7,631,000 from
$39,764,000 in 1997 primarily due to $25,529,000 of expenses related to the
merger, approximately $900,000 in legal expenses (compared to $200,000 in 1997)
associated with Taylor's antitrust lawsuit against Jostens for which Taylor
received a favorable judgement totaling $25,225,000 (see Note 11) and $2,152,000
of expenses related to management severance, the consolidation of two facilities
and a noncompete infringement lawsuit filed by the Company. In addition, the
Company incurred increased costs, primarily higher shipping costs, from
production delays during its peak yearbook production season at Taylor
Publishing and lower margins at Steel Parts primarily due to increased costs
incurred to improve future operational efficiency and for the reasons cited
above, an operating loss at its McKenica business unit and lower operating
margins at Signal and Stewart Connector.
The Automotive Components Group's operating income in the third quarter of 1998
compared to the
15
<PAGE> 16
corresponding period of 1997 decreased to $4,338,000 from $4,611,000 primarily
due to an operating loss of $225,000 at its McKenica business unit which
represented a $628,000 decline from the third quarter of 1997 operating income.
This decline was partially offset by improved operating income results at the
Company's heat exchanger and automotive tubing business. For the first nine
months of 1998, the Automotive Components Group's operating income compared to
the corresponding period of 1997 decreased to $15,809,000 from $17,211,000 due
to an operating loss of $535,000 at its McKenica business unit which represented
a $2,259,000 decline from 1997 and increased costs at Steel Parts incurred to
improve future operational efficiency. These declines were partially offset by
improved operating results at the other operating units of the Thermal
Components Group.
The Technologies Group's operating income decreased to $3,593,000 in the third
quarter of 1998 from $5,955,000 in the same period of 1997 as the continued
weakness in the electronics market caused significant declines in operating
income at Signal Transformer and Escod. Operating income at Stewart Connector
decreased from the prior year period due to a less favorable sales mix of
products and price degradation on certain mature connector products. For the
first nine months of 1998, the Technologies Group's operating income, compared
to the corresponding period of 1997, decreased to $14,183,000 from $17,326,000.
Operating income was impacted by the decreased sales of power transformers, wire
and cable assemblies and competitive pricing pressures in the connector market.
Partially offsetting these declines, operating income improved over the prior
year at Stewart Stamping.
Taylor Publishing had an operating loss of $59,000 in the third quarter of 1998
compared to operating income of $421,000 in 1997 primarily due to $300,000 of
severance expenses incurred in the third quarter of 1998 and $132,000 of legal
expenses associated with Taylor's antitrust lawsuit against Jostens. For the
first nine months of 1998, operating income decreased to $3,222,000 from
$5,535,000 in the prior year period primarily due to increased costs of labor
and air freight following production delays in the second quarter during its
peak yearbook production and delivery period. In addition, Taylor incurred
$900,000 of legal expenses associated with Taylor's antitrust lawsuit against
Jostens in the first nine months of 1998 compared to $200,000 in 1997.
OTHER INCOME (EXPENSE). Other income for the third quarters of 1998 and 1997
included $693,000 and $607,000, respectively, of equity income from the
Company's unconsolidated joint venture, Thermalex, which manufactures extruded
aluminum tubing primarily for automotive air conditioning condensers. For the
first nine months of 1998, other income included $2,144,000 of equity income
from Thermalex compared to $2,154,000 in 1997. Interest expense increased
$2,337,000 and $8,380,000 in the third quarter and first nine months of 1998,
respectively, from the corresponding 1997 periods due to the issuance of the
$150,000,000 of the 10 1/4% Notes completed in the third quarter of 1997 and the
issuance of the $70.2 million of 14% Senior Discount Notes in August 1998 (See
"The Merger Financing"). Interest income decreased $748,000 and $2,714,000 in
the third quarter and first nine months of 1998, respectively, from the
corresponding 1997 periods as a result of interest income earned on the proceeds
from the sale of the Rolodex Business in 1997.
"Other income, net", included in Other income (expense), for the third quarter
and first nine months of 1998 increased $285,000 and $2,242,000, respectively,
from the corresponding periods of 1997, respectively. Other income for the first
nine months of 1998 included gains on the sale of idle assets.
INCOME TAX EXPENSE. The Company incurred a net loss of $10,008,000 primarily due
to $25,529,000 of merger expenses incurred. Consequently, the tax benefit
arising from these losses was mitigated by the fact that a significant amount of
these costs were not deductible for tax, resulting in the 26% third quarter 1998
effective tax rate and a 5% effective tax rate for the nine month period ending
September 30, 1998.
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES. Operations used $26,244,000 of
cash in the first nine months of 1998 as compared to providing $11,621,000 in
the first nine months of 1997. Cash flows from operations in the first nine
months of 1998 were impacted by $25,529,000 of merger expenses incurred and
interest payments
16
<PAGE> 17
related to the 10 1/4% Notes totaling $15,504,000 partially offset by Federal
income tax refund of $5,110,000. The Company's cash flow for periods prior to
the nine months ended September 30, 1997 was favorably impacted by tax loss
carryforwards, which reduced the actual cash payments for the years to well
below the financial statement income tax expense. The tax loss carryforwards
were substantially reduced in 1997 due to the gain from the sale of the Rolodex
Business.
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES. In March 1997, the Company sold
its Rolodex Business for a net sales price of $112,610,000. In the first nine
months of 1998 and 1997, the Company received dividend distributions from
Thermalex of $1,324,000 and $1,460,000, respectively. The Company's other
investing activities consisted principally of capital expenditures which totaled
$15,714,000 and $15,022,000 for the first nine months of 1998 and 1997,
respectively.
CASH FLOWS FROM (USED IN)FINANCING ACTIVITIES. Financing activities provided
$32,472,000 in the first nine months of 1998 compared to using $111,239,000 in
the first nine months of 1997. On August 17, 1998 a series of transactions
involving the Company were completed. (See "The Merger Financing" below.)
On July 3, 1997, the Company refinanced its bank debt (See Note 3 to the
condensed consolidated financial statements) and using the Rolodex Proceeds
purchased 2,857,142 shares of its common stock, at $38.50 per share in cash, for
an aggregate purchase price of $109,999,967. On August 12, 1997, the Company
completed the Tender Offer, in which it purchased an additional 2,857,142 shares
at a price of $38.50 per share in cash for an aggregate purchase price of
$109,999,967. On August 12, 1997, the Company issued $150 million of the 10 1/4%
Notes, for net proceeds of approximately $145.9 million (the "Offering"). The
Company used the net proceeds from the Offering to fund the repurchase of shares
tendered in the Tender Offer, repay loans under the Bank Credit Agreement, pay
fees and expenses of the aforementioned transactions and for general corporate
purposes. The Company incurred $11,126,000 in costs for the refinancing, Tender
Offer and issuance of the Notes.
SEASONALITY. The Company's yearbook publishing business, Taylor Publishing, is
highly seasonal, with a majority of its sales occurring in the second and third
quarters of the year. Taylor receives significant customer advance deposits in
the second half of the year. The Company's other businesses are not highly
seasonal.
IMPACT OF INFLATION AND CHANGING PRICES. Inflation and changing prices have not
significantly affected the Company's operating results or markets.
LIQUIDITY. At September 30, 1998, the Company's cash and cash equivalents and
net working capital amounted to $4,659,000 and $78,056,000, respectively,
representing a decrease in cash and cash equivalents of $5,992,000 and an
increase in net working capital of $38,548,000 from year end 1997. The borrowing
ability under the Insilco's revolving credit facility as of the end of the
quarter was $27,840,000 which is also available for issuing of letters of
credit.
Trade receivables, net, at September 30, 1998 increased 25% or $16,958,000 over
the December 31, 1997 amount primarily due to increased receivables at Taylor
Publishing following its peak yearbook production period (see Seasonality).
THE MERGER. On August 17, 1998, a series of transactions involving the Company
was completed. These transactions included, among other things, the formation by
Insilco Holding Co. ("Holdings" or the "Company") (then a wholly owned
subsidiary of Insilco) of a wholly owned subsidiary ("ReorgSub"), followed by
the merger of ReorgSub with and into Insilco (the "Reorganization Merger"),
pursuant to which each stockholder of Insilco had his or her shares of Insilco
converted into the same number of shares of Holdings and the right to receive
$0.01 per share in cash, and Holdings became the parent of the Company.
Promptly following the Reorganization Merger, a second merger took place
pursuant to which Silkworm
17
<PAGE> 18
Acquisition Corporation ("Silkworm"), an affiliate DLJMB, merged with and into
Holdings (the "Merger," and together with the Reorganization Merger, the
"Mergers") and each share of Holdings Common Stock was converted into the right
to receive $43.47 in cash and 0.03378 of a share of Holdings Common Stock. Thus,
as a result of the Mergers, each stockholder of Insilco, in respect of each of
his or her shares, received $43.48 in cash and retained 0.03378 of a share of
Holdings Common Stock. Concurrently with the consummation of the Mergers, the
DLJMB Funds purchased 1,400,000 shares of Holdings 15% Senior Exchangeable
Preferred Stock due 2012 (the "PIK Preferred Stock"), and warrants to purchase
65,603 shares of Holdings Common Stock at an exercise price of $0.01 per share.
Following the Mergers, (i) Insilco's existing stockholders retained, in the
aggregate, approximately 10.1% (9.4% on a fully diluted basis) of the
outstanding shares of Holdings Common Stock; (ii) the DLJMB Funds held
approximately 69.0% (69.8% on a fully diluted basis) of the outstanding shares
of Holdings Common Stock; (iii) 399 Venture Partners Inc., an affiliate of
Citibank, N.A. ("CVC"), purchased shares of Silkworm which in the Merger were
converted into approximately 19.3% (17.8% on a fully diluted basis) of the
outstanding shares of Holdings Common Stock; and (iv) management of the Company
purchased approximately 1.7% (1.5% on a fully diluted basis) of the outstanding
shares of Holdings Common Stock.
Immediately prior to the effectiveness of the Reorganization Merger, each
outstanding option to acquire shares of the common stock of Insilco granted to
employees and directors, whether or not vested (the "Options") was canceled and
in lieu thereof, each holder of an Option received a cash payment in an amount
equal to (x) the excess, if any, of $45.00 over the exercise price of the Option
multiplied by (y) the number of shares subject to the Option, less applicable
withholding taxes (the "Option Cash Payments"). Certain holders of such Options
elected to utilize amounts otherwise receivable by them to purchase equity or
equity units of Holdings.
THE MERGER FINANCING. The total amount of cash required to consummate the
foregoing transactions was approximately $204.4 million. This amount was
financed with (i) gross proceeds of approximately $70.2 million from the
issuance by Silkworm of units (which were converted into units of Holdings (the
"Holdings Units") in the Merger), each unit consisting of $1,000 principal
amount at maturity of 14% Senior Discount notes due 2008 (the "Holdings Senior
Discount Notes") and one warrant to purchase 0.325 of a share of Holdings Common
Stock at an exercise price of $0.01 per share, (ii) the issuance by Holdings to
the DLJMB Funds, CVC and certain members of management of the Company, for an
aggregate consideration of approximately $56.1 million, of 1,245,138 shares of
Silkworm common stock (which was converted into Holdings Common Stock in the
Merger), (iii) the issuance to the DLJMB Funds for an aggregate consideration of
$35.0 million of 1,400,000 shares of the PIK Preferred Stock by Holdings and the
DLJMB Warrants to purchase 65,603 shares of Holdings Common Stock at an exercise
price of $0.01 per share, and (iv) approximately $43.1 million of new borrowings
under the Company's existing credit facility (the "Existing Credit Facility").
THE YEAR 2000 ISSUES. Many existing computer programs utilized globally use only
two digits to identify a year in the date field. These programs, if not
corrected, could fail or create erroneous results after the century date changes
on January 1, 2000 or when otherwise dealing with dates later than December 31,
1999. This " Year 2000" issue is believed to affect virtually all companies and
organizations, including the Company.
The Company relies on computer-based technology and primarily utilizes a variety
of third-party hardware and software and to a minimal degree some proprietary
software. In addition to such information technology ('IT") systems, the
Company's operations rely on various non-IT equipment and systems that contain
embedded computer technology. Third parties with whom the Company has commercial
relationships, including raw materials suppliers and service providers used by
the Company in its operations (such as banking and financial services, data
processing services, telecommunications services and utilities), are also highly
reliant on computer-based technology.
In 1996, the Company commenced an assessment of the potential effects of the
Year 2000 issue on the Company's
18
<PAGE> 19
business, financial condition and results of operations. In conjunction with
such assessment, the Company developed and implemented a "Year 2000" compliance
program as described below.
THIRD-PARTY IT SYSTEMS. The majority of the Company's IT systems are third party
systems for which the Company has received Year 2000 compliant versions. The
Company does not expect any significant outlay of cash for these systems as all
of the third party systems are under current maintenance agreements which
provide for continuing operation including functions involving Year 2000. The
strategy instituted by the Company to identify and address Year 2000 issues
affecting third-party IT Systems includes contacting all third-party providers
of computer hardware and software to secure appropriate representations to the
effect that such hardware or software is or will timely be Year 2000 compliant.
PROPRIETARY IT SYSTEMS. The Company does not rely heavily on Company developed
proprietary IT systems. Pursuant to the Company's Year 2000 compliance program,
the Company has examined its proprietary IT systems for Year 2000 problems. All
such systems that were identified as relating to a critical function and were
not Year 2000 compliant are being fixed. The Company believes that nearly all of
the proprietary IT systems have been fixed and placed into production. The
Company is in the process of testing the remediated systems for Year 2000
compliance.
NON-IT SYSTEMS. The Company has undertaken a review of its non-IT systems and is
in the process of fixing such systems that are within the control of its
Company. The Company expects to complete this remediation effort by April 30,
1999.
NON-IT VENDORS AND SUPPLIERS. The Company procures its raw materials and
operating and supplies from a vast network of vendors located both within and
outside the United States. As a part of its contingency planning effort, the
Company is continually assessing the Year 2000 readiness of its important
vendors in order to identify any significant exposures that may exist and
establish alternate sources or strategies where necessary.
COSTS. Costs incurred to implement the Company's Year 2000 compliance program
have been immaterial to date and the Company presently expects to incur less
that $1.0 million of costs in the aggregate. All of the Company's Year 2000
compliance costs have been or are expected to be funded from the Company's
operating cash flow. The Company's Year 2000 compliance budget does not include
material amounts for hardware replacement because the Company has historically
employed a strategy to continually upgrade its business systems. Consequently,
the Company's Year 2000 budget has not required the diversion of funds from or
the postponement of the implementation of other planned IT projects.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES. The Company's Year 2000 compliance
program is directed primarily towards ensuring that the Company will be able to
continue to perform three critical functions: (i) make and sell its products,
(ii) order and receive raw material and supplies, and (iii) pay its employees
and vendors. It is difficult, if not impossible, to assess with any degree of
accuracy the impact on any of these three areas of the failure of one or more
aspects of the Company's compliance program.
The novelty and complexity of the issues presented and the proposed solutions
therefore and the Company's dependence on the technical skills of employees and
independent contractors and on the representations and preparedness of third
parties are among the factors that could cause the Company's efforts to be less
than fully effective. Moreover, Year 2000 issues present a number of risks that
are beyond the Company's reasonable control, such as the failure of utility
companies to deliver electricity, the failure of telecommunications companies to
provide voice and data services, the failure of financial institutions to
process transactions and transfer funds, the failure of vendors to deliver
materials or perform services required by the Company and the collateral effects
on the Company of the effects of Year 2000 issues on the economy in general or
on the Company's customers in particular. Although the Company believes that its
Year 2000 compliance program is designed to appropriately identify and address
those Year 2000 issues that are subject to the Company's reasonable control,
there can be no
19
<PAGE> 20
assurance that the Company's efforts in this regard will be fully effective or
that Year 2000 issues will not have a material adverse effect on the Company's
business, financial condition or results of operations.
SUBSEQUENT EVENTS. As a result of the Merger, the Company was required to make
an Offer to Purchase (as defined in the indenture (the "10 1/4% Note Indenture")
relating to the 10 1/4% Notes) for all of the outstanding 10 1/4% Notes at 101%
of their aggregate principal amount, plus accrued interest. The Offer to
Purchase expires on November 16, 1998 and the Company intends to repurchase all
10 1/4% Notes validly tendered and not withdrawn as promptly as practicable
following acceptance of the 10 1/4% Notes. There is an aggregate of $150 million
principal amount of 10 1/4% Notes outstanding.
On November 9, 1998 the Company completed the offering of $120 million of 12%
Senior Subordinated Notes (the "New Notes") due 2007 with warrants to purchase
62,400 shares of Holdings common stock. The net proceeds from the offer and sale
of the New Notes will be used to fund the repurchase of the 10 1/4% Notes
validly tendered at a purchase price of 101% of principal amount plus accrued
and unpaid interest.
DLJ Capital Funding Inc. ("DLJ Capital Funding") has committed to lend up to
$300 million to the Company (the "New Credit Facility"). The New Credit Facility
will be used to refinance the Existing Credit Facility and to fund any remaining
portion of the repurchase of 10 1/4% Notes. The New Credit Facility will include
a term loan facility (the "Term Loan Facility") and a revolving credit facility
(subject to adjustment), which will provide for revolving loans and up to $50
million of letters of credit (the "Revolving Credit Facility"). The Term Loan
Facility will have a maturity of seven years. The Revolving Credit Facility will
terminate on July 8, 2003. DLJ Capital Funding's commitment, however, is subject
to significant conditions.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Except for the historical information contained herein, the matters
discussed in this Form 10-Q included in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" include "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Although the Company believes that the expectations reflected in the
Forward-Looking Statements contained herein are reasonable, no assurance can be
given that such expectations will prove to have been correct. Certain important
factors that could cause actual results to differ materially from expectations
("Cautionary Statements") include, but are not limited to the following: delays
in new product introductions, lack of market acceptance of new products, changes
in demand for the Company's products, changes in market trends, operating
hazards, general competitive pressures from existing and new competitors,
effects of governmental regulations, changes in interest rates, and adverse
economic conditions which could affect the amount of cash available for debt
servicing and capital investments. All subsequent written and oral
Forward-Looking Statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4(a) - Warrant Agreement between the Company and the Warrant Agent
dated November 9, 1998.
4(b) - Warrant and Registration Rights Agreement, dated as of
November 9, 1998, between the Company and the Initial
Purchaser.
10(a) - Purchase Agreement between Insilco Corporation, Insilco
Holding Co. and the Initial Purchaser dated as of
November 2, 1998.
27 - Financial Data Schedule.
(b) Reports on Form 8-K
A report, dated August 17, 1998, on Form 8-K was filed during the quarter
ending September 30, 1998, pursuant to Items 5 and 7 of that form.
A report, dated August 25, 1998, on Form 8-K was filed during the quarter
ending September 30, 1998, pursuant to Items 5 and 7 of that form.
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<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSILCO HOLDING CO.
--------------------------------
Registrant
Date: November 13, 1998 By: /s/ David A. Kauer
-----------------------------
David A. Kauer
Vice President and
Chief Financial Officer
22
<PAGE> 23
Exhibit Index
4(a) - Warrant Agreement between the Company and the Warrant Agent dated
November 9, 1998.
4(b) - Warrant and Registration Rights Agreement, dated as of November
9, 1998, between the Company and the Initial Purchaser.
10(a) - Purchase Agreement between Insilco Corporation, Insilco Holding
Co. and the Initial Purchaser dated as of November 2, 1998.
27 - Financial Data Schedule.
<PAGE> 1
Exhibit 4(a)
EXECUTION COPY
================================================================================
INSILCO HOLDING CO.
Warrants to Purchase
62,400 Shares of Common Stock
WARRANT AGREEMENT
Dated as of November 9, 1998
NATIONAL CITY BANK
Warrant Agent
================================================================================
<PAGE> 2
WARRANT AGREEMENT, dated as of November 9, 1998 between
Insilco Holding Co., a Delaware corporation (the "COMPANY"), and National City
Bank, as warrant agent (the "WARRANT AGENT").
WHEREAS, the Company proposes to issue warrants (the
"WARRANTS") to initially purchase up to an aggregate of 62,400 shares of Common
Stock, par value $.001 per share (the "COMMON STOCK"), of the Company (the
Common Stock issuable on exercise of the Warrants being referred to herein as
the "WARRANT SHARES"), in connection with the offering (the "OFFERING") by
Insilco Corporation, the Company's wholly owned subsidiary ("INSILCO"), of
120,000 Units (the "UNITS"), each consisting of $1,000 principal amount of
Insilco's 12% Senior Subordinated Notes due 2007 (the "NOTES") and one Warrant,
each Warrant initially representing the right to purchase 0.52 of a Warrant
Share.
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act in connection
with the issuance of Warrant Certificates (as defined) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"144A GLOBAL WARRANT" means a global Warrant substantially in
the form of Exhibit A hereto bearing the Global Warrant Legend and the
Private Placement Legend and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee.
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
used with respect to any Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such specified Person, whether through the
ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Warrant, the
rules and procedures of the Depositary.
"BUSINESS DAY" means any day other than a Legal Holiday.
<PAGE> 3
2
"CLOSING DATE" means the date hereof.
"COMMISSION" means the Securities and Exchange Commission.
"DEFINITIVE WARRANT" has the meaning given such term in
Section 3.1(b) hereof.
"DEPOSITARY" means, with respect to the Warrants issuable or
issued in whole or in part in global form, the Person specified in
Section 3.3 hereof as the Depositary with respect to the Warrants, and
any and all successors thereto appointed as Depositary hereunder and
having become such pursuant to the applicable provision of the
Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GLOBAL WARRANTS" means, individually and collectively, each
of the Restricted Global Warrants and the Unrestricted Global Warrants,
substantially, in the form of Exhibit A hereto issued in accordance
with Section 3.1(b) and 3.5 hereof.
"GLOBAL WARRANT LEGEND" means the legend set forth in Section
3.5(g)(ii), which is required to be placed on all Global Warrants
issued under this Warrant Agreement.
"HOLDER" means a person who is listed as the record owner of
Warrants.
"INDENTURE" means the indenture, dated the date hereof,
between Insilco and Star Bank, N.A. as trustee relating to the Notes.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Warrant through a Participant.
"INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, which is not also a QIB.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, or at a place of payment,
are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue on such payment for the
intervening period.
<PAGE> 4
3
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary or any
Vice-President of such Person.
"OPINION OF COUNSEL" means an opinion from legal counsel who
is reasonably acceptable to the Warrant Agent in form and substance
reasonably acceptable to the Warrant Agent. The counsel may be an
employee of or counsel to the Company, any subsidiary of the Company or
the Warrant Agent.
"PARTICIPANT" means, with respect to the Depositary, a Person
who has an account with the Depositary.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof, including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity,
subdivision or business.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 3.5(g)(i)(A) to be placed on all Warrants issued under this
Warrant Agreement except where otherwise permitted by the provisions of
this Warrant Agreement.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"REGISTRATION STATEMENT" as defined in the Warrant
Registration Rights Agreement or herein.
"REGISTRABLE SECURITIES" shall mean the Warrants, the Warrant
Shares and any other securities issued or issuable with respect to the
Warrants or the Warrant Shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization; provided that a security
ceases to be a Registrable Security when it is no longer a Transfer
Restricted Security. The Registrable Securities are entitled to the
benefits of the Warrant Registration Rights Agreement.
"RESTRICTED DEFINITIVE WARRANT" means a Definitive Warrant
bearing the Private Placement Legend.
"RESTRICTED GLOBAL WARRANT" means a Global Warrant bearing the
Private Placement Legend.
"RULE 144" means Rule 144 promulgated under the Securities
Act.
<PAGE> 5
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"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPARATION DATE" means the earliest of (i) 180 days after the
closing of the Offering, (ii) the date on which a registration
statement with respect to a registered exchange offer for the Notes is
declared effective under the Securities Act, (iii) the date a shelf
registration statement with respect to the Notes is declared effective
under the Securities Act, (iv) such date as Donaldson, Lufkin &
Jenrette Securities Corporation in its sole discretion shall determine
and (v) the occurrence of a Change of Control (as defined in the
Indenture).
"TRANSFER RESTRICTED SECURITIES" shall mean (a) each Warrant
and Warrant Share held by an Affiliate of the Issuer and (b) each other
Warrant and Warrant Share until the earlier to occur of (i) the date on
which such Warrant or Warrant Share has been disposed of in accordance
with a Registration Statement (or the date on which such Warrant Share
is issued upon exercise of a Warrant in accordance with a Registration
Statement) and (ii) the date on which such Warrant or Warrant Share is
distributed to the public pursuant to Rule 144 under the Act.
"TRUSTEE" means the trustee under the Indenture.
"UNRESTRICTED GLOBAL WARRANT" means a global Warrant
substantially in the form of Exhibit A attached hereto that bears the
Global Warrant Legend and that has the "Schedule of Exchanges of
Interests in the Global Warrant" attached thereto, and that is
deposited with or on behalf of and registered in the name of the
Depositary, representing Warrants that do not bear the Private
Placement Legend.
"UNRESTRICTED DEFINITIVE WARRANT" means one or more Definitive
Warrants that do not bear and are not required to bear the Private
Placement Legend.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"WARRANT REGISTRATION RIGHTS AGREEMENT" means the registration
rights agreement, dated as of November 9, 1998, by and among the
Company and the Initial Purchaser relating to the Warrants and the
Warrant Shares.
Section 2. APPOINTMENT OF WARRANT AGENT.
<PAGE> 6
5
The Company hereby appoints the Warrant Agent to act as agent
for the Company in accordance with the instructions set forth hereinafter in
this Agreement and the Warrant Agent hereby accepts such appointment.
Section 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES.
3.1. FORM AND DATING.
(a) General.
The Warrants shall be substantially in the form of Exhibit A
hereto (the "WARRANT CERTIFICATES"). The Warrants may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature. The terms and provisions contained in
the Warrants shall constitute, and are hereby expressly made, a part of this
Warrant Agreement. The Company and the Warrant Agent, by their execution and
delivery of this Warrant Agreement, expressly agree to such terms and provisions
and to be bound thereby. However, to the extent any provision of any Warrant
conflicts with the express provisions of this Warrant Agreement, the provisions
of this Warrant Agreement shall govern and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the
form of Exhibit A attached hereto (including the Global Warrant Legend thereon
and the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto). Warrants issued in definitive form ("DEFINITIVE WARRANTS") shall be
substantially in the form of Exhibit A attached hereto (but without the Global
Warrant Legend thereon and without the "Schedule of Exchanges of Interests in
the Global Warrant" attached thereto). Each Global Warrant shall represent such
of the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the number of outstanding Warrants from time to time
endorsed thereon and that the number of outstanding Warrants represented thereby
may from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any endorsement of a Global Warrant to reflect the
amount of any increase or decrease in the number of outstanding Warrants
represented thereby shall be made by the Warrant Agent in accordance with
instructions given by the Holder thereof as required by Section 3.5 hereof.
3.2. EXECUTION.
An Officer shall sign the Warrants for the Company by manual
or facsimile signature.
If the Officer whose signature is on a Warrant no longer holds
that office at the time a Warrant is countersigned, the Warrant shall
nevertheless be valid.
<PAGE> 7
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A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been properly issued under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company
signed by an Officer (a "WARRANT COUNTERSIGNATURE ORDER"), countersign Warrants
for original issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the
Company to countersign Warrants. Such an agent may countersign Warrants whenever
the Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3. REGISTRAR.
The Company shall maintain an office or agency where Warrants
may be presented for registration of transfer or for exchange ("WARRANT
REGISTRAR"). The Warrant Registrar shall keep a register of the Warrants and of
their transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company may change any Warrant Registrar without notice to any holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
agent not a party to this Warrant Agreement. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as the
Warrant Registrar with respect to the Warrants.
3.4. HOLDER LISTS.
The Warrant Agent shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders. If the Warrant Agent is not the Warrant Registrar, the
Company shall promptly furnish to the Warrant Agent at such times as the Warrant
Agent may request in writing, a list in such form and as of such date as the
Warrant Agent may reasonably require of the names and addresses of the Holders.
3.5. TRANSFER AND EXCHANGE.
<PAGE> 8
7
(a) Transfer and Exchange of Global Warrants.
A Global Warrant may not be transferred as a whole except by
the Depositary to a nominee of the Depositary, by a nominee of the Depositary to
the Depositary or to another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Warrants will be exchanged by the Company for Definitive
Warrants if (i) the Company delivers to the Warrant Agent notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 120
days after the date of such notice from the Depositary or (ii) the Company in
its sole discretion determines that the Global Warrants (in whole but not in
part) should be exchanged for Definitive Warrants and delivers a written notice
to such effect to the Warrant Agent. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Warrants shall be issued in
such names as the Depositary shall instruct the Warrant Agent. Global Warrants
also may be exchanged or replaced, in whole or in part, as provided in Sections
3.6 and 3.7 hereof. A Global Warrant may not be exchanged for another Warrant
other than as provided in this Section 3.5(a) or pursuant to Section 3.5(c),
however, beneficial interests in a Global Warrant may be transferred and
exchanged as provided in Section 3.5(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants.
The transfer and exchange of beneficial interests in the
Global Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the Applicable Procedures. Beneficial
interests in the Restricted Global Warrants shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Warrants also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Warrant. Beneficial interests in any Restricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Warrant in accordance
with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant. No written
orders or instructions shall be required to be delivered to the Warrant
Registrar to effect the transfers described in this Section 3.5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Warrants. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 3.5(b)(i) above,
the transferor of such beneficial interest must deliver to the Warrant
Registrar either (A) (1) a written order from a Participant or an
Indirect
<PAGE> 9
8
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Warrant in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Warrant in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given by the Depositary to the
Warrant Registrar containing information regarding the Person in whose
name such Definitive Warrant shall be registered. Upon effectiveness of
the Registration Statement (as defined in the Warrant Registration
Rights Agreement) by the Company in accordance with Section 3.5(f)
hereof, the requirements of this Section 3.5(b)(ii) shall be deemed to
have been satisfied upon receipt by the Warrant Registrar of a
certification required by the Company in connection with such
Registration Statement delivered by the Holder of such beneficial
interests in the Restricted Global Warrants. Upon satisfaction of all
of the requirements for transfer or exchange of beneficial interests in
Global Warrants contained in this Agreement and the Warrants or
otherwise applicable under the Securities Act, the Warrant Agent shall
adjust the principal amount of the relevant Global Warrant(s) pursuant
to Section 3.5(h) hereof.
(iii) (intentionally omitted)
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Warrant for Beneficial Interests in the Unrestricted
Global Warrant. A beneficial interest in any Restricted Global Warrant
may be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Warrant or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Warrant if the exchange or transfer complies with
the requirements of Section 3.5(b)(ii) above and:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Warrant, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person
<PAGE> 10
9
who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global
Warrant, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in
item (3) thereof;
and, in each such case (other than a transfer pursuant to Rule 144) set
forth in this subparagraph (B), if the Warrant Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
above at a time when an Unrestricted Global Warrant has not yet been
issued, the Company shall issue and, upon receipt of an Warrant
Countersignature Order in accordance with Section 3.2 hereof, the
Warrant Agent shall countersign one or more Unrestricted Global
Warrants in the number equal to the number of beneficial interests
transferred pursuant to subparagraph (B) above.
(c) Transfer and Exchange of Beneficial Interests for
Definitive Warrants.
(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a beneficial interest
in a Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Restricted Definitive Warrant, then, upon receipt by the Warrant
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraph (B) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (2) thereof, if applicable; or
<PAGE> 11
10
(D) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2)(b) thereof,
the Warrant Agent shall cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the number of Warrants represented by the Global Warrant
to be reduced by the number of Warrants to be represented by the
Definitive Warrant pursuant to Section 3.5(h) hereof, and the Company
shall execute and the Warrant Agent shall countersign and deliver to
the Person designated in the instructions a Definitive Warrant in the
appropriate amount. Any Definitive Warrant issued in exchange for a
beneficial interest in a Restricted Global Warrant pursuant to this
Section 3.5(c) shall be registered in such name or names as the holder
of such beneficial interest shall instruct the Warrant Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Warrant Agent shall deliver such Definitive
Warrants to the Persons in whose names such Warrants are so registered.
Any Definitive Warrant issued in exchange for a beneficial interest in
a Restricted Global Warrant pursuant to this Section 3.5(c)(i) shall
bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a beneficial interest in
a Restricted Global Warrant may exchange such beneficial interest for
an Unrestricted Definitive Warrant or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a Definitive
Warrant that does not bear the Private Placement
Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Warrant that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (3) thereof;
<PAGE> 12
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and, in each such case (other than a transfer pursuant to Rule
144) set forth in this subparagraph (B), if the Warrant
Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Warrant Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Warrants to
Unrestricted Definitive Warrants. If any holder of a beneficial
interest in an Unrestricted Global Warrant proposes to exchange such
beneficial interest for a Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Warrant, then, upon satisfaction of the conditions set
forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall cause the
amount of the applicable Global Warrant to be reduced accordingly
pursuant to Section 3.5(h) hereof, and the Company shall execute and
the Warrant Agent shall countersign and deliver to the Person
designated in the instructions a Definitive Warrant in the appropriate
principal amount. Any Definitive Warrant issued in exchange for a
beneficial interest pursuant to this Section 3.5(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct
the Warrant Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Warrant Agent shall deliver
such Definitive Warrants to the Persons in whose names such Warrants
are so registered. Any Definitive Warrant issued in exchange for a
beneficial interest pursuant to this Section 3.5(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Warrants for
Beneficial Interests.
(i) Restricted Definitive Warrants to Beneficial Interests in
Restricted Global Warrants. If any Holder of a Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial interest in
a Restricted Global Warrant or to transfer such Restricted Definitive
Warrants to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Warrant, then, upon receipt
by the Warrant Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial
interest in a Restricted Global Warrant, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Warrant is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof; or
<PAGE> 13
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(C) if such Restricted Definitive Warrant is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2)(b) thereof, the
Warrant Agent shall cancel the Restricted Definitive Warrant
and increase or cause to be increased the amount of the
appropriate Restricted Global Warrant.
(ii) Restricted Definitive Warrants to Beneficial Interests in
Unrestricted Global Warrants. A Holder of a Restricted Definitive
Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Restricted Definitive
Warrant to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Registration
Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Definitive
Warrants proposes to exchange such Warrants for a
beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive
Warrants proposes to transfer such Warrants to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in
item (3) thereof;
and, in each such case (other than a transfer pursuant to Rule
144) set forth in this subparagraph (C), if the Warrant
Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Warrant Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 3.5(d)(ii), the Warrant Agent shall cancel the Definitive
Warrants and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Warrant.
(iii) Unrestricted Definitive Warrants to Beneficial Interests
in Unrestricted Global Warrants. A Holder of an Unrestricted Definitive
Warrant may exchange such
<PAGE> 14
13
Warrant for a beneficial interest in an Unrestricted Global Warrant or
transfer such Definitive Warrants to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Warrant at any time. Upon receipt of a request for such an exchange or
transfer, the Warrant Agent shall cancel the applicable Unrestricted
Definitive Warrant and increase or cause to be increased the amount of
one of the Unrestricted Global Warrants.
If any such exchange or transfer from a Definitive Warrant to a
beneficial interest is effected pursuant to subparagraphs (ii)(B) or
(iii) above at a time when an Unrestricted Global Warrant has not yet
been issued, the Company shall issue and, upon receipt of an Warrant
Countersignature Order in accordance with Section 3.2 hereof, the
Warrant Agent shall countersign one or more Unrestricted Global
Warrants in the number equal to the number of beneficial interests of
Definitive Warrants so transferred.
(e) Transfer and Exchange of Definitive Warrants for
Definitive Warrants.
Upon request by a Holder of Definitive Warrants and such Holder's compliance
with the provisions of this Section 3.5(e), the Warrant Registrar shall register
the transfer or exchange of Definitive Warrants. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Warrant Registrar the Definitive Warrants duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Warrant Registrar
duly executed by such Holder or by its attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 3.5(e).
(i) Restricted Definitive Warrants to Restricted Definitive
Warrants. Any Restricted Definitive Warrant may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant Registrar receives
the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (2)
thereof, if applicable.
(ii) Restricted Definitive Warrants to Unrestricted Definitive
Warrants. Any Restricted Definitive Warrant may be exchanged by the
Holder thereof for an Unrestricted
<PAGE> 15
14
Definitive Warrant or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Warrants proposes to exchange such
Warrants for an Unrestricted Definitive Warrant, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted Definitive
Warrants proposes to transfer such Warrants to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Warrant, a certificate
from such Holder in the form of Exhibit B hereto,
including the certifications in item (3) thereof;
and, in each such case (other than a transfer pursuant to Rule
144) set forth in this subparagraph (C), if the Warrant
Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A Holder of Unrestricted Definitive Warrants may
transfer such Warrants to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Warrant. Upon receipt of a request
to register such a transfer, the Warrant Registrar shall register the
Unrestricted Definitive Warrants pursuant to the instructions from the
Holder thereof.
<PAGE> 16
15
(f) Registration Statement.
Upon the effectiveness of the Registration Statement and sales
of Warrants in connection therewith in accordance with the Warrant Registration
Rights Agreement, the Company shall issue and, upon receipt of a Warrant
Countersignature Order in accordance with Section 3.2, the Warrant Agent shall
countersign (i) one or more Unrestricted Global Warrants in an amount equal to
the amount of the beneficial interests in the Restricted Global Warrants sold
under such Registration Statement and (ii) Definitive Warrants in an amount
equal to the amount of the beneficial interests of the Restricted Definitive
Warrants sold under such Registration Statement. Concurrently with the issuance
of such Warrants, the Warrant Agent shall cause the amount of the applicable
Restricted Global Warrants to be reduced accordingly, and the Company shall
execute and the Warrant Agent shall countersign and deliver to the Persons
designated by the Holders of Definitive Warrants so accepted Definitive Warrants
in the appropriate amount.
(g) Legends.
The following legends shall appear on the face of all Global
Warrants and Definitive Warrants issued under this Warrant Agreement unless
specifically stated otherwise in the applicable provisions of this Warrant
Agreement.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS WARRANT (OR ITS PREDECESSOR) AND THE WARRANT
SHARES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB") OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),(2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
<PAGE> 17
16
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS WARRANT OR THE WARRANT SHARES EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE WARRANT
AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM
OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (E) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING
THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING.
(B) Notwithstanding the foregoing, any Global Warrant
or Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 3.5 (and all Warrants issued
in exchange therefor or substitution thereof) shall not bear
the Private Placement Legend.
(C) Any Warrant Shares issued pursuant to an exercise
of Warrants bearing a Private Placement Legend shall, unless
such exercise is pursuant to a Registration Statement or
unless the Company determines that the Holder thereof is
otherwise entitled to have the Private Placement Legend
removed, bear a Private Placement Legend.
<PAGE> 18
17
(ii) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS
DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR
ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF
THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(A)
OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE
DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO
SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE
PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear a legend in substantially the following form:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE
INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE
"UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT OF
THE 12% SENIOR SUBORDINATED NOTES DUE 2007 OF INSILCO
CORPORATION. (THE "NOTES") AND ONE WARRANT (THE "WARRANTS")
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.52 OF A
SHARE, PAR VALUE $0.001 PER SHARE, OF INSILCO HOLDING CO.
COMMON STOCK.
PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER
THE CLOSING OF THE OFFERING OF THE UNITS, (II) THE DATE ON
WHICH A REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED
EXCHANGE OFFER FOR THE NOTES IS DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (III) THE DATE A SHELF REGISTRATION STATEMENT
WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (IV) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE
AND (V) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN
THE INDENTURE GOVERNING THE NOTES), THE WARRANTS EVIDENCED BY
THIS CERTIFICATE MAY
<PAGE> 19
18
NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
(h) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular
Global Warrant have been exercised or exchanged for Definitive Warrants or a
particular Global Warrant has been exercised, redeemed, repurchased or canceled
in whole and not in part, each such Global Warrant shall be returned to or
retained and canceled by the Warrant Agent in accordance with Section 3.8
hereof. At any time prior to such cancellation, if any beneficial interest in a
Global Warrant is exercised or exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Warrant or for Definitive Warrants, the amount of Warrants represented by such
Global Warrant shall be reduced accordingly and an endorsement shall be made on
such Global Warrant by the Warrant Agent or by the Depositary at the direction
of the Warrant Agent to reflect such reduction; and if the beneficial interest
is being exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Warrant, such other
Global Warrant shall be increased accordingly and an endorsement shall be made
on such Global Warrant by the Warrant Agent or by the Depositary at the
direction of the Warrant Agent to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company"s order or at the
Warrant Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith .
(iii) All Global Warrants and Definitive Warrants issued upon
any registration of transfer or exchange of Global Warrants or
Definitive Warrants shall be the duly authorized, executed and issued
warrants for Common Stock of the Company, not subject to any preemptive
rights, and entitled to the same benefits under this Warrant Agreement,
as the Global Warrants or Definitive Warrants surrendered upon such
registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a
transfer of any Warrant, the Warrant Agent, and the Company may deem
and treat the Person in whose name any
<PAGE> 20
19
Warrant is registered as the absolute owner of such Warrant for all
purposes and none of the Warrant Agent, or the Company shall be
affected by notice to the contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(j) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel
required to be submitted to the Warrant Registrar pursuant to this Section 3.5
to effect a registration of transfer or exchange may be submitted by facsimile.
All references to Exhibits B and C herein shall include any other form of
certificate containing comparable certifications approved by the Company).
Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Registrar pursuant
to this Section 3.5, the Warrant Registrar's duties shall be limited to
confirming that any such certifications and certificates delivered to it are
substantially in the form of Exhibits B and C attached hereto. The Warrant
Registrar shall not be responsible for confirming the truth or accuracy of
representations made in any such certifications or certificates. As to any
Opinions of Counsel delivered pursuant to this Section 3.5, the Warrant
Registrar may rely upon, and be fully protected in relying upon, such opinions.
3.6. REPLACEMENT WARRANTS.
If any mutilated Warrant is surrendered to the Warrant Agent
or the Company and the Warrant Agent receives evidence to its satisfaction of
the destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced. The Company may charge for its expenses in
replacing a Warrant.
Every replacement Warrant is an additional warrant of the
Company and shall be entitled to all of the benefits of this Warrant Agreement
equally and proportionately with all other Warrants duly issued hereunder.
3.7. TEMPORARY WARRANTS.
Until certificates representing Warrants are ready for
delivery, the Company may prepare and the Warrant Agent, upon receipt of a
Warrant Countersignature Order, shall issue
<PAGE> 21
20
temporary Warrants. Temporary Warrants shall be substantially in the form of
certificated Warrants but may have variations that the Company considers
appropriate for temporary Warrants and as shall be reasonably acceptable to the
Warrant Agent. Without unreasonable delay, the Company shall prepare and the
Warrant Agent shall countersign definitive Warrants in exchange for temporary
Warrants.
Holders of temporary Warrants shall be entitled to all of the
benefits of this Warrant Agreement.
3.8. CANCELLATION.
Subject to Section 3.5(h) hereof, the Company at any time may
deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar
and Warrant Paying Agent shall forward to the Warrant Agent any Warrants
surrendered to them for registration of transfer, exchange or exercise. The
Warrant Agent and no one else shall cancel all Warrants surrendered for
registration of transfer, exchange, exercise, replacement or cancellation and
shall destroy canceled Warrants (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all canceled Warrants
shall be delivered to the Company. The Company may not issue new Warrants to
replace Warrants that have been exercised or that have been delivered to the
Warrant Agent for cancellation.
SECTION 4. SEPARATION OF WARRANTS; TERMS OF WARRANTS;
------------------------------------------
EXERCISE OF WARRANTS.
- - ---------------------
(a) The Notes and Warrants will not be separately transferable
until the Separation Date. Subject to the terms of this Agreement, each Warrant
holder shall have the right, which may be exercised during the period commencing
at the opening of business on the Separation Date and until 5:00 p.m., New York
City time on August 15, 2007 (the "EXERCISE PERIOD"), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the exercise price (the "EXERCISE PRICE") as set forth below in cash,
by wire transfer or by certified or official check payable to the order of the
Company, in each case, equal to the Exercise Price then in effect for such
Warrant Shares; provided that holders shall be able to exercise their Warrants
only if a registration statement relating to the such exercise is then in
effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and such holder delivers to the Company such notices as the Company shall
reasonably request in connection therewith, and such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders of the Warrants or other persons to whom
it is proposed that the Warrant Shares be issued on exercise of the Warrants
reside. Each holder may exercise its right, during the Exercise Period, to
receive Warrant Shares on a net basis, such that, without the exchange of any
funds, the holder will receive such number of Warrant Shares equal to the
<PAGE> 22
21
product of (A) the number of Warrant Shares for which such Warrant is
exercisable as of the date of exercise (if the Exercise Price were being paid in
cash) and (B) the Cashless Exercise Ratio. The Cashless Exercise Ratio shall
equal a fraction the numerator of which is the Market Value (as defined below)
per share of Common Stock minus the Exercise Price per share as of the date of
exercise and the denominator of which is the Market Value per share on the date
of exercise. Each Warrant not exercised prior to 5:00 p.m., New York City time,
on August 15, 2007 (the "EXPIRATION DATE") shall become void and all rights
thereunder and all rights in respect thereof under this agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.
The "Market Value" per share of Common Stock as of any date
shall equal (i) if Common Stock is primarily traded on a securities exchange,
the last sale price on such securities exchange on the trading day immediately
prior to the date of determination, or if no sales occurred on such day, the
mean between the closing "bid" and "asked" prices on such day, (ii) if the
principal market for Common Stock is in the over-the-counter market, the closing
sale price on the trading day immediately prior to the date of the
determination, as published by the National Association of Securities Dealers
Automated Quotation System or similar organization, or if such price is not so
published on such day, the mean between the closing "bid" and "asked" prices, if
available, on such day, which prices may be obtained from any reputable pricing
service, broker or dealer, and (iii) if neither clause (i) nor clause (ii) is
applicable, the fair market value on the date of determination of Common Stock
as determined in good faith by the Board of Directors of the Company.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, the holder thereof must deliver to the
Warrant Agent at its corporate trust office set forth in Section 15 hereof the
Warrant Certificate and the form of election to purchase on the reverse thereof
duly filled in and signed, which signature shall be medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, which is set forth in the form of
Warrant Certificate attached hereto as Exhibit A, as adjusted as herein
provided, for the number of Warrant Shares in respect of which such Warrants are
then exercised. Payment of the aggregate Exercise Price shall be made (i) in
cash, by wire transfer or by certified or official bank check payable to the
order of the Company or (ii) on a net basis in the manner provided in Section
4(a) hereof.
(c) Subject to the provisions of Section 5 hereof, upon
compliance with clause (b) above, the Warrant Agent shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of whole Warrant Shares issuable upon
the exercise of such Warrants or other securities or property to which such
holder is entitled hereunder, together with cash as provided in Section 9
hereof; provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in
<PAGE> 23
22
Section 8(m) hereof, or a tender offer or an exchange offer for shares of Common
Stock shall be made, upon such surrender of Warrants and payment of the Exercise
Price as aforesaid, the Warrant Agent shall, as soon as possible, but in any
event not later than two business days thereafter, deliver or cause to be
delivered the full number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence or other securities or
property to which such holder is entitled hereunder, together with cash as
provided in Section 9 hereof. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part. If less than all
the Warrants represented by a Warrant Certificate are exercised, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
SECTION 5. PAYMENT OF TAXES.
-----------------
The Company will pay all documentary stamp taxes attributable
to the initial issuance of Warrant Shares upon the exercise of Warrants;
provided that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
<PAGE> 24
23
SECTION 6. RESERVATION OF WARRANT SHARES.
(a) The Company will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the
Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for any
shares of the Company"s capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company"s capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 9 hereof. The
Company will furnish such Transfer Agent a copy of all notices of adjustments,
and certificates related thereto, transmitted to each holder pursuant to Section
11 hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 8 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS.
----------------------------------
The Company will from time to time take all action which may
be necessary so that the Warrant Shares, immediately upon their issuance upon
the exercise of Warrants, will be listed on the principal securities exchanges,
automated quotation systems or other markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
<PAGE> 25
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SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
-------
SHARES ISSUABLE.
- - ----------------
The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 8. For purposes of
this Section 8, "COMMON STOCK" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Company (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares, (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares of
its capital stock, then the Exercise Price in effect immediately prior to such
action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised may receive the aggregate number and kind of shares of
capital stock of the Company which he would have owned immediately following
such action if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine, in good faith, the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 8. Such adjustment shall be made successively whenever any event listed
above shall occur.
<PAGE> 26
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(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 45
days after the record date mentioned below to purchase shares of Common Stock at
a price per share less than the Fair Value (as defined herein) per share on that
record date, the Exercise Price shall be adjusted in accordance with the
formula:
O + N x P
---------
E' = E x M
-------------------------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on
the record date.
N = the number of additional shares of Common Stock to
be issued pursuant to such rights,
options or warrants.
P = the price per share of the additional shares.
M = the Fair Value per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock
any of its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Company, the Exercise Price shall
be adjusted in accordance with the formula:
M - F
E" = E x ----------------
M
where:
E" = the adjusted Exercise Price.
<PAGE> 27
26
E = the current Exercise Price.
M = the Fair Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the
assets, securities, rights or warrants to be
distributed in respect of one share of Common
Stock as determined in good faith by the Board of
Directors of the Company (the "Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 8(c) does not apply to rights, options
or warrants referred to in Section 8(b) hereof.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a
consideration per share less than the Fair Value per share on the date the
Company fixes the offering price of such additional shares, the Exercise Price
shall be adjusted in accordance with the formula:
P
-----
E' = E x O + M
-------------------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the Fair Value per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
<PAGE> 28
27
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 8,
(2) the exercise of Warrants or any other rights,
options or warrants to purchase Common Stock outstanding on the date
hereof, or the conversion or exchange of other securities convertible
or exchangeable for Common Stock the issuance of which caused an
adjustment to be made under Section 8(e),
(3) Common Stock issued to the Company's employees
(or employees of its subsidiaries) under bona fide employee benefit
plans adopted by the Board of Directors and approved by the holders of
Common Stock when required by law, if such Common Stock would otherwise
be covered by this subsection (d) (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date of
this Warrant Agreement shall not exceed 5% of the Common Stock
outstanding at the time of the adoption of each such plan, exclusive of
anti-dilution adjustments thereunder),
(4) Common Stock issued to shareholders of any person
which merges into the Company, or with a subsidiary of the Company, in
proportion to their stock holdings of such person immediately prior to
such merger, upon such merger, provided that if such person is an
Affiliate of the Company, the Board of Directors shall have obtained a
fairness opinion from a nationally recognized investment banking,
appraisal or valuation firm, which is not an Affiliate of the Company,
stating that the consideration received in such merger is fair to the
Company from a financial point of view, or
(5) the issuance of shares of Common Stock pursuant
to rights, options or warrants which were originally issued in a
Non-Affiliate Sale (as defined below) together with one or more other
securities as part of a unit at a price per unit.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 8) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the Fair Value per share on the date of issuance of such
securities, the Exercise Price shall be adjusted in accordance with this
formula:
P
-----
O + M
E" = E x ----------------
<PAGE> 29
28
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the Fair Value per share on the date
of issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at the
initial conversion or exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to convertible securities
issued to shareholders of any person which merges into the Company, or with a
subsidiary of the Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger, provided that if such person
is an Affiliate of the Company, the Board of Directors shall have obtained a
fairness opinion from a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, stating that the
consideration received in such merger is fair to the Company from a financial
point of view.
(f) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d), and (e) of this Section 8, the following
shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company for
any underwriting of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of
<PAGE> 30
29
Directors (irrespective of the accounting treatment thereof), whose
determination shall be conclusive, and described in a Board resolution
which shall be filed with the Warrant Agent;
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion or exchange thereof (the consideration in each case
to be determined in the same manner as provided in clauses (1) and (2)
of this subsection); and
(4) in the case of the issuance of shares of Common
Stock pursuant to rights, options or warrants which rights, options or
warrants were originally issued together with one or more other
securities as part of a unit at a price per unit, the consideration
shall be deemed to be the fair value of such rights, options or
warrants at the time of issuance thereof as determined in good faith by
the Board of Directors whose determination shall be conclusive and
described in a Board resolution which shall be filed with the Warrant
Agent plus the additional minimum consideration, if any, to be received
by the Company upon the exercise, conversion or exchange thereof (as
determined in the same manner as provided in clauses (1) and (2) of
this subsection).
(g) Fair Value.
In Sections 8(d) and (e) hereof, the "Fair Value" per security
at any date of determination shall be (1) in connection with a sale by the
Company to a party that is not an Affiliate of the Company in an arm's-length
transaction (a "NON-AFFILIATE SALE"), the price per security at which such
security is sold and (2) in connection with any sale by the Company to an
Affiliate of the Company, (a) the last price per security at which such security
was sold in a Non-Affiliate Sale within the three-month period preceding such
date of determination or (b) if clause (a) is not applicable, the fair market
value of such security determined in good faith by (i) a majority of the Board
of Directors, including a majority of the Disinterested Directors, and approved
in a Board resolution delivered to the Warrant Agent or (ii) a nationally
recognized investment banking, appraisal or valuation firm, which is not an
Affiliate of the Company, in each case, taking into account, among all other
factors deemed relevant by the Board of Directors or such investment banking,
appraisal or valuation firm, the trading price and volume of such security on
any national securities exchange or automated quotation system on which such
security is traded. Notwithstanding the foregoing, any sale to Donaldson, Lufkin
& Jenrette Securities Corporation (or any successor thereto) pursuant to an
underwritten public offering registered under the Securities Act shall be deemed
to be and treated as a Non-Affiliate Sale.
In Sections 8(b) and (c) hereof, the "Fair Value" per security
at any date of determination shall be (a) the last price per security at which
such security was sold by the
<PAGE> 31
30
Company in a Non-Affiliate Sale within the three-month period preceding such
date of determination or (b) if clause (a) is not applicable, the fair market
value of such security determined in good faith by (i) a majority of the Board
of Directors, including a majority of the Disinterested Directors, and approved
in a Board resolution delivered to the Warrant Agent or (ii) a nationally
recognized investment banking, appraisal or valuation firm, which is not an
Affiliate of the Company, in each case, taking into account, among all other
factors deemed relevant by the Board of Directors or such investment banking,
appraisal or valuation firm, the trading price and volume of such security on
any national securities exchange or automated quotation system on which such
security is traded.
For purposes of this Section 8(g), "Disinterested Director"
means, in connection with any issuance of securities that gives rise to a
determination of the Fair Value thereof, each member of the Board of Directors
who is not an officer, employee, director or other Affiliate of the party to
whom the Company is proposing to issue the securities giving rise to such
determination.
For purposes of this Section 8(g), "AFFILIATE" of any
specified Person means (A) any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
Person and (B) any director, officer or employee of such specified person. For
purposes of this definition "CONTROL" (including, with correlative meanings, the
terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") as used
with respect to any Person, shall mean 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, by agreement or
otherwise.
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be, it being understood that no such rounding shall be made under
subsection (p).
<PAGE> 32
31
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to
Section 8(a), (b), (c), (d), (e) or (f) hereof, if Warrant holders are to
participate (without being required to exercise their Warrants) in the
transaction on a basis and with notice that the Board of Directors determines to
be fair and appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. No adjustment need be made for (i)
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest or (ii) a change in the par value or no par value of the
Common Stock. To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 10 hereof.
(k) Notice of Certain Transactions.
If (i) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to Section 8(a), (b), (c), (d), (e) or
(f) hereof and if the Company does not arrange for Warrant holders to
participate pursuant to Section 8(i) hereof, (ii) the Company takes any action
that would require a supplemental Warrant Agreement pursuant to Section 8(l)
hereof or (iii) there is a liquidation or dissolution of the Company, then the
Company shall mail to Warrant holders a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
<PAGE> 33
32
(l) Reorganization of Company.
Immediately after the date hereof, if the Company consolidates
or merges with or into, or transfers or leases all or substantially all its
assets to, any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall enter into
(i) a supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 8(l) and (ii) a supplement to the
Warrant Registration Rights Agreement providing for the assumption of the
Company's obligations thereunder. The successor Company shall mail to Warrant
holders a notice describing the supplemental Warrant Agreement and Warrant
Registration Rights Agreement. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an affiliate of
the formed, surviving, transferee or lessee corporation, that issuer shall join
in the supplemental Warrant Agreement and Warrant Registration Rights Agreement.
If this Section 8(l) applies, Sections 8(a), (b), (c), (d), (e) and (f) hereof
do not apply.
(m) Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof
is conclusive.
(n) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment
under this Section 8 should be made, how it should be made or what it should be.
The Warrant Agent has no duty to determine whether any provisions of a
supplemental Warrant Agreement under Section 8(l) hereof are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 8.
<PAGE> 34
33
(o) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 10 hereof; provided that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder"s right
to receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 8, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:
N' = N x E
---
E"
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted
Exercise Price.
N = the number or Warrant Shares previously issuable
upon exercise of a Warrant by payment of the Exercise
Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 9. FRACTIONAL INTERESTS.
---------------------
<PAGE> 35
34
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of any
Warrants (or specified portion thereof), the Company shall pay an amount in cash
equal to the Fair Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole U.S. cent.
SECTION 10. NOTICES TO WARRANT HOLDERS.
---------------------------
(a) Upon any adjustment of the Exercise Price pursuant to
Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Warrant Agent a certificate of a firm of independent public accountants
of recognized standing selected by the Board of Directors of the Company (who
may be the regular auditors of the Company) setting forth the Exercise Price
after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment in the Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of Warrants at the address appearing on the Warrant
register for each such registered holder written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 10.
(b) In case:
(i) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants;
(ii) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than dividends or cash distributions paid out of
consolidated current or retained earnings as shown on the books of the
Company prepared in accordance with generally accepted accounting
principles or dividends payable in shares of Common Stock or
distributions referred to in Section 10(a) hereof);
(iii) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any
<PAGE> 36
35
reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock;
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(v) the Company proposes to take any action (other than
actions of the character described in Section 8(a) hereof) which would
require an adjustment of the Exercise Price pursuant to Section 8
hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 11 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT
--------------------------------------------------
AGENT.
- - ------
(a) Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or
<PAGE> 37
36
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
warrant agent under the provisions of Section 13 hereof. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 12. WARRANT AGENT.
--------------
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrants, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
<PAGE> 38
37
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of this Agreement except as a result of its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of
<PAGE> 39
38
such adjustments, or with respect to the nature or extent of any such
adjustments, when made, or with respect to the method employed in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value or the kind or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will when issued be validly issued and fully paid and nonassessable, and makes
no representation with respect thereto.
SECTION 13. CHANGE OF WARRANT AGENT.
------------------------
If the Warrant Agent shall become incapable of acting as
Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such incapacity by the Warrant Agent or by
the registered holder of a Warrant Certificate, then the registered holder of
any Warrant may apply to any court of competent jurisdiction for the appointment
of a successor to the Warrant Agent. Pending appointment of a successor to such
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. The holders of a majority of
the unexercised Warrants shall be entitled at any time to remove the Warrant
Agent and appoint a successor to such Warrant Agent. Such successor to the
Warrant Agent need not be approved by the Company or the former Warrant Agent.
After appointment the successor to the Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; provided that the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section 13, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
SECTION 14. REPORTS.
--------
(a) Whether or not required by the rules and regulations of
the Commission, so long as any Warrants or the Warrant Shares are outstanding,
the Company shall furnish to the Warrant Agent and the holders of Warrants or
Warrant Shares (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Company shall file a copy of all such
information and reports with the Commission for public availability (unless the
<PAGE> 40
39
Commission shall not accept such a filing) and make such information available
to securities analysts and prospective investors upon request.
(b) The Company shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants and the Warrant Shares under
this Section 14.
SECTION 15. REGISTRATION.
-------------
Holders shall be able to exercise their Warrants only if a
registration statement relating to such exercise is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside.
(a) The Company shall prepare and cause to be filed within 120
days of the issuance date of the Warrants with the Commission pursuant to Rule
415 under the Securities Act a shelf registration statement (the "Registration
Statement") on the appropriate form relating to the offer and sale by the
Company of the Warrant Shares to the holders of Warrants upon exercise of the
Warrants.
(b) The Company shall use its reasonable best efforts to cause
such Registration Statement to be declared effective by the Commission on or
before 150 days from the date of issuance of the Warrants.
(c) The Company shall use its reasonable best efforts to keep
the Registration Statement continuously effective under the Securities Act in
order to permit the prospectus included therein to be lawfully delivered by the
Company to the holders exercising the Warrants until the earlier of (i) two
years following the first date as of which no Warrants remain outstanding and
(ii) if all of the Warrants expire unexercised, the Expiration Date; provided
that, except as provided below with respect to any Black Out Period (as defined
herein), the Company shall be deemed not to have used its reasonable best
efforts to keep the Registration Statements effective during the requisite
period if it voluntarily takes any action that would result in it not being able
to offer and sell the Warrant Shares upon exercise of the Warrants during that
period, unless such action is required by applicable law. Notwithstanding the
foregoing, the Company shall not be required to amend or supplement the
Registration Statement, any related prospectus or any document incorporated
therein by reference, for a period (a "Black Out Period") not to exceed, for so
long as this Agreement is in effect, an aggregate of 60 days in any calendar
year, in the event that (i) an event occurs and is continuing as a result of
which the Registration Statements, any related prospectus or any document
incorporated therein by reference as then amended or supplemented would, in the
Company's good faith judgment, contain an untrue
<PAGE> 41
40
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and (ii)(A) the Company determines in its good
faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (B) the disclosure otherwise relates to a material business transaction which
has not yet been publicly disclosed; provided, further, that such Black Out
Period shall be extended for any period, not to exceed an aggregate of 30 days
in any calendar year, during which the Commission is reviewing any proposed
amendment or supplement to the Registration Statement, any related prospectus or
any document incorporated therein by reference which has been filed by the
Company; and provided, further, that no Black Out Period may be in effect during
the three months prior to the Expiration Date.
(d) The Company shall cause the Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Registration Statement, amendment or supplement, (i) to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(e) The Company shall give prompt written notice to the
holders of the Warrants, the Initial Purchaser and the Warrant Agent of (i) the
effectiveness of the Registration Statement or any post-effective amendment
thereto, (ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statements or the initiation or threatening of
any proceedings for that purpose, (iii) the receipt by the Company or its legal
counsel of any notification with respect to the suspension of the qualification
of the Warrant Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (iv) the happening of any event
that requires the Company to make changes in the Registration Statements or the
prospectus in order to make the statements therein not misleading and (v) the
commencement and termination of any Black Out Period.
(f) The Company shall use its reasonable best efforts to
prevent the issuance or obtain the withdrawal of any order suspending the
effectiveness of the Registration Statements at the earliest possible time.
(g) Upon the occurrence of any event contemplated by Section
15(e)(iv) or (v) hereof (subject to the last sentence of Section 15(c) hereof)
the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to holders of the
Warrants, the prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and will
contain the current information required by the Securities Act.
<PAGE> 42
41
(h) Not later than the effective date of the Registration
Statements, the Company will provide a CUSIP number for the Warrant Shares and
provide the Warrant Agent with printed certificates for the Warrant Shares in a
form eligible for deposit with the Depository Trust Company.
(i) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registration Statement.
(j) The Company shall register or qualify or cooperate with
the holders in connection with the registration or qualification of the Warrant
Shares for offer and sale by the Company upon exercise of the Warrants under the
securities or blue sky laws of such states of the United States as any holder
reasonably requests and do any and all other acts or things necessary or
advisable to enable such offer and sale in such jurisdictions; provided that the
Company shall not be required to (i) qualify to do business in any jurisdiction
in which it is not then so qualified or (ii) take any action which would subject
it to general service of process or to taxation in any jurisdiction in which it
is not then so subject.
(k) The Company shall bear all expenses incurred by it in
connection with the performance of its obligations under this Section 15.
(l) The Company acknowledges and agrees that any remedy at law
for breach of any provision of this Section 15 will be inadequate and that, in
addition to any other remedies that the holder may have, the holders shall be
entitled to the remedy of specific performance to ensure the Company performs
its obligations under this Section 15. The election of any one or more remedies
by the holders hereunder shall not constitute a waiver of the right to pursue
other available remedies.
(m) No person is entitled to include any securities of the
Company held by such person in, or to have such securities registered under, the
Registration Statement.
SECTION 16 NOTICES TO COMPANY AND WARRANT AGENT.
-------------------------------------
Any notice or demand authorized by this Agreement to be given
or made by the Warrant Agent or by the registered holder of any Warrant to or on
the Company shall be sufficiently given or made when received if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
Insilco Holding Co.
425 Metro Place N.
Box 7196
Dublin, Ohio 43017
<PAGE> 43
42
Telephone: (614) 792-0468
Attention: Kenneth H. Koch, Esq.
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 450-4800
Attention: Richard Truesdell, Jr, Esq.
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
National City Bank
Corporate Trust Administration
629 Euclid Avenue
Cleveland, Ohio 44114
Telephone: (330) 575-2644
Attention: J. Dean Presson
SECTION 17. SUPPLEMENTS AND AMENDMENTS.
---------------------------
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Warrants in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not in any way materially adversely
affect the interests of the holders of Warrants. Any amendment or supplement to
this Agreement that has a material adverse effect on the interests of the
holders of Warrants shall require the written consent of the holders of a
majority of the then outstanding Warrants (excluding Warrants held by the
Company or any of its affiliates). The consent of each holder of Warrants
affected shall be required for any amendment pursuant to which the Exercise
Price would be increased or the number of Warrant Shares purchasable upon
<PAGE> 44
43
exercise of Warrants would be decreased (other than pursuant to adjustments
provided in this Agreement).
SECTION 18. SUCCESSORS.
-----------
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 19. TERMINATION.
------------
This Agreement shall terminate at 5:00 p.m., New York City
time on August 15, 2007. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised. The
provisions of Section 12 shall survive such termination.
SECTION 20. GOVERNING LAW.
--------------
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws of
said State.
SECTION 21. BENEFITS OF THIS AGREEMENT.
---------------------------
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
registered holders of Warrants any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the registered holders of
Warrants.
SECTION 22. COUNTERPARTS.
-------------
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
[Signature Page Follows]
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
INSILCO HOLDING CO.
By:_______________________________
Name:
Title:
NATIONAL CITY BANK, as Warrant Agent
By:_______________________________
Name:
Title:
<PAGE> 46
EXHIBIT A
[Form of Warrant Certificate]
[Face]
Unit Legend. Each Warrant issued prior to the Separation Date
shall bear the following legend (the "UNIT LEGEND") on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF
$1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 12% SENIOR SUBORDINATED NOTES DUE
2007 OF INSILCO CORPORATION. (THE "NOTES") AND ONE WARRANT (THE "WARRANTS")
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.52 OF A SHARE, PAR VALUE
$0.001 PER SHARE, OF INSILCO HOLDING CO. COMMON STOCK.
PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE
CLOSING OF THE OFFERING OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION
STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR THE NOTES IS DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (III) THE DATE A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (IV) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION IN
ITS SOLE DISCRETION SHALL DETERMINE AND (V) THE OCCURRENCE OF A CHANGE OF
CONTROL (AS DEFINED IN THE INDENTURE GOVERNING THE NOTES), THE WARRANTS
EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY
FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Private Placement Legend: Each Warrant issued pursuant to an
exemption from the registration requirements of the Securities Act shall bear
the following legend (the "PRIVATE PLACEMENT LEGEND") on the face thereof
THIS WARRANT (OR ITS PREDECESSOR) AND THE WARRANT SHARES TO BE
ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B)
<PAGE> 47
2
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),(2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
WARRANT OR THE WARRANT SHARES EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION,
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE
WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION
OF THE FOREGOING.
Global Warrant Legend: Each Global Warrant shall bear the
following legend (the "GLOBAL WARRANT Legend") on the face thereof:
THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF THE WARRANT
AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 3.5(A) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT
MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
<PAGE> 48
3
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
<PAGE> 49
1
No. ___________ ___Warrants
CUSIP No. ________
Warrant Certificate
INSILCO HOLDING CO.
This Warrant Certificate certifies that______ its registered
assigns, is the registered holder of Warrants expiring August 15, 2007 (the
"Warrants") to purchase Common Stock, par value $.001 (the "Common Stock"), of
Insilco Holding Co., a Delaware corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on the
Separation Date referred to below (the "Exercise Date") until 5:00 p.m. New York
City Time on August 15, 2007, to receive from the Company 0.52 fully paid and
nonassessable shares of Common Stock (the "Warrant Shares") at the initial
exercise price (the "Exercise Price") of $45.00 per share payable upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding
the foregoing, Warrants may be exercised without the exchange of funds pursuant
to the net exercise provisions of Section 4 of the Warrant Agreement. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
The holder of this Warrant by the acceptance hereof agrees
that upon the occurrence of any Special Redemption (as defined in the Indenture)
of the Notes, it shall deliver to the Company for cancellation one Warrant for
each $1,000 principal amount of Notes being redeemed from such holder, which
Warrants shall be deemed canceled upon redemption of such Notes pursuant to the
Special Redemption.
"Separation Date" shall mean the earliest of (i) May 8, 1999,
(ii) the date on which a registration statement with respect to a registered
exchange offer for the Notes is declared effective under the Securities Act,
(iii) the date a shelf registration statement with respect to the Notes is
declared effective under the Securities Act, (iv) such date as Donaldson, Lufkin
& Jenrette Securities Corporation in its sole discretion shall determine and (v)
the occurrence of a Change of Control (as defined in the Indenture governing the
Notes).
No Warrant may be exercised after 5:00 p.m., New York City
Time on August 15, 2007, and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
<PAGE> 50
2
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
<PAGE> 51
3
IN WITNESS WHEREOF, Insilco Holding Co. has caused this
Warrant Certificate to be signed below.
DATED: November 9, 1998
INSILCO HOLDING CO.
By:
----------------------------------------
Name:
Title:
Countersigned:
NATIONAL CITY BANK
as Warrant Agent
By:
-----------------------------------
Authorized Signature
<PAGE> 52
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
August 15, 2007 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of November 9, 1998 (the "Warrant Agreement"), duly executed and delivered by
the Company to National City Bank, as warrant agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrants may be exercised at any time on or after the
Separation Date and on or before 5:00 p.m. New York City time on August 15,
2007; provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrants Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. The Company has agreed pursuant to the Warrant
Agreement and a Warrant Registration Rights Agreement dated as of November 9,
1998 (the "Warrant Registration Rights Agreement") to file within 120 days after
the issuance of the Warrants and use its reasonable best efforts to make
effective on or before 150 days after such date a shelf registration statement
on the appropriate form under the Securities Act, and to use its reasonable best
efforts to keep such registration statement continuously effective, subject to
certain exceptions, under the Securities Act in order to permit the resale of
the Warrants and Warrant Shares by the holders thereof and the issuance of
Warrants Shares upon exercise of Warrants resold pursuant to an effective
Registration Statement, subject to certain exceptions, until the earlier of (i)
two years following the first date as of which no Warrants remain outstanding
and (ii) if all of the Warrants expire unexercised, the Expiration Date.
In order to exercise all or any of the Warrants represented by
this Warrant Certificate, the holder must deliver to the Warrant Agent at its
New York corporate trust office set forth in Section 19 of the Warrant Agreement
this Warrant Certificate and the form of election to purchase on the reverse
hereof duly filled in and signed, which signature shall be medallion guaranteed
by an institution which is a member of a Securities Transfer Association
recognized signature guarantee program, and upon payment to the Warrant Agent
for the account of the Company of the Exercise Price, as adjusted as provided in
the Warrant Agreement, for the number of Warrant Shares in respect of which such
Warrants are then exercised.
A-1
<PAGE> 53
Notwithstanding the foregoing, Warrants may be exercised without the exchange of
funds pursuant to the net exercise provisions of Section 4 of the Warrant
Agreement. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-2
<PAGE> 54
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive _____________ shares
of Common Stock and herewith tenders payment for such shares to the order of
INSILCO HOLDING CO., in the amount of $__________ in accordance with the terms
hereof unless the holder is exercising Warrants pursuant to the net exercise
provisions of Section 4 of the Warrant Agreement in which case the holder shall
receive such number of Warrant Shares equal to the product of (A) the number of
Warrant Shares for which this Warrant Certificate is exercisable as of the date
of exercise (if the Exercise Price were being paid in cash) and (B) the Cashless
Exercise Ratio (as defined in the Warrant Agreement). The undersigned requests
that a certificate for such shares be registered in the name of _______________,
whose address is __________________ and that such shares be delivered to
___________, whose address is ____________________________. If said number of
shares is less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of such shares be registered in the name of ______________________,
whose address is ____________________, and that such Warrant Certificate be
delivered to whose address is ____________________.
-----------------------------
Signature
Date:
-----------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-3
<PAGE> 55
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Number of Warrants in
in Number of in Number of this Global Warrant Signature of
warrants in this Warrants in this following such authorized officer
Date of Exchange Global Warrant Global Warrant decrease or increase of Warrant Agent
- - ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE> 56
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Insilco Holding Co.
425 Metro Place N.
Box 7196
Dublin, Ohio 43017
National City Bank
Corporate Trust Administration
629 Euclid Avenue
Cleveland, Ohio 44114
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
November 9, 1998 (the "WARRANT AGREEMENT"), between Insilco Holding Co., as
issuer (the "COMPANY"), and National City Bank, as warrant agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
___________________, (the "TRANSFEROR") owns and proposes to
transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A
hereto, in the principal amount at maturity of $___________ in such Warrant[s]
or interests (the "TRANSFER"), to ___________________________ (the
"TRANSFEREE"), as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO RULE
144A. The Transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Warrant is being transferred to a Person that
the Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with
B-1
<PAGE> 57
the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the 144A Global Warrant and/or the
Definitive Warrant and in the Warrant Agreement and the Securities Act.
2. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF
A BENEFICIAL INTEREST IN A DEFINITIVE WARRANT PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Warrants and Restricted Definitive Warrants and pursuant to
and in accordance with the Securities Act and any applicable blue sky securities
laws of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in
compliance with the prospectus delivery requirements of the
Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A or Rule 144,
and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Warrant or
Restricted Definitive Warrants and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed
by the Transferee in the form of Exhibit D to the Warrant Agreement and
(2) if the Company requests, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject
to the restrictions on transfer
B-2
<PAGE> 58
enumerated in the Private Placement Legend printed on the IAI Global
Warrant and/or the Definitive Warrants and in the Warrant Agreement and
the Securities Act.
3. [] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL WARRANT OR OF AN UNRESTRICTED DEFINITIVE
WARRANT.
(a) [] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky
securities laws of any state of the United States and (ii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will no longer be
subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Warrants, on
Restricted Definitive Warrants and in the Warrant Agreement.
(b) [] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act
other than Rule 144 or Rule 144A and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue
sky securities laws of any State of the United States and (ii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will not be
subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Warrants or
Restricted Definitive Warrants and in the Warrant Agreement.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
----------------------------------
[Insert Name of Transferor]
By:
-------------------------------
Name:
Title:
B-3
<PAGE> 59
Dated:
-----------------
B-4
<PAGE> 60
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the 144A Global Warrant, or
(b) [ ] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] IAI Global Warrant, or
(iv) [ ] Unrestricted Global Warrant; or
(b) [ ] a Restricted Definitive Warrant; or
(c) [ ] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
B-5
<PAGE> 61
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Insilco Holding Co.
425 Metro Place N.
Box 7196
Dublin, Ohio 43017
National City Bank
Corporate Trust Administration
629 Euclid Avenue
Cleveland, Ohio 44114
Re: Warrants
(CUSIP ____________)
Reference is hereby made to the Warrant Agreement, dated as of
November 9, 1998 (the "WARRANT AGREEMENT"), between Insilco Holding Co., as
issuer (the "COMPANY"), and National City Bank, as warrant agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
__________________________, (the "OWNER") owns and proposes to
exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the
amount of $____________ in such Warrant[s] or interests (the "EXCHANGE"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
WARRANT. In connection with the Exchange of the Owner's beneficial
interest in a Restricted Global Warrant for a beneficial interest in an
Unrestricted Global Warrant in an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Global Warrants and pursuant to and in accordance
C-1
<PAGE> 62
with the United States Securities Act of 1933, as amended (the
"Securities Act"), (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Warrant is being acquired
in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for an Unrestricted Definitive Warrant, the Owner hereby
certifies (i) the Definitive Warrant is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted
Global Warrants and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive
Warrant is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT. In connection
with the Owner's Exchange of a Restricted Definitive Warrant for a
beneficial interest in an Unrestricted Global Warrant, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted
Definitive Warrants and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the
beneficial interest is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO
UNRESTRICTED DEFINITIVE WARRANT. In connection with the Owner's
Exchange of a Restricted Definitive Warrant for an Unrestricted
Definitive Warrant, the Owner hereby certifies (i) the Unrestricted
Definitive Warrant is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive
Warrants and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Warrant Agreement
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive
Warrant is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
C-2
<PAGE> 63
2. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL WARRANTS FOR RESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL WARRANT TO RESTRICTED DEFINITIVE WARRANT. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for a Restricted Definitive Warrant in a number equal to the
number of beneficial interests exchanged, the Owner hereby certifies
that the Restricted Definitive Warrant is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Warrant Agreement, the
Restricted Definitive Warrant issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Definitive Warrant and in the Warrant
Agreement and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT. In connection with
the Exchange of the Owner's Restricted Definitive Warrant for a
beneficial interest in the 144A Global Warrant, in a number equal to
the number of beneficial interests exchanged, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer and (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to the
Restricted Global Warrants and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Warrant
Agreement, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Warrant and in the Warrant
Agreement and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
---------------------------------------
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:______________________
C-3
<PAGE> 64
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Insilco Holding Co.
425 Metro Place N.
Box 7196
Dublin, Ohio 43017
National City Bank
Corporate Trust Administration
629 Euclid Avenue
Cleveland, Ohio 44114
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
November 9, 1998 (the "WARRANT AGREEMENT"), between Insilco Holding Co., as
issuer (the "COMPANY"), and National City Bank, as warrant agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Warrant Agreement.
In connection with our proposed purchase of____________
Definitive Warrants, we confirm that:
1. We understand that any subsequent transfer of the Warrants
or any interest therein is subject to certain restrictions and conditions set
forth in the Warrant Agreement and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Warrants or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Warrants have
not been registered under the Securities Act, and that the Warrants and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if
requested by the Company,
D-1
<PAGE> 65
an Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) pursuant to the
provisions of Rule 144(k) under the Securities Act or (E) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Warrant or beneficial
interest in a Global Warrant from us in a transaction meeting the requirements
of clauses (A) through (D) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants
or beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Warrants,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
We agree not to engage in any hedging transactions with
regard to the Warrants unless such hedging transactions are in compliance with
the Securities Act.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
----------------------------
[Insert Name of Transferor]
By:
-------------------------
Name:
Title:
Dated: _____________________
D-2
<PAGE> 66
EXHIBIT E
FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT
E-1
<PAGE> 1
EXECUTION COPY
Exhibit 4(b)
===============================================================================
WARRANT
REGISTRATION RIGHTS AGREEMENT
INSILCO HOLDING CO.
-------------------------------------------------------
Warrants to Purchase 62,400 Shares of Common Stock
-------------------------------------------------------
Dated as of November 9, 1998
-------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
===============================================================================
<PAGE> 2
This Warrant Registration Rights Agreement (this "Agreement") is made
and entered into as of November 9, 1998, by and among Insilco Holding Co., a
Delaware corporation (the "Issuer"), and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), which has agreed to purchase the Warrants
of the Issuer issued pursuant to the Warrant Agreement (the "Warrant Agreement")
between the Issuer and National City Bank, as warrant agent (the "Warrant
Agent").
The Warrants are being issued and sold in connection with the offering
by Insilco Corporation, a wholly owned subsidiary of the Issuer ("Insilco") of
120,000 Units each consisting of (i) $1,000 principal amount at maturity of 12%
Senior Subordinated Notes due 2007 (the "Notes") of Insilco and (ii) one
Warrant.
This Agreement is made pursuant to the Purchase Agreement, dated
November 2, 1998 (the "Purchase Agreement"), by and between the Issuer, Insilco
and the Initial Purchaser. In order to induce the Initial Purchaser to purchase
the Warrants, the Issuer has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the obligations of the Initial Purchaser set forth in Section 9 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Warrant Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144.
Black Out Notice: As defined in Section 4(b) hereof.
Black Out Period: As defined in Section 3(a) hereof.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Expiration Date: 5:00 p.m. New York City time on August 15, 2007.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus
<PAGE> 3
2
supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.
Registration Statement: Any registration statement of the Issuer
relating to the registration for resale of Transfer Restricted Securities that
is filed pursuant to the provisions of this Agreement and including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Rule 144: Rule 144 promulgated under the Act.
Transfer Restricted Securities: (a) Each Warrant and Warrant Share held
by an Affiliate of the Issuer and (b) each other Warrant and Warrant Share until
the earlier to occur of (i) the date on which such Warrant or Warrant Share has
been disposed of in accordance with a Registration Statement or the date on
which such Warrant Share is issued upon exercise of a Warrant in accordance with
a registration statement filed under the Act and (ii) the date on which such
Warrant or Warrant Share is distributed to the public pursuant to Rule 144 under
the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person is (i) the holder of record of any
definitive certificated security which are Transfer Restricted Securities or
(ii) a beneficial holder of any global security which are Transfer Restricted
Securities.
SECTION 3. SHELF REGISTRATION
(a) SHELF REGISTRATION. The Issuer shall prepare and cause to be filed
with the Commission on or before 120 days from the Closing Date pursuant to Rule
415 under the Securities Act a Registration Statement on the appropriate form
relating to resales of Transfer Restricted Securities by the Holders thereof.
The Company shall use its reasonable best efforts to cause the Registration
Statement to be declared effective by the Commission on or before 150 days after
the Closing Date.
To the extent necessary to ensure that the Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 3(a), the Issuer shall use its
reasonable best efforts to keep any Registration Statement required by this
Section 3(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Section 4(a) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, until
the earlier of (i) two years following the first date as of which no Warrants
remain outstanding and (ii) if all of the Warrants expire unexercised, the
expiration of the Warrants; provided that such obligation shall expire before
such date if the Issuer delivers to the Warrant Agent a written opinion of
counsel to the Issuer (which opinion of counsel shall be satisfactory to the
Issuer) that all Holders (other than Affiliates of the Issuer) of Warrants and
Warrant Shares may resell the Warrants and the Warrant Shares without
registration under the Act and without restriction as to the manner, timing or
volume of any such sale and instruct the Warrant Agent to remove the Private
Placement Legend from all Warrants and Warrant shares; and provided, further,
that notwithstanding the foregoing, any
<PAGE> 4
3
Affiliate of the Issuer may, with notice to the Issuer, require the Issuer to
keep the Registration Statement continuously effective for resales by such
Affiliate for so long as such Affiliate holds Warrants or Warrant Shares,
including as a result of any market-making activities or other trading
activities of such Affiliate. Notwithstanding the foregoing, the Issuer shall
not be required to amend or supplement the Registration Statement, any related
prospectus or any document incorporated therein by reference, for a period (a
"Black Out Period") not to exceed, for so long as this Agreement is in effect,
an aggregate of 60 days in any calendar year, in the event that (i) an event
occurs and is continuing as a result of which the Registration Statement, any
related prospectus or any document incorporated therein by reference as then
amended or supplemented would, in the Issuer's good faith judgment, contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii)(A) the Issuer determines in its
good faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Issuer
or (B) the disclosure otherwise relates to a material business transaction which
has not yet been publicly disclosed; provided that such Black Out Period shall
be extended for any period, not to exceed an aggregate of 30 days in any
calendar year, during which the Commission is reviewing any proposed amendment
or supplement to the Registration Statement, any related prospectus or any
document incorporated therein by reference which has been filed by the Issuer;
and provided, further, that no Black Out Period may be in effect during the
three months prior to the Expiration Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Registration Statement pursuant
to this Agreement unless and until such Holder furnishes to the Issuer in
writing, within 20 days after receipt of a request therefor, the information
specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for
use in connection with any Registration Statement or Prospectus or preliminary
Prospectus included therein. Each selling Holder agrees to promptly furnish
additional information required to be disclosed in order to make the information
previously furnished to the Issuer by such Holder not materially misleading.
SECTION 4. REGISTRATION PROCEDURES
(a) In connection with the Registration Statement and any related
Prospectus required by this Agreement, the Issuer shall:
(i) use its reasonable best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities
being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the
Issuer pursuant to Section 3(b) hereof), and pursuant thereto the
Issuer will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under
the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods
of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof;
(ii) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3
<PAGE> 5
4
of this Agreement. Upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A)
to contain an untrue statement of material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Issuer shall, subject
to Section 3(a), file promptly an appropriate amendment to such
Registration Statement or a supplement to the Prospectus, as
applicable, curing such defect, and, in the case of an amendment, use
its reasonable best efforts to cause such amendment to be declared
effective as soon as practicable;
(iii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule_424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act
in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iv) advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any applicable Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, and (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Issuer shall use its
reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(v) subject to Section 4(a)(ii), if any fact or event
contemplated by Section 4(a)(iv)(D) hereof shall exist or have
occurred, prepare a supplement or post-effective
<PAGE> 6
5
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(vi) furnish to the Initial Purchaser, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Persons, if any, for a period of at least five Business Days,
and the Issuer will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which the Initial Purchaser shall reasonably object
within five Business Days after the receipt thereof. The Initial
Purchaser shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or fails to comply with the applicable
requirements of the Act;
(vii) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the Initial Purchaser,
make the Issuer"s representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as the Initial
Purchaser may reasonably request;
(viii) make available, at reasonable times, for inspection by
the Initial Purchaser and any attorney or accountant retained by the
Initial Purchaser, all financial and other records, pertinent corporate
documents of the Issuer and cause the Issuer"s officers, directors and
employees to supply all information reasonably requested by the Initial
Purchaser, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the
filing thereof and prior to its effectiveness;
(ix) if requested by the Initial Purchaser, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as the
Initial Purchaser may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities and the use of the
Registration Statement or Prospectus for market-making activities; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Issuer is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(x) furnish to the Initial Purchaser and each Holder upon
request, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each
<PAGE> 7
6
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(xi) deliver to the Initial Purchaser and each Holder, without
charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as the Initial
Purchaser or such Holder reasonably may request; the Issuer hereby
consents to the use (in accordance with law and subject to Section 4(d)
hereof) of the Prospectus and any amendment or supplement thereto by
each selling Person in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto and all market-making activities of the
Initial Purchaser, as the case may be;
(xii) upon the request of the Initial Purchaser, enter into
such agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by the Initial Purchaser in connection with any
sale or resale pursuant to any applicable Registration Statement. In
such connection, the Issuer shall:
(A) upon request of the Initial Purchaser, furnish
(or in the case of paragraphs (2) and (3), use its reasonable
best efforts to cause to be furnished) to the Initial
Purchaser, upon the effectiveness of the Registration
Statement:
(1) a certificate, dated such date, signed
on behalf of the Issuer by (x) the President or any
Vice President and (y) a principal financial or
accounting officer of the Issuer, confirming, as of
the date thereof, the matters set forth in Sections
6(cc), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as such Person may
reasonably request;
(2) an opinion, dated the date of
effectiveness of the Registration Statement, of
counsel for the Issuer covering matters similar to
those set forth in Sections 9(e) and (f) of the
Purchase Agreement and such other matters as the
Initial Purchaser may reasonably request, and in any
event including a statement to the effect that such
counsel has participated in conferences with officers
and other representatives of the Issuer,
representatives of the independent public accountants
for the Issuer and have considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Issuer) and without
independent check or verification), no facts came to
such counsel"s attention that caused such counsel to
believe that the applicable Registration Statement,
at the time such Registration Statement or any
post-effective amendment thereto became effective
contained an untrue
<PAGE> 8
7
statement of a material fact or omitted to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date contained an
untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading. Without
limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial
data included in any Registration Statement
contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the
date of effectiveness of the Registration Statement,
from the Issuer"s independent accountants, in the
customary form and covering matters of the type
customarily covered in comfort letters to
underwriters in connection with underwritten
offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9(h) of
the Purchase Agreement; and
(B) deliver such other documents and certificates as
may be reasonably requested by the Initial Purchaser to
evidence compliance with the matters covered in clause (A)
above and with any customary conditions contained in any
agreement entered into by the Issuer pursuant to this clause;
(xiii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided that the Issuer shall
not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xv) use its reasonable best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the
<PAGE> 9
8
proviso contained in clause (xiii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Warrant Agent with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with The Depository
Trust Company;
(xvii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in Rule 158(c) under the Act); and
(xviii) provide promptly to the Initial Purchaser, upon
request, each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act.
(b) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security and the Initial Purchaser agrees that, upon receipt
of the notice from the Issuer of the commencement of a Black Out Period (in each
case, a "Black Out Notice"), such Person will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable Registration
Statement until such Person is advised in writing by the Issuer of the
termination of the Black Out Period. Each Person receiving a Black Out Notice
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Person"s possession which have been replaced
by the Issuer with more recently dated Prospectuses or (ii) deliver to the
Issuer (at the Issuer"s expense) all copies, other than permanent file copies,
then in such Person"s possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the Black Out
Notice.
SECTION 5. REGISTRATION EXPENSES
All expenses incident to the Issuer"s performance of or compliance with
this Agreement will be borne by the Issuer, regardless of whether a Registration
Statement becomes effective, including, without limitation: (i) all registration
and filing fees and expenses; (ii) all fees and expenses of compliance with
federal securities and state Blue Sky or securities laws; (iii) all expenses of
printing (including printing Prospectuses (whether for sales, market-making or
otherwise), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Issuer; (v) all application and filing fees in
connection with listing the Warrant Shares on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the Issuer
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Issuer will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts,
<PAGE> 10
9
retained by the Issuer.
SECTION 6. INDEMNIFICATION
(a) The Issuer agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Issuer to any Holder or
any prospective purchaser of Transfer Restricted Securities, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to a Holder furnished in
writing to the Issuer by such Holder.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuer, its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuer, to the same extent
as the foregoing indemnity from the Issuer set forth in Section 6(a) hereof, but
only with reference to information relating to such Holder furnished in writing
to the Issuer by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 6(a) or 6(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing,
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that,
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 6(a) and 6(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 6(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party, unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action
<PAGE> 11
10
(including any impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 6(a), and by the Issuer, in the case of parties indemnified pursuant to
Section 6(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action effected
with its written consent. Notwithstanding the foregoing, in the case of Section
6(a) hereof, any such settlement may be effected by the Initial Purchaser
without the Issuer"s written consent if the settlement is entered into more than
twenty Business Days after the Issuer shall have received a request from the
Initial Purchaser for reimbursement for the fees and expenses of counsel (in any
case where such fees and expenses are at the expense of the Issuer) and, prior
to the date of such settlement, the Issuer shall have failed to comply with such
reimbursement request. In the case of Section 6(a) hereof, the Issuer shall not,
without the prior written consent of the Initial Purchaser, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party. Notwithstanding the foregoing, in the case of Section 6(b)
hereof, any such settlement may be effected by the indemnified party without the
indemnifying party"s written consent if the settlement is entered into more than
twenty Business Days after the indemnifying party shall have received a request
from the indemnified party for reimbursement for the fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
Indemnified party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. In the case
of Section 6(b) hereof, the indemnifying party shall not, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
6 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims,
<PAGE> 12
11
damages, liabilities or judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuer, on the one hand, and the
Holders, on the other hand, from their sale of Transfer Restricted Securities or
(ii) if the allocation provided by clause 6(d)(i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 6(d)(i) hereof but also the relative fault of the
Issuer, on the one hand, and of the Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Issuer, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer, on the one hand, or by the Holder, on the other hand,
and the parties" relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 6(a), any legal
or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any matter, including any action that
could have given rise to such losses, claims, damages, liabilities or judgments.
The Issuer and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders" obligations to contribute
pursuant to this Section 6(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
(e) The Issuer agrees that the indemnity and contribution provisions of
this Section 6 shall apply to the Initial Purchaser to the same extent, on the
same conditions, as it applies to Holders.
SECTION 7. RULE 144
The Issuer agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Issuer is subject to Section 13 or 15(d) of the Exchange Act, to make all
filings required thereby in a timely manner in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144.
<PAGE> 13
12
SECTION 8. MISCELLANEOUS
(a) REMEDIES. The Issuer acknowledges and agrees that any failure by
the Issuer to comply with its obligations under Section 3 hereof may result in
material irreparable injury to the Initial Purchaser or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Issuer"s obligations under Section 3 hereof. The Issuer
further agrees to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuer will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Issuer"s securities under any agreement
in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of this Section
8(c)(i), the Issuer has obtained the written consent of Holders of all
outstanding Transfer Restricted Securities, and (ii) in the case of all other
provisions hereof, the Issuer has obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
(excluding Transfer Restricted Securities held by the Issuer or its Affiliates);
provided that this Agreement may be amended without the consent of any Holder
pursuant to Section 11(l) of the Warrant Agreement.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements granting rights to Holders made hereunder
between the Issuer, on the one hand, and the Initial Purchaser, on the other
hand, and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect its rights or
the rights of Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Warrant Agent, with a copy to the Warrant Agent; and
(ii) if to the Issuer:
Insilco Holding Co.
425 Metro Place N.
Box 7196
Dublin, Ohio 43017
Attention: Kenneth Koch, Esq.
<PAGE> 14
13
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 450-4000
Attention: Richard D. Truesdell, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent at the
address specified in Warrant Agreement.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation, and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Warrant
Agreement. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INSILCO HOLDING CO.
By:
----------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10(a)
EXECUTION COPY
================================================================================
INSILCO CORPORATION
AND
INSILCO HOLDING CO.
as Issuers
-------------------------------------
120,000 UNITS CONSISTING OF
$120,000,000 12% SENIOR SUBORDINATED NOTES DUE 2007 AND
WARRANTS TO PURCHASE 62,400 SHARES OF COMMON STOCK
--------------------------------------
------------------
PURCHASE AGREEMENT
Dated as of November 2, 1998
------------------
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
---------------------------------
================================================================================
<PAGE> 2
120,000 Units Consisting of
$120,000,000 12% Senior Subordinated Notes due 2007
of Insilco Corporation and
Warrants to Purchase 62,400 Shares of Common Stock
of Insilco Holding Co.
PURCHASE AGREEMENT
November 2, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue New York,
New York 10172
Dear Sirs:
Insilco Corporation, a Delaware corporation ("Insilco") and Insilco
Holding Co., a Delaware corporation ("Holdings" and together with Insilco, the
"Issuers"), propose to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser") 120,000 units (the
"Units"), each consisting of $1,000 principal amount of 12% Senior
Subordinated Notes due 2007 (the "Series A Notes") of Insilco and one warrant
(collectively, the "Warrants") to purchase 0.520 of a share of common stock of
Holdings, par value $0.001 per share (the "Common Stock"), subject to the
terms and conditions set forth herein. The Series A Notes are to be issued
pursuant to the provisions of an indenture (the "Indenture"), to be dated as
of the Closing Date (as defined below), between Insilco and Star Bank, N.A., as
trustee (the "Trustee"). The Series A Notes and the Series B Notes (as defined
below) issuable in exchange therefor are collectively referred to herein as the
"Notes." The Warrants will be issued pursuant to a warrant agreement to be
dated as of the Closing Date (the "Warrant Agreement") between Holdings and
National City Bank, as warrant agent (the "Warrant Agent"). Shares of Common
Stock of Holdings issuable upon exercise of the Warrants are collectively
referred to herein as the "Warrant Shares." The Units, the Notes, the Warrants
and the Warrant Shares are collectively referred to herein as the
"Securities." The Series A Notes and the Warrants will not be detachable or
separable until the first to occur of certain events specified in the Offering
Memorandum. Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture or the Warrant Agreement, as
applicable.
All agreements, representations and warranties of the Issuers set forth
in this Agreement are made as of the date of this Agreement. This Agreement, the
Indenture, the Series A Notes, the Warrants, the Warrant Agreement, the A/B
Registration Rights Agreement (as defined), and the Warrant Registration Rights
Agreement (as defined) are collectively referred herein as the "Operative
Documents."
<PAGE> 3
1. OFFERING MEMORANDUM.
The Units will be offered and sold to the Initial Purchaser pursuant to
one or more exemptions from the registration requirements under the Securities
Act of 1933, as amended (the "Securities Act"). The Issuer has prepared a
preliminary offering memorandum, dated October 30, 1998 (the "Preliminary
Offering Memorandum"), and a final offering memorandum, dated November 2, 1998
(the "Offering Memorandum"), relating to the Units.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)
(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN IAI THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND
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(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING."
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Warrant Agreement, the Warrants (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS WARRANT (OR ITS PREDECESSOR) AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)
(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS WARRANT
OR THE WARRANT SHARES EXCEPT (A) TO THE ISSUER OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS WARRANT OR THE WARRANT SHARES (THE
FORM OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND
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<PAGE> 5
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS WARRANT OR
THE WARRANT SHARES OR AN INTEREST HEREIN OR THEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT AGENT
TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Issuers agree to issue
and Insilco agrees to sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from Insilco, all of the Units at a price equal to $970 per
Unit (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchaser has advised the Issuers
that the Initial Purchaser will make offers (the "Exempt Resales") of the
Units purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to persons whom the Initial Purchaser reasonably
believes to be "qualified institutional buyers" ("QIBs") as defined in Rule
144A under the Securities Act (the "Eligible Purchasers"). The Initial
Purchaser will offer the Units to Eligible Purchasers initially at a price equal
to $1,000 per Unit. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement with
respect to the Series A Notes (the "A/B Registration Rights Agreement"), to be
dated the Closing Date, in substantially the form of Exhibit A hereto, for so
long as such Series A Notes constitute "Transfer Restricted Securities" (as
defined in the A/B Registration Rights Agreement). Pursuant to the A/B
Registration Rights Agreement, Insilco will agree to file with the Securities
and Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement under the Securities Act (the "Exchange
Offer Registration Statement") relating to Insilco's 12% Senior Subordinated
Notes due 2007 (the "Series B Notes"), to be offered in exchange for the
Series A Notes (such offer to exchange being referred to as the "Exchange
Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Note Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Note Registration Statements")
relating to the resale by certain holders of the Series A Notes and to use its
reasonable best efforts to cause such Note Registration Statements to be
declared and remain effective and usable for the periods specified in the A/B
Registration Rights Agreement and to consummate the Exchange Offer.
Holders (including subsequent transferees) of the Warrants will have
the registration rights with respect to the Warrants set forth in the warrant
registration rights agreement (the "Warrant Registration Rights Agreement,"
and together with the A/B Registration Rights Agreement, the "Registration
Rights Agreements"), to be dated the Closing Date, in substantially the form of
Exhibit B hereto, for so long as the Warrants or Warrant Shares constitute
"Transfer Restricted Securities" (as defined in the Warrant Registration
Rights Agreement). Pursuant to the Warrant Registration Rights Agreement,
Holdings will agree to file with the Commission under the circumstances set
forth therein, a shelf registration
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<PAGE> 6
statement pursuant to Rule 415 under the Securities Act (the "Warrant
Registration Statement") relating to the resale by certain holders of Warrants
and Warrant Shares and to use its reasonable best efforts to cause such Warrant
Registration Statement to be declared and remain effective and usable for the
periods specified in the Warrant Registration Rights Agreement.
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Units shall
be made at the offices of Davis Polk & Wardwell or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on November 9, 1998, or at such other time on the same date or
such other date as shall be agreed upon by the Initial Purchaser and the Issuers
in writing. The time and date of such delivery and the payment for the Units are
herein called the "Closing Date."
(b) One or more of the Units containing Series A Notes and Warrants in
definitive global form (collectively, the "Global Securities"), registered in
the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
shall be delivered by the Issuers to the Initial Purchaser (or as the Initial
Purchaser directs), in each case, with any transfer taxes thereon duly paid by
the Issuers against payment by the Initial Purchaser of the portion of the
Purchase Price relating to the Units by wire transfer in immediately available
funds to the order of Insilco. The Global Securities shall be made available to
the Initial Purchaser for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE ISSUERS. Each Issuer hereby agrees with the
Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Units for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose, and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. Each Issuer shall use its
reasonable best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Securities under any state
securities or Blue Sky laws, and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any Securities under any state securities or
Blue Sky laws, each Issuer shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time; provided,
however, that neither Issuer shall be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation, other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
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<PAGE> 7
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Issuers as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchaser may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchaser's compliance with
its representations and warranties and agreements set forth in Section 7 hereof,
each Issuer consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchaser in connection with Exempt Resales and
market-making activities.
(c) During such period as, in the opinion of counsel for the Initial
Purchaser, an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Securities
are outstanding, (i) not to make any amendment or supplement to the Offering
Memorandum of which the Initial Purchaser shall not previously have been advised
or to which the Initial Purchaser shall reasonably object after being so advised
and (ii) to prepare promptly, upon the Initial Purchaser's reasonable request,
any amendment or supplement to the Offering Memorandum which may be necessary or
advisable in connection with such Exempt Resales or such market-making
activities.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered by the Initial
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Units pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchaser and counsel to the
Initial Purchaser in connection with the registration or qualification of the
Units for offer and sale to the Initial Purchaser and pursuant to Exempt Resales
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may request and to continue such registration or qualification in
effect so long as required for Exempt Resales and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that neither Issuer shall
be required in connection therewith to qualify as a foreign entity in any
jurisdiction in which it is now so qualified or to take any action that would
subject it to general consent to service of process or taxation, other than as
to matters and transactions relating to the Preliminary Offering Memorandum, the
Offering Memorandum or Exempt Resales, in any jurisdiction in which it is now so
subject.
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<PAGE> 8
(f) So long as any of the Securities are outstanding and the Indenture
or Warrant Agreement so requires, (i) to mail and make generally available as
soon as practicable after the end of each fiscal year to the record holders of
the Securities a financial report of the Issuers and their subsidiaries on a
consolidated basis, all such financial reports to include a consolidated balance
sheet, a consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of shareholders' equity as of the end of and
for such fiscal year, together with comparable information as of the end of and
for the preceding year, certified by the Issuer's independent public accountants
and (ii) to mail and make generally available as soon as practicable after the
end of each quarterly period (except for the last quarterly period of each
fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows as of the end
of and for such period, and for the period from the beginning of such year to
the close of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as any of the Securities are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by either Issuer to its security holders or furnished
to or filed with the Commission or any national securities exchange on which any
class of securities of either Issuer is listed and such other publicly available
information concerning either Issuer and/or their subsidiaries as the Initial
Purchaser may reasonably request.
(h) So long as any of the Series A Notes or Warrants remain outstanding
and during any period in which either Issuer is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to make available to any holder of Series A Notes or Warrants in connection with
any sale thereof and any prospective purchaser of such Series A Notes or
Warrants from such holder, the information ("Rule 144A Information") required
by Rule 144A(d)(4) under the Securities Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of each Issuer under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Issuers and accountants of the Issuers in connection with the sale and
delivery of the Units to the Initial Purchaser and pursuant to Exempt Resales,
and all other fees and expenses in connection with the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum, the Offering
Memorandum and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof to
the Initial Purchaser and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Units to the Initial Purchaser and pursuant to Exempt Resales, including any
transfer or other taxes payable thereon, (iii) all costs of printing or
producing this Agreement, the other Operative Documents and any other agreements
or documents in connection with the offering, purchase, sale or delivery of the
Units, (iv) all expenses in connection with the registration or qualification of
the Units for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchaser in
connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing
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<PAGE> 9
certificates representing the Securities, (vi) all expenses and listing fees in
connection with the application for quotation of the Units in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Warrant
Agent and their respective counsel in connection with the Indenture, the Notes,
the Warrant Agreement and the Warrants, (viii) the costs and charges of any
transfer agent, registrar and/or depositary (including the DTC), (ix) any fees
charged by rating agencies for the rating of the Notes, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreements, and (xi) and all other costs and expenses
incident to the performance of the obligations of the Issuers hereunder and
under the Registration Rights Agreements for which provision is not otherwise
made in this Section.
(j) To use its best efforts to effect the inclusion of the Units,
Series A Notes and Warrants in PORTAL and to maintain the listing of the Units,
Series A Notes and Warrants on PORTAL for so long as any Units, Series A Notes
or Warrants are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Securities, and to comply with all agreements set forth in the representation
letters of the Issuers to DTC relating to the approval of the Securities by DTC
for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any securities of either Issuer or any
warrants, rights or options to purchase or otherwise acquire securities of
either Issuer substantially similar to the Units, Notes, Warrants or Common
Stock (other than (i) the Units, Notes, Warrants or Warrant Shares and (ii)
commercial paper issued in the ordinary course of business), without the prior
written consent of the Initial Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Units, the Series A Notes or the
Warrants to the Initial Purchaser or pursuant to Exempt Resales in a manner that
would require the registration of any such sale of the Units, the Series A Notes
or the Warrants under the Securities Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes registered pursuant to the Securities Act to be offered in
exchange for the Series A Notes, subject to the limitations contemplated by the
A/B Registration Rights Agreement, and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the Registration
Rights Agreements.
(q) To cause the Offer to Purchase (as defined in Offering Memorandum)
to be consummated no later than November 20, 1998.
(r) To enter into the New Credit Facility (as defined in Offering
Memorandum) no later than November 20, 1998.
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<PAGE> 10
(s) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Units.
(t) For so long as any of the Securities are outstanding and during
such period after the Closing Date as, in the opinion of counsel for the Initial
Purchaser, an Offering Memorandum is required by law to be delivered in
connection with market-making activities of the Initial Purchaser, to (i)
periodically amend the Offering Memorandum so that the Offering Memorandum would
comply with the requirements of Section 10(a) of the Securities Act if the
Series A Notes or the Warrants were being offered and sold pursuant to a
registration statement under the Securities Act, (ii) amend or supplement the
Offering Memorandum when necessary to reflect any material changes in the
information provided therein, and (iii) provide the Initial Purchaser with
copies of each such amendment or supplement and such other documents, including
opinions of counsel and "comfort" letters, as the Initial Purchaser may
reasonably request.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ISSUERS. As of the
date hereof, each Issuer represents and warrants to, and agrees with, the
Initial Purchaser that:
(a) The Preliminary Offering Memorandum as of its date did not, and the
Offering Memorandum does not, and any supplement or amendment to them will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this paragraph (a)
shall not apply to statements in or omissions from the Preliminary Offering
Memorandum or the Offering Memorandum (or any supplement or amendment thereto)
based upon information relating to the Initial Purchaser furnished to either
Issuer in writing by the Initial Purchaser expressly for use therein. No stop
order preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued.
(b) Each of the Issuers and their subsidiaries listed on Schedule B
hereto (each, a "Significant Subsidiary") has been duly organized, is validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to carry on its business as described
in the Preliminary Offering Memorandum and the Offering Memorandum and to own,
lease and operate its properties, and is duly qualified and is in good standing
as a foreign entity authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not (i) have a
material adverse effect on the business, prospects, financial condition or
results of operations of Holdings and its subsidiaries, taken as a whole or (ii)
in any manner draw into question the validity of any of the Operative Documents
(the events referred to in clauses (i) and (ii), a "Material Adverse Effect").
(c) All equity interests of each Issuer have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights.
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<PAGE> 11
(d) The entities listed on Schedule A hereto are the only subsidiaries,
direct or indirect, of Holdings. Except as otherwise set forth in the Offering
Memorandum, all of the outstanding equity interests of each of Holdings'
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable and are owned by Holdings, directly or indirectly through one or
more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien") except for
Liens under the Credit Facility.
(e) This Agreement has been duly authorized, executed and delivered by
each Issuer.
(f) The Issuers have duly and validly authorized the issuance of the
Series A Notes and the Warrants as a Unit.
(g) The Indenture has been duly authorized by Insilco, and on the
Closing Date, will have been validly executed and delivered by Insilco. When the
Indenture has been duly executed and delivered by Insilco, the Indenture will be
a valid and binding agreement of Insilco, enforceable against Insilco in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or
"Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(h) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by Insilco. When the Series
A Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of Insilco, enforceable in accordance with their terms, except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
(i) The Series B Notes have been duly authorized by Insilco. When the
Series B Notes are issued, executed and authenticated in accordance with the
terms of the Exchange Offer and the Indenture, the Series B Notes will be
entitled to the benefits of the Indenture and will be the valid and binding
obligations of Insilco, enforceable against Insilco in accordance with their
terms, except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(j) The Warrant Agreement has been duly authorized by Holdings and, on
the Closing Date, will have been validly executed and delivered by Holdings.
When the Warrant Agreement has been validly executed and delivered, the Warrant
Agreement will constitute the
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<PAGE> 12
valid and binding agreement of Holdings, enforceable against Holdings in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(k) The Warrants have been duly authorized by Holdings and, on the
Closing Date, will have been validly delivered by Holdings. When the Warrants
have been validly issued and countersigned and upon delivery to the Initial
Purchaser against payment therefor in accordance with the terms hereof, the
Warrants will be entitled to the benefits of the Warrant Agreement and will be
valid and binding obligations of Holdings, enforceable against Holdings in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(l) Holdings has duly authorized and reserved for issuance the Warrant
Shares to be issued upon the exercise of the Warrants and, when issued and
delivered upon the exercise of the Warrants against payment of the exercise
price as provided in the Warrant Agreement, the Warrant Shares will have been
validly issued and will be fully paid and non assessable, and the issuance of
the Warrant Shares will not be subject to any preemptive or similar rights.
(m) The Registration Rights Agreements have been duly authorized by the
Issuer party thereto and, on the Closing Date, will have been duly executed and
delivered by such Issuer. When each Registration Rights Agreement has been duly
executed and delivered, such Registration Rights Agreement will be a valid and
binding agreement of such Issuer, enforceable against such Issuer in accordance
with its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability and (iii) rights to
indemnity and contribution thereunder may be limited by applicable law. On the
Closing Date, the Registration Rights Agreements will conform as to legal
matters to the descriptions thereof in the Offering Memorandum.
(n) (1) All of the indebtedness represented by the Series A Notes is
being incurred for proper purposes and in good faith. (2) As of the date hereof
(a) the fair value and present fair saleable value of the assets of Holdings and
its subsidiaries exceeds and would exceed their stated liabilities and
identified contingent liabilities, (b) Holdings and its subsidiaries should be
able to pay their debts as they become absolute and matured and (c) the capital
of Holdings and its subsidiaries is not and would not be unreasonably small for
the business in which it each of them is engaged.
(o) Neither of the Issuers nor any of their subsidiaries is in
violation of their respective organizational documents or, except as otherwise
set forth in the Offering Memorandum, in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which either
Issuer or any of their subsidiaries is a party or by which either Issuer
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<PAGE> 13
or any of their subsidiaries or their respective property is bound, except for
such defaults which, singly or in the aggregate, would not have a Material
Adverse Effect.
(p) The execution, delivery and performance by each Issuer of each of
the Operative Documents to which it is a party, the compliance by each Issuer
with all provisions thereof and the consummation of the transactions
contemplated thereby, and the consummation of the Offer to Purchase (as defined
in the Offering Memorandum) will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the federal
securities or Blue Sky laws of the various states or have been or will be
obtained prior to the Closing Date), (ii) conflict with or constitute a breach
of any of the terms or provisions of, or a default under, (A) the organizational
documents of the Issuers or any of their subsidiaries or (B), except as
otherwise set forth in the Offering Memorandum, any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to Holdings
and its subsidiaries, taken as a whole, to which either Issuer or any of their
subsidiaries is a party or by which either Issuer or any of their subsidiaries
or their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over either Issuer or any
of their subsidiaries or their respective property, (iv) except as otherwise set
forth in the Offering Memorandum, result in the imposition or creation of (or
the obligation to create or impose) a Lien under any agreement or instrument to
which either Issuer or any of their subsidiaries is a party or by which either
Issuer or any of their subsidiaries or their respective property is bound, or
(v) result in the termination, suspension or revocation of any Authorization (as
defined below) of either Issuer or any of their subsidiaries or result in any
other impairment of the rights of the holder of any such Authorization, except,
in the case of clauses (i), (ii)(B), (iv) and (v), as would not, singly or in
the aggregate, have a Material Adverse Effect.
(q) To the best knowledge of each Issuer, no action has been taken and
no law, statute, rule or regulation or order has been enacted, adopted or issued
by any governmental agency or body which prevents the execution, delivery and
performance of any of this Agreement, the Indenture, the Notes, the Warrants,
the Warrant Agreement or any of the other Operative Documents or the issuance of
the Securities, or suspends the sale of the Securities in any jurisdiction
referred to in Section 5(e) and no injunction, restraining order or other order
or relief of any nature by a federal or state court or other tribunal of
competent jurisdiction has been issued with respect to either Issuer which would
prevent or suspend the issuance or sale of the Units in any jurisdiction
referred to in Section 5(e).
(r) There are no legal or governmental proceedings pending or
threatened to which either Issuer or any of their subsidiaries is or could be a
party or to which any of their respective property is or could be subject, which
might result, singly or in the aggregate, in a Material Adverse Effect.
(s) To the best knowledge of each Issuer, neither Issuer nor any of
their subsidiaries has violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any provisions of the
Foreign Corrupt Practices
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Act or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(t) There are no known costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of Holdings and its subsidiaries, taken as a
whole.
(u) Each of the Issuers and their subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to,
all governmental or regulatory authorities and self-regulatory organizations and
all courts and other tribunals, including without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Issuers and
their subsidiaries is in compliance with all the terms and conditions thereof
and with the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or governing
body) which allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or results or,
after notice or lapse of time or both, would result in any other impairment of
the rights of the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to either Issuer or any of their
subsidiaries; except, in each case, where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction, would not, singly or in the aggregate, have a
Material Adverse Effect.
(v) The accountants, KPMG Peat Marwick LLP, that have certified the
financial statements included in the Preliminary Offering Memorandum and the
Offering Memorandum are independent public accountants with respect to each
Issuer, as required by the Securities Act and the Exchange Act.
(w) The historical financial statements, together with related notes,
forming part of the Preliminary Offering Memorandum and the Offering Memorandum
(and any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position of
Insilco and its subsidiaries (and for the third quarter of 1998 Holdings and its
subsidiaries as set forth in Annex A to the Offering Memorandum) on the basis
stated in the Preliminary Offering Memorandum and the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Preliminary Offering
Memorandum and the Offering Memorandum (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared on a basis
consistent with such
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<PAGE> 15
financial statements and the books and records of Insilco and its subsidiaries
or Holdings and its subsidiaries, as the case may be.
(x) To the best knowledge of each Issuer, each Issuer has complied with
all provisions of Section 517.075, Florida Statues (Chapter 92-198, Laws of
Florida).
(y) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of Insilco and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under the
Securities Act. The other pro forma financial and statistical information and
data included in the Preliminary Offering Memorandum and the Offering Memorandum
are, in all material respects, accurately presented and prepared on a basis
consistent with the pro forma financial statements.
(z) Neither Issuer is, and after giving effect to the offering and sale
of the Units and the application of the net proceeds thereof as described in the
Offering Memorandum, neither Issuer will be, an "investment company," as such
term is defined in the Investment Company Act of 1940, as amended.
(aa) Except as otherwise set forth in the Offering Memorandum, there
are no contracts, agreements or understandings between either Issuer and any
person granting such person the right to require such Issuer to file a
registration statement under the Securities Act with respect to any securities
of the Issuer or to require such Issuer to include such securities with the
Securities registered pursuant to any Registration Statements.
(bb) Neither Issuer nor any agent thereof acting on its behalf has
taken, and none of them will take, any action that might cause this Agreement or
the issuance or sale of the Series A Notes to violate Regulation G (12 C.F.R.
Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221)
or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(cc) No "nationally recognized statistical rating organization" (as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act)
(i) has imposed (or has informed either Issuer that it is considering imposing)
any condition (financial or otherwise) on such Issuer's retaining any rating
assigned to such Issuer or any securities of such Issuer or (ii) has indicated
to such Issuer that it is considering (A) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (B) any change in
the outlook for any rating of such Issuer, or any securities of such Issuer.
(dd) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management
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<PAGE> 16
or operations of Holdings and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of
Holdings or any of its subsidiaries and (iii) neither Holdings nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(ee) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
(ff) When the Series A Notes and Warrants are issued and delivered
pursuant to this Agreement, neither the Series A Notes nor the Warrants will be
of the same class (within the meaning of Rule 144A under the Securities Act) as
any security of Holdings or Insilco that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is quoted in a
United States automated inter-dealer quotation system.
(gg) No form of general solicitation or general advertising (as defined
in Regulation D under the Securities Act) was used by either Issuer or any of
its representatives (other than the Initial Purchaser, as to whom the Issuers
make no representation) in connection with the offer and sale of the Units
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes or the Warrants have been
issued and sold by Insilco or Holdings within the six-month period immediately
prior to the date hereof.
(hh) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(ii) No registration under the Securities Act of the Units, the
Warrants or the Series A Notes is required for the sale of such securities to
the Initial Purchaser as contemplated hereby or for the Exempt Resales assuming
the accuracy of the Initial Purchaser's representations and warranties and
agreements set forth in Section 7 hereof.
(jj) There is no (i) material unfair labor practice complaint,
grievance or arbitration proceeding pending or, to the best knowledge of each
Issuer, threatened against either Issuer or any of their subsidiaries before the
National Labor Relations Board or any state or local labor relations board or
(ii) strike, labor dispute, slowdown or stoppage pending or, to the best
knowledge of each Issuer, threatened against either Issuer or any of their
subsidiaries, except for such actions specified in clause (i) or (ii) above,
which, singly or in the aggregate, would not have a Material Adverse Effect. To
the best of each Issuer's knowledge, no collective bargaining organizing
activities are taking place with respect to either Issuer or any of their
subsidiaries, which, singly or in the aggregate, would have a Material Adverse
Effect.
(kk) Each of the Issuers and their subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, and (ii) the recorded accountability
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<PAGE> 17
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(ll) Except as otherwise set forth in the Offering Memorandum, the
Issuers and their subsidiaries own or possess, or can acquire on reasonable
terms, all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by them in connection
with the business now operated by them except where the failure to own or
possess or otherwise be able to acquire such intellectual property would not,
singly or in the aggregate, have a Material Adverse Effect; and, to the best of
each Issuer's knowledge, neither of the Issuers nor any of their subsidiaries
has received any notice of infringement of or conflict with asserted rights of
others with respect to any of such intellectual property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
(mm) Each certificate signed by any officer of either Issuer and
delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be
deemed to be a representation and warranty by such Issuer to the Initial
Purchaser as to the matters covered thereby.
Each Issuer acknowledges that the Initial Purchaser and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuer and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, the Issuers:
(a) The Initial Purchaser is either a QIB or an institutional
"accredited investor" (as such term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, an "Accredited Institution"), in either case,
with such knowledge and experience in financial and business matters as is
necessary in order to evaluate the merits and risks of an investment in the
Units.
(b) The Initial Purchaser is not acquiring the Units with a view to any
distribution thereof or with any present intention of offering or selling any of
the Units in a transaction that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction. The Initial Purchaser will be reoffering and reselling the Units
only to QIBs in reliance on the exemption from the registration requirements of
the Securities Act provided by Rule 144A.
(c) The Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) has been or will be used by the Initial Purchaser or any of its
representatives in connection with the offer and sale of the Units pursuant
hereto, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
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(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, the Initial Purchaser will solicit offers to buy the Units only from,
and will offer to sell the Units only to, Eligible Purchasers. The Initial
Purchaser further agrees that it will offer to sell the Units only to, and will
solicit offers to buy the Units only from Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs that agree that (x) the Units purchased
by them may be resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of Rule 144(d)
under the Securities Act, if applicable) under the Securities Act, as in effect
on the date of the transfer of such Units, only (I) to the Issuers or any of
their subsidiaries, (II) to a person whom the seller reasonably believes is a
QIB purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Securities Act, (III) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (IV)
to an Accredited Institution that, prior to such transfer (A) in the case of the
Series A Notes, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Series A Notes (the form of which may be obtained from the Trustee) or (B) in
the case of the Warrants, furnishes the Warrant Agent a signed letter containing
certain representations and agreements relating to the registration of transfer
of such Warrants (the form of which may be obtained from the Warrant Agent),
and, with respect to the Series A Notes, if such transfer is in respect of an
aggregate principal amount of Series A Notes less than $250,000, and, with
respect to the Warrants, an opinion of counsel acceptable to the Issuers that
such transfer is in compliance with the Securities Act, (V) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel acceptable to the Issuer thereof) or (VI)
pursuant to an effective registration statement and, in each case, in accordance
with the applicable securities laws of any State of the United States or any
other applicable jurisdiction and (y) they will deliver to each person to whom
such Units or an interest therein is transferred a notice substantially to the
effect of the foregoing.
The Initial Purchaser acknowledges that the Issuers and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuers and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations, and the Initial
Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, its directors, its officers and each person, if
any, who controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (or any amendment or supplement thereto), the
Preliminary Offering Memorandum or any Rule 144A Information provided by the
Issuers to any holder or prospective purchaser of Units pursuant to Section 5(h)
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or
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alleged untrue statement or omission based upon information relating to the
Initial Purchaser furnished in writing to the Issuers by the Initial Purchaser;
provided, however, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of the Initial
Purchaser if the Initial Purchaser fails to deliver a final Offering Memorandum
(as then amended or supplemented, provided by the Issuers to the Initial
Purchaser in the requisite quantity and on a timely basis to permit proper
delivery on or prior to the Closing Date) to the person asserting any losses,
claims, damages and liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such material misstatement or omission or
alleged material misstatement or omission was cured in the final Offering
Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold harmless each
Issuer and its directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) such Issuer to the same extent as the foregoing indemnity from the
Issuers to the Initial Purchaser but only with reference to information relating
to the Initial Purchaser furnished in writing to the Issuers by the Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"Indemnified Party"), the Indemnified Party shall promptly notify the person
against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses of such counsel, as incurred
(except that, in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any Indemnified Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the Indemnified Party or (iii) the
named parties to any such action (including any impleaded parties) include both
the Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to assume the defense of such action on behalf of the
Indemnified Party). In any such case, the Indemnifying Party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all Indemnified Parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated
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in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of the parties indemnified pursuant to Section 8(a), and by the Issuers, in the
case of parties indemnified pursuant to Section 8(b). The Indemnifying Party
shall indemnify and hold harmless the Indemnified Party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the Indemnifying Party shall have received a request from
the Indemnified Party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the Indemnifying
Party) and, prior to the date of such settlement, the Indemnifying Party shall
have failed to comply with such reimbursement request. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the Indemnified Party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the Indemnified Party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the Indemnified
Party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
Indemnified Party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Initial Purchaser, on the other hand, from the
offering of the Units or (ii) if the allocation provided by clause 8(d)(i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i) above but
also the relative fault of the Issuers, on the one hand, and the Initial
Purchaser, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Issuers, on the one hand, and the Initial Purchaser, on the
other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Units (after underwriting discounts and
commissions, but before deducting expenses) received by the Issuers, and the
total discounts and commissions received by the Initial Purchaser bear to the
total price to investors of the Units, in each case, as set forth in the table
on the cover page of the Offering Memorandum. The relative fault of the Issuers,
on the one hand, and the Initial Purchaser, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers, on the one hand,
or the Initial Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified
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<PAGE> 21
Party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such Indemnified Party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
the Initial Purchaser exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Units under this Agreement are subject to
the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of either
Issuer or any securities of either Issuer (including, without limitation, the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" (as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act), (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of either Issuer or
any securities of either Issuer by any such rating organization and (iii) no
such rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the Notes
were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of Holdings and its subsidiaries,
taken as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt of
either Issuer or any of their subsidiaries and (iii) neither of the Issuers nor
any of their subsidiaries shall have incurred any liability or obligation,
direct or contingent, the effect of
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which, in any such case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in
the judgment of the Initial Purchaser, is material and adverse and, in the
judgment of the Initial Purchaser, makes it impracticable to market the Units on
the terms and in the manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President and the Chief Financial Officer of each
Issuer, confirming the matters set forth in Sections 6(cc), 9(a), 9(b) and 9(c)
and stating that such Issuer has complied with all the agreements and satisfied
all of the conditions herein contained and required to be complied with or
satisfied on or prior to the Closing Date.
(e) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to the Initial Purchaser and counsel for the Initial
Purchaser), dated the Closing Date, of Kenneth H. Koch, General Counsel for the
Issuers, to the effect that:
(i) each Issuer has been duly incorporated and is validly
existing in good standing under the laws of its jurisdiction of
organization and has the requisite power to enter into the Operative
Documents to which it is a party;
(ii) all the outstanding shares of capital stock of Insilco
are duly authorized and validly issued and are fully paid and
non-assessable and have not been issued in violation of any preemptive
rights pursuant to law or Insilco's certificate of incorporation;
(iii) all the shares of capital stock of Holdings
outstanding prior to the Mergers and the Merger Financing (as such
terms are defined in the Offering Memorandum), and any shares of
capital stock of Holdings issued subsequent to the Mergers and prior to
the date hereof, are duly authorized and validly issued and, to such
counsel's knowledge, fully paid and non-assessable and have not been
issued in violation of any preemptive rights pursuant to law or
Holding's certificate of incorporation;
(iv) each Significant Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has all requisite corporate power
and authority to own its properties and to carry on its business as now
being conducted. Each Issuer and each Significant Subsidiary is a
corporation duly qualified to transact business and is in good standing
as a foreign corporation in each jurisdiction where the character of
its activities requires such qualification, except where the failure to
be so qualified would not have a Material Adverse Effect;
(v) all of the outstanding shares of the capital stock of
each Significant Subsidiary are duly authorized, validly issued, and,
to such counsel's knowledge, fully paid and nonassessable, and have not
been issued in violation of any preemptive rights pursuant to law or in
such certificate of incorporation of such Significant Subsidiary, and
all of the outstanding shares of the capital stock of each Significant
Subsidiary are owned by Insilco, however, as set forth in the Offering
Memorandum, all of such shares have been pledged to Insilco's lenders
under the Existing Credit Facility (as such term is defined in the
Offering Memorandum) and are expected to be pledged to Insilco's
21
<PAGE> 23
lenders under the New Credit Facility (as such term is defined in the
Offering Memorandum);
(vi) to such counsel's knowledge, there is no material
document, agreement or other instrument to which either Issuer is a
party (other than the Registration Rights Agreements, the Pledge
Agreement between Holdings and the lenders pursuant to the Existing
Credit Facility, with respect to the pledge of Insilco stock, and such
other registration rights agreements as are described in the Offering
Memorandum) granting any person the right to require either Issuer to
file a registration statement under the Securities Act with respect to
any securities of the Issuers or to require either Issuer to include
such securities with the Securities registered pursuant to any
Registration Statement; and
(vii) the execution, delivery and performance by the Issuers
of the Operative Documents to which each is a party, the consummation
of the transactions contemplated thereby and compliance by the Issuers
with the provisions thereof, and the consummation of the Offer to
Purchase, will not (i) except to the extent such has been obtained,
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except
such as may be required under the Securities Act or the securities or
Blue Sky laws of the various states or by NASD or the Secretary of
State of Delaware), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, (A) the certificate of
incorporation or bylaws of Insilco or Holdings, as the case may be, or
(B), assuming receipt of the consents from the lenders under the
Existing Credit Facility as described in the Offering Memorandum,
require any consent or approval (which has not been obtained or waived)
of parties to, or conflict with or constitute a breach of any of the
terms or provisions of, or a default under, any document, agreement or
other instrument to which Holdings or any of its subsidiaries is a
party or by which any of them is bound, (iii) to such counsel's
knowledge, violate or conflict with any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Holdings or any of its subsidiaries or any of their
respective properties, or (iv) result in the termination, suspension or
revocation of any Authorization of Holdings or any of its subsidiaries,
except in the case of clauses (i), (ii)(B), (iii) and (iv), as would
not, singly or in the aggregate, have a Material Adverse Effect.
The opinion of Kenneth H. Koch described in this Section 9(e) shall be
rendered to the Initial Purchaser at the request of the Issuers and shall so
state therein.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to the Initial Purchaser and counsel for the Initial
Purchaser), dated the Closing Date, of Davis Polk & Wardwell, to the effect
that:
(i) each Issuer is validly existing in good standing
under the laws of its jurisdiction of organization and has the
requisite power to enter into the Operative Documents to which it
is a party;
(ii) assuming all the outstanding shares of capital stock
of Insilco have been duly authorized and validly issued and are fully
paid and non-assessable, all shares of
22
<PAGE> 24
capital stock of Holdings issued in connection with the Mergers and the
Merger Financing were duly authorized and validly issued and are fully
paid and non-assessable and not subject to any preemptive or similar
rights, as applicable;
(iii) the execution, delivery and performance by each Issuer
of this Agreement and the other Operative Documents to which each
Issuer is a party, the compliance by each Issuer with the provisions
hereof and thereof, and the consummation of the Offer to Purchase, will
not (i) require any consent, approval, authorization or other order of,
or qualification with, any court or governmental body or agency (except
such as may be required under the Securities Act or the securities or
Blue Sky laws of the various states or by NASD or the Secretary of
State of Delaware), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, (A) the certificate of
incorporation or bylaws of Insilco or Holdings, as the case may be, or
(B) require any consent or approval (which has not been obtained or
waived) of parties to, or conflict with or constitute a breach of any
of the terms or provisions of, or a default under, the Indenture dated
as of August 12, 1997 relating to the 10.25% Senior Subordinated Notes
due 2007 of Insilco, the Indenture dated as of August 17, 1998 relating
to the 14% Senior Discount Notes due 2008 of Holdings, any of the
Operative Documents or the Warrant Agreement or the Registration Rights
Agreements as defined in the Purchase Agreement, dated as of August 12,
1998, relating to the Holdings Units, (iii) violate or conflict with
any laws, rules, regulations or rulings normally applicable to general
business corporations in relation to transactions of the type
contemplated by the aforementioned agreements or court decrees
applicable to either Issuer or their properties, or (iv) result in the
imposition or creation of a Lien under any agreement referred to in
clause (ii)(B), except in the case of clauses (i), (ii)(B) and (iv), as
would not, singly or in the aggregate, have a Material Adverse Effect;
(iv) the Series A Notes have been duly authorized by
Insilco and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, will
be entitled to the benefits of the Indenture and will be valid and
binding obligations of Insilco, enforceable against Insilco in
accordance with their terms, except as (x) the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally, (y) as
such enforcement may be limited by equitable principles of general
applicability, regardless of whether enforcement is sought in a
proceeding at law or in equity and (z) to the extent that a waiver of
rights under any usury or stay law may be unenforceable;
(v) the Indenture has been has been duly authorized,
executed and delivered by Insilco and is a valid and binding agreement
of Insilco, enforceable against Insilco in accordance with its terms,
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, (y) as such enforcement may
be limited by equitable principles of general applicability, regardless
of whether enforcement is sought in a proceeding at law or in equity
and (z) to the extent that a waiver of rights under any usury or stay
law may be unenforceable;
23
<PAGE> 25
(vi) the Series B Notes have been duly authorized;
(vii) this Agreement has been duly authorized, executed and
delivered by each Issuer;
(viii) the Warrants have been duly authorized by Holdings
and, when executed and countersigned in accordance with the provisions
of the Warrant Agreement and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, will be
entitled to the benefits of the Warrant Agreement and will be valid and
binding obligations of Holdings, enforceable against Holdings in
accordance with their terms, except as (x) the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or moratorium
or similar laws affecting creditors' rights and remedies generally and
(y) as such enforcement may be limited by equitable principles of
general applicability, regardless of whether enforcement is sought in a
proceeding at law or in equity;
(ix) the Warrant Agreement has been has been duly
authorized, executed and delivered by Holdings and is a valid and
binding agreement of Holdings, enforceable against Holdings in
accordance with its terms, except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally and (y)
as such enforcement may be limited by equitable principles of general
applicability, regardless of whether enforcement is sought in a
proceeding at law or in equity;
(x) each of the Registration Rights Agreements has been
duly authorized, executed and delivered by the Issuer party thereto and
is a valid and binding agreement of such Issuer, enforceable against
such Issuer in accordance with its terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
and remedies generally, (y) as such enforcement may be limited by
equitable principles of general applicability, regardless of whether
enforcement is sought in a proceeding at law or in equity, and (z) as
rights to indemnity and contribution thereunder may be limited by
applicable law;
(xi) Holdings has duly authorized and reserved for issuance
the Warrant Shares to be issued upon the exercise of the Warrants and,
when issued and delivered upon the exercise of the Warrants against
payment of the exercise price as provided in the Warrant Agreement,
will have been validly issued and will be fully paid and non
assessable, and the issuance of the Warrant Shares will not be subject
to any preemptive or similar statutory rights;
(xii) the statements under the captions "Certain
Relationships and Related Party Transactions," "Description of
Certain Indebtedness," "Description of Holdings Capital Stock"
(other than the second sentence thereof), "Description of Units,"
"Description of the Notes," "Description of Warrants" and "Plan of
Distribution" and the description of the existing employment
agreements under "Executive Compensation - Employment and Severance
Benefit Agreements" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters or documents
24
<PAGE> 26
referred to therein, fairly present in all material respects such legal
matters or documents;
(xiii) the statements made in the Offering Memorandum under
the caption "Certain Federal Income Tax Consequences," insofar as
they purport to constitute summaries of matters of United States
federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described therein
in all material respects;
(xiv) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder;
(xv) it is not necessary in connection with the offer, sale
and delivery of the Units to the Initial Purchaser in the manner
contemplated by this Agreement or in connection with the initial
placement of the Units by the Initial Purchaser in the manner
contemplated by the Offering Memorandum pursuant to Exempt Resales to
qualify the Indenture under the TIA, and no registration under the
Securities Act of the Units, the Series A Notes or the Warrants is
required for the sale of the Units, the Series A Notes and the Warrants
to the Initial Purchaser as contemplated by this Agreement or for the
initial placement of the Units by the Initial Purchaser in the manner
contemplated by the Offering Memorandum pursuant to Exempt Resales
assuming that (i) each Eligible Purchaser is a QIB, (ii) the accuracy
of, and compliance with, the Initial Purchaser's representations and
agreements contained in Section 7 of this Agreement, and (iii) the
accuracy of the agreements and representations of the Issuers set forth
in Sections 5(h) and (m) and 6(ee), (ff) and (gg) of this Agreement;
and
(xvi) Neither Issuer is, after giving effect to the offering
and sale of the Units in accordance with the terms of this Agreement
and the application of the net proceeds thereof as described in the
Offering Memorandum under the caption "Use of Proceeds," an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
In addition, such counsel shall state that it has participated in the
preparation of the Offering Memorandum and any amendments or supplements
thereto, if applicable, and that although such counsel has not independently
verified the accuracy, completeness or fairness of the statements contained
therein, no facts have come to such counsel's attention to cause it to believe
that, as of the date of the Offering Memorandum or as of the Closing Date, the
Offering Memorandum, as amended or supplemented, if applicable (except for the
financial statements and other financial or statistical data included therein or
omitted therefrom, as to which such counsel need not express any belief)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The opinions of Davis Polk & Wardwell described in this Section 9(p)
shall be rendered to the Initial Purchaser at the request of the Issuers and
shall so state therein.
25
<PAGE> 27
(g) The Initial Purchaser shall have received, at the Closing Date, an
opinion, dated the Closing Date, of Simpson Thacher & Bartlett, counsel for the
Initial Purchaser, in form and substance satisfactory to the Initial Purchaser.
(h) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchaser from KPMG Peat Marwick, independent public accountants,
containing the information and statements of the type ordinarily included in
accountants' "comfort letters" with respect to the financial statements and
certain financial information contained in the Offering Memorandum.
(i) The Units shall have been approved by the NASD for trading and duly
listed in PORTAL.
(j) The Initial Purchaser shall have received a counterpart, conformed
as executed, of (i) the Indenture which shall have been entered into by Insilco
and the Trustee and (ii) the Warrant Agreement which shall have been entered
into by Holdings and the Warrant Agent.
(k) Each Issuer shall have executed the Operative Documents to which it
is a party, and the Initial Purchaser shall have received an original copy
thereof, duly executed by such Issuer.
(l) Neither Issuer shall have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by such Issuer at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to the Issuers if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Units on the terms and in the
manner contemplated in the Offering Memorandum, (ii) the suspension or material
limitation of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation on prices for securities or other instruments on
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of either Issuer on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which, in the Initial Purchaser's opinion, materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of Holdings and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which, in the Initial Purchaser's opinion, has a material adverse
effect on the financial markets in the United States.
26
<PAGE> 28
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to either Issuer, at 425 Metro
Place North, 5th Floor, Dublin, OH 43017, Attn: Chief Financial Officer, and
(ii) if to the Initial Purchaser, to Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Issuers and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Units,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of the Initial Purchaser, the officers or directors of the
Initial Purchaser, any person controlling the Initial Purchaser, the Issuers,
the officers or directors of the Issuers, or any person controlling the Issuer,
(ii) acceptance of the Units and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Units are not delivered by or on behalf of the
Issuers as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), Insilco agrees to reimburse the Initial
Purchaser for all out-of-pocket expenses (including the fees and disbursements
of counsel) incurred by them. Notwithstanding any termination of this Agreement,
Insilco shall be liable for all expenses which the Issuers have agreed to pay
pursuant to Section 5(i) hereof. Insilco also agrees to reimburse the Initial
Purchaser and its officers, directors and each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation their rights under Section 8).
27
<PAGE> 29
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons of the Initial Purchaser referred to herein, each Issuer's directors and
officers, any controlling persons of the Issuers referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
a purchaser of any of the Units from the Initial Purchaser merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
INSILCO CORPORATION
By:
------------------------------------------
Name:
Title:
INSILCO HOLDING CO.
By:
------------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
28
<PAGE> 30
SCHEDULE A
SUBSIDIARIES
ARUP Alu-Rohr und-Profil GmbH
Great Lake, Inc.
Insilco Corporation
Insilco Asia Corporation
Dalian General ThermoDynamics Incorporated Ltd.
InNet Technologies, Inc.
Insilco Deutschland GmbH
Insilco Teoranta
Signal Caribe, Inc.
Signal Dominicana, S.A.
Signal Transformer Co., Inc.
Steel Parts Corporation
Stewart Connector Systems, Inc.
Stewart Connector Systems GmbH
Stewart Connector Systems (Japan), Inc.
Stewart Connector Systems de Mexico, S.A. de C.V.
Stewart Stamping Corporation
Taylor Publishing Company
Thermal Components Division, Inc.
Thermal Components, Inc.
Thermalex, Inc.
S-1
<PAGE> 31
SCHEDULE B
SIGNIFICANT SUBSIDIARIES
Signal Transformer Co., Inc.
Steel Parts Corporation
Stewart Connector Systems, Inc.
Stewart Stamping Corporation
Taylor Publishing Company
S-1
<PAGE> 32
EXHIBIT A
FORM OF A/B REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE> 33
EXHIBIT B
FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT
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<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,659
<SECURITIES> 0
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<INVENTORY> 60,989
<CURRENT-ASSETS> 162,223
<PP&E> 190,355
<DEPRECIATION> (76,224)
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<BONDS> 214,213
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32,722
<COMMON> 1
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