<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
INSILCO HOLDINGS CORPORATION
PORTER, WRIGHT, MORRIS & ARTHUR
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
INSILCO HOLDING CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JULY 22, 1999
AND
PROXY STATEMENT
================================================================================
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE> 3
INSILCO HOLDING CO.
425 METRO PLACE NORTH
DUBLIN, OHIO 43017
(614) 792-0468
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 1999
July 8, 1999
To the Stockholders of Insilco Holding Co.:
NOTICE is hereby given that the Annual Meeting of Stockholders of
Insilco Holding Co., a Delaware corporation (the "Company"), will be held at the
offices of Donaldson, Lufkin & Jenrette at 277 Park Avenue, New York, New York,
on Thursday, July 22, 1999, at 9:00 a.m., local time, for the following
purposes:
1. To elect seven directors, each for a one-year term expiring at
the Annual Meeting of Stockholders in 2000.
2. To amend the Insilco Holding Co. Stock Option Plan to allow the
grant of stock options to non-employee directors under the Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Owners of Common Stock of the Company of record at the close of
business on July 6, 1999, will be entitled to vote at the meeting.
Whether or not you plan to attend the meeting, please date, sign and
mail the enclosed proxy in the envelope provided.
A copy of the Annual Report on Form 10-K/A No. 1 of the Company for the
fiscal year ended December 31, 1998, is enclosed. Thank you for your
cooperation.
By Order of the Board of Directors
David A. Kauer
President and Chief Executive Officer
<PAGE> 4
INSILCO HOLDING CO.
425 METRO PLACE NORTH
DUBLIN, OHIO 43017
(614) 792-0468
July 8, 1999
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Insilco Holding
Co., a Delaware corporation (the "Company"), in connection with the solicitation
by the Board of Directors of the Company of proxies to be used at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at the offices of
Donaldson, Lufkin & Jenrette at 277 Park Avenue, New York, New York, on
Thursday, July 22, 1999, at 9:00 a.m., local time, and at any adjournment
thereof. The Proxy Statement and the enclosed proxy are being mailed to the
stockholders on or about the date set forth above.
All shares represented by properly executed proxies received by the
Board of Directors pursuant to this solicitation will be voted in accordance
with the stockholder's directions specified on the proxy or, in the absence of
specific instructions to the contrary, will be voted in accordance with the
Board of Director's unanimous recommendations, which are FOR the election of
Randall E. Curran, William F. Dawson, Jr., Thompson Dean, John F. Fort III,
David Y. Howe, David A. Kauer, and Keith Palumbo as directors of the Company;
FOR the amendment of the Insilco Holding Co. Stock Option Plan allowing the
grant of stock options to non-employee directors under the Plan; and, at the
discretion of the persons acting under the proxy, to transact such other
business as may properly come before the meeting or any adjournment thereof.
A proxy may be revoked, without affecting any vote previously taken, by
written notice mailed to the Company (attention Chief Executive Officer or
Corporate Secretary) or delivered in person at the meeting, by filing a duly
executed, later dated proxy, or by attending the meeting and voting in person.
A majority of the outstanding shares of the Company will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. The election of each director nominee requires the favorable vote of a
plurality of all votes cast by the holders of Common Stock at a meeting at which
a quorum is present. Only shares that are voted for a particular nominee will be
counted towards such nominee's achievement of a plurality. Abstentions and
broker non-votes are not counted toward such nominee's achievement of a
plurality and, thus, will have no effect. Each other matter to be submitted to
the stockholders at this meeting requires the affirmative vote of the majority
of shares present in person or represented by proxy at the meeting and entitled
to vote. Therefore, on all matters other than the election of directors,
abstentions and broker non-votes will have the same effect as votes cast against
the proposal.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS
Only stockholders of record at the close of business on July 6, 1999,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. At July 6, 1999, the Company had 1,472,487 outstanding shares of Common
Stock, $.001 par value (the "Common Stock"). Each stockholder is entitled to one
vote for each share held. There are no cumulative voting rights in the election
of directors. See also, "Information Concerning Directors, Executive Officers
and Principal Stockholders."
ELECTION OF DIRECTORS
Management has nominated Randall E. Curran, William F. Dawson, Jr.,
Thompson Dean, John F. Fort III, David Y. Howe, David A. Kauer, and Keith
Palumbo for election as directors of the Company, each to serve for a term of
one year and until his successor is duly elected and qualified. The shares
represented by the enclosed proxy, if returned duly executed and unless
instructions to the contrary are indicated thereon, will be voted FOR the
nominees. If for any reason a nominee should not be a candidate for election at
the time of the meeting (which management does not expect), the proxies may be
voted for a substitute nominee in the discretion of those named as
- 1 -
<PAGE> 5
proxies. The election of each nominee requires the favorable vote of a plurality
of all votes cast by the holders of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH NOMINEE FOR DIRECTOR.
The following table sets forth name, age and business experience of the
nominees for election as directors of the Company. Each director has held the
occupation indicated for more than the past five years unless otherwise
indicated.
NAME AND BUSINESS EXPERIENCE AGE
---------------------------- ---
RANDALL E. CURRAN 43
Mr. Curran has been a Director, Chairman of the Board, President and
Chief Executive Officer of Thermadyne LLC since May 1998. Mr. Curran
has also served as a Director of Thermadyne Holdings Corporation since
February 1994 and was elected Chairman of the Board and Chief
Executive Officer of Thermadyne Holdings Corporation in February 1995,
having previously served as President of Thermadyne Holdings since
August 1994 and as Executive Vice President and Chief Operating
Officer of Thermadyne Holdings Corporation since February 1994. He
also serves as President of Thermadyne Industries, Inc., a position he
has held since 1992. From 1986 to 1992, Mr. Curran was Chief Financial
Officer of Thermadyne Holdings Corporation and/or its predecessors.
Prior to 1986, Mr. Curran held various executive positions with Cooper
Industries, Inc.
WILLIAM F. DAWSON, JR. 34
Mr. Dawson has been a Principal of DLJMB Inc. since August 1997. From
December 1995 to August 1997, he was a Senior Vice President in DLJ's
High Yield Capital Markets Group. Prior thereto, Mr. Dawson was a Vice
President in the Leveraged Finance Group within DLJ's Investment
Banking Group. Mr. Dawson serves as a director of Von Hoffman
Corporation and Thermadyne Holdings Corporation.
THOMPSON DEAN 40
Mr. Dean has been the Managing Partner of DLJMB Inc. since November
1996. Prior thereto, Mr. Dean was a Managing Director of DLJMB Inc.
(and its predecessor). Mr. Dean serves as a director of Commvault
Inc., Von Hoffman Corporation, Manufacturers' Services Limited, Phase
Metrics, Inc., and Arcade Holding Corporation.
JOHN F. FORT III 57
Mr. Fort retired as Chairman of the Board of the Directors of Tyco
International, Inc. a position he held from 1982 to December 1992. Mr.
Fort also served as Chief Executive Officer of Tyco International,
Inc. from 1982 to June 1992. Mr. Fort serves as a director of Tyco
International, Inc., Dover Corporation and Roper Industries.
DAVID Y. HOWE 34
Mr. Howe has been a Vice President of Citicorp Venture Capital, Ltd.
since 1993. Mr. Howe serves as a director of Aetna Industries, Inc.,
American Italian Pasta Company, IPC Information Systems, Inc. and
PenTab Industries, Inc.
- 2 -
<PAGE> 6
DAVID A. KAUER 43
Mr. Kauer has been President and Chief Executive Officer of the
Company since June 1999. Prior to that, he served as Vice President
and Chief Financial Officer of the Company from May 1998 to June 1999,
as Vice President and Treasurer of the Company from April 1997 to May
1998, and as Treasurer from September 1993 to April 1997. From October
1989 to September 1993, he served as Controller and Treasurer of
Johnson Yokogawa Corporation (a joint venture of Yokogawa Electric
Corporation and Johnson Controls, Inc.)
KEITH PALUMBO 30
Mr. Palumbo has been a Vice President of DLJMB Inc. since December
1997. Prior thereto, Mr. Palumbo was an Associate in DLJ's investment
banking group.
Messrs. Howe, Dawson and Dean were first elected to the Board of
Directors effective August 17, 1998. Mr. Curran became a director on October 21,
1998 and Messrs. Fort and Palumbo became directors on January 26, 1999. Each has
served as a director continuously since his election. Mr. Smialek, who was a
director of the Company and its predecessor since May 1, 1993, resigned as a
director in June 1999 and is not seeking reelection. In June 1999, Mr. Kauer was
elected to the Company's Board of Directors to fill the vacancy left by Mr.
Smialek's resignation.
INFORMATION CONCERNING THE DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS, AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of Company Common Stock as of June 30, 1999 by (i) any
person or group who beneficially owns more than five percent of Company Common
Stock, (ii) each of the Company's directors and named executive officers and
(iii) all directors and executive officers as a group.(1)
<TABLE>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- - - -------------------------------------------------- ------------ ----------
<S> <C> <C>
DLJ Merchant Banking Partners II, L.P. and related
investors(2)(3) ............................. 1,043,584 70.8%
399 Venture Partners, Inc.(4) .................... 266,666 19.3%
Thompson Dean(6) ................................. -- --
William F. Dawson, Jr.(5) ........................ -- --
Keith Palumbo(5) ................................. -- --
David Y. Howe(6) ................................. -- --
Randall E. Curran ................................ -- --
John F. Fort III ................................. -- --
Robert L. Smialek(7) ............................. 21,354 1.5%
Kenneth H. Koch(7) ............................... 300 *
David A. Kauer ................................... 27 *
Leslie G. Jacobs(7) .............................. 13 *
Michael R. Elia .................................. -- --
All directors and executive officers
as a group (8 persons)(5)(6) ................ 27 *
- - - ----------
</TABLE>
* Represents less than 1%.
(1) On August 17, 1998, a series of transactions involving the Company was
completed. These transactions included, among other things, the formation
by 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
- 3 -
<PAGE> 7
"Reorganization Merger"), pursuant to which each stockholder of Insilco
had his or her shares of Insilco Corporation converted into the same
number of shares of the Company and the right to receive $0.01 per share
in cash, and the Company became the parent of Insilco.
Promptly following the Reorganization Merger, a second merger took place
pursuant to which Silkworm Acquisition Corporation ("Silkworm"), an
affiliate of Donaldson, Lufkin & Jenrette Merchant Banking Partners, II,
L.P. ("DLJMB"), merged with and into the Company (the "Merger," and
together with the Reorganization Merger, the "Mergers") and each share of
the Company's Common Stock was converted into the right to receive $43.47
in cash and 0.03378 of a share of the Company's 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 the Company's Common Stock. Concurrently with the consummation of the
Mergers, the DLJMB Funds purchased 1,400,000 shares of the Company 15%
Senior Exchangeable Preferred Stock due 2012 (the "PIK Preferred Stock"),
and warrants to purchase 65,603 shares of the Company's Common Stock at an
exercise price of $0.001 per share (the "DLJMB Warrants").
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 the Company's Common Stock; (ii) the DLJMB Funds
held approximately 69.0% (69.8% on a fully diluted basis) of the
outstanding shares of the Company's 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 the
Company's Common Stock; and (iv) management of the Company purchased
approximately 1.7% (1.5% on a fully diluted basis) of the outstanding
shares of the Company's 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 the
Company.
(2) Includes 65,603 shares of the Company's Common Stock issued following
exercise on March 12, 1999 of the DLJMB Warrants issued in connection with
the PIK Preferred Stock. Also includes 22,425 shares of the Company's
Common Stock issued following exercise on March 12, 1999 of warrants,
which were issued as part of the Company's Units purchased by the DLJ
Mezzanine Investors (as defined herein).
(3) Consists of shares held directly by the following investors related to
DLJMB: DLJ Offshore Partners II, C.V. ("Offshore"), a Netherlands Antilles
limited partnership, DLJ Diversified Partners, L.P. ("Diversified"), a
Delaware limited partnership, DLJMB Funding II, Inc. ("Funding"), a
Delaware corporation, DLJ Merchant Banking Partners II-A, L.P.
("DLJMBPIIA"), a Delaware limited partnership, DLJ Diversified Partners-A.
L.P. ("Diversified A"), a Delaware limited partnership, DLJ Millennium
Partners, L.P. ("Millennium"), a Delaware limited partnership, DLJ
Millennium Partners-A, L.P. ("Millennium A"), a Delaware limited
partnership, DLJ EAB Partners, L.P. ("EAB"), a Delaware limited
partnership, UK Investment Plan 1997 Partners ("UK Partners"), a Delaware
partnership, DLJ First ESC L.P. ("DLJ First ESC"), a Delaware limited
partnership, and DLJ ESC II, L.P. ("DLJESCII"), a Delaware limited
partnership. See "Board of Director Interlocks and Insider
Participation"). The address of each of DLJMB, Diversified, Funding,
DLJMBPIIA, Diversified A, Millennium, Millennium A, DLJ First ESC, DLJ ESC
II and EAB is 277 Park Avenue, New York, New York 10172. The address of
Offshore is John B. Gorsiraweg 14, Willemstad, Curacao, Netherlands
Antilles. The address of UK Partners is 2121 Avenue of the Stars, Fox
Plaza, Suite 3000, Los Angeles, California 90067.
(4) The address of 399 Venture Partners, Inc. is 399 Park Avenue, New York,
New York, 10022-4614.
(5) Messrs. Dean, Dawson and Palumbo are officers of DLJMB Inc., an affiliate
of DLJMB and the Initial Purchaser. The business address of Messrs. Dean,
Dawson and Palumbo is DLJMB Inc., 277 Park Avenue,
- 4 -
<PAGE> 8
New York, New York 10172. Share data shown for such individuals excludes
shares shown as held by the DLJMB Funds, as to which such individuals
disclaim beneficial ownership.
(6) Mr. Howe is an officer of Citicorp Venture Capital, Ltd., an affiliate of
399 Venture Partners, Inc. The business address of Mr. Howe is 399 Park
Avenue, New York, NY 10022-4614. Share data shown for Mr. Howe excludes
shares shown as held by 399 Venture Partners, Inc., as to which Mr. Howe
disclaims beneficial ownership.
(7) Messrs. Smialek, Koch, and Jacobs resigned from the Company in June 1999.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company had one regular meeting and one
special meeting during 1998. Each of the directors attended 75% or more of the
total number of the Board of Directors meetings held during 1998.
The Board of Directors has no standing Audit or Compensation Committees.
Insilco, the registrant prior to the Mergers, had one regular and seven
special board meetings prior to the Mergers. On August 13, 1998, all of the
directors of Insilco resigned, except for Mr. Smialek who subsequently resigned
in June 1999, and vacancies on the Board of Insilco created by the resignations
were filled by Messrs. Dean and Dawson. The members of the Insilco Audit
Committee prior to the Mergers were James J. Gaffney, Terence M. O'Toole, Thomas
E. Petry and Barry S. Volpert. The Audit Committee oversaw the work of the
internal audit staff and external auditors. The Compensation Committee, prior to
the Mergers, was comprised of James J. Gaffney and Thomas E. Petry, and it
reviewed officer compensation, administered the Insilco 1993 Long-Term Incentive
Plan (the "Incentive Plan"), and met once during 1998, with both members
attending both meetings. The Board of Directors of the Company currently
performs the functions formerly performed by the Audit and Compensation
Committees of Insilco.
DIRECTOR COMPENSATION
During fiscal 1998, no director received compensation for director
services except for reimbursement of reasonable and customary travel expenses.
EXECUTIVE OFFICERS
Set forth below are the name, age and office of each "executive officer"
of the Company (as defined by the Securities and Exchange Commission).
David A. Kauer, age 43 President and Chief Executive Officer
Michael R. Elia, age 40 Vice President and Chief Financial Officer
Executive officers are elected annually to serve for a year or until
their successors are elected. During the past five years, Mr. Kauer has had the
business experience set forth above under "Directors," while the other executive
officer has had the business experience described below. Unless otherwise
stated, positions are with the Company.
Mr. Elia: Vice President and Chief Financial Officer ( since June 1999)
and Vice President and Controller (August 1998 to June 1999); was Chief
Financial Officer of Jordan Telecommunication Products from February 1997 to
August 1998; Director of Strategic Planning Fieldcrest Cannon, Inc. from 1994 to
1997; prior thereto held senior financial positions with Insilco's Technologies
Group.
- 5 -
<PAGE> 9
EXECUTIVE COMPENSATION
The aggregate remuneration of the Chief Executive Officer during 1998 and
the four other most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 for the fiscal year ended December 31, 1998,
is set forth in the following table:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
--------------------------
Annual Compensation Awards
-----------------------------------------------------
Other Annual Securities All Other
Name and Principal Compensation Underlying Compensation
Position Year Salary ($) Bonus ($) ($) Options (#) ($)
- - - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Smialek(1) 1998 $550,000 -- -- -- $ 13,519(7)
President and CEO 1997 550,000 $300,000 -- -- 9,901(8)
1996 537,499 235,000 -- -- 13,251(9)
David A. Kauer(2) 1998 196,667 40,000 -- -- 93,830(10)
Vice President and Chief 1997 164,000 80,000 -- 10,000 3,369(11)
Financial Officer 1996 143,917 58,000 -- 1,500 3,109(12)
Kenneth H. Koch(1) 1998 173,500 27,500 -- -- 393,254(13)
Vice President, General 1997 162,833 75,000 -- 10,000 3,314(14)
Counsel and Secretary 1996 151,167 78,373 -- 2,500 3,114(15)
Leslie G. Jacobs(1) 1998 174,167 13,500 13,500(5) -- 388,921(16)
Vice President, Human 1997 165,000 70,000 -- 10,000 4,031(17)
Resources and Assistant 1996 155,833 62,500 -- -- 3,762(18)
Secretary
Michael R. Elia(3) 1998 70,288 44,875(4) 14,875(6) -- 99,294(19)
Vice President and 1997 -- -- -- -- --
Corporate Controller 1996 -- -- -- -- --
</TABLE>
- - - --------------
(1) Messrs. Smialek, Koch, and Jacobs resigned from the Company in June 1999.
(2) Mr. Kauer was named President and Chief Executive Officer of the Company
in June 1999.
(3) Mr. Elia joined the Company August 1, 1998, and was named Vice President
and Chief Financial Officer in June 1999.
(4) Includes $30,000 sign-on bonus.
(5) Portion of bonus deferred to purchase equity units (see Long-Term
Incentive Plan Table).
(6) Portion of bonus deferred to purchase equity units (see Long-Term
Incentive Plan Table).
(7) Includes employer contributions under the Company's Employee Thrift Plan
401(k) (the "Thrift Plan") ($2,400), insurance premiums paid by the
Company ($7,643) and medical reimbursements ($3,476).
(8) Includes Thrift Plan contributions ($2,250) and insurance premiums paid
by the Company ($7,501).
(9) Includes Thrift Plan contributions ($2,250) and insurance premiums paid
by the Company ($10,509).
- 6 -
<PAGE> 10
(10) Includes monies received from the Value Appreciation Agreement ($90,300),
Thrift Plan contributions ($2,400) and insurance premiums paid by the
Company ($1,130).
(11) Includes Thrift Plan contributions ($2,400) and insurance premiums paid
by the Company ($969).
(12) Includes Thrift Plan contributions ($2,250) and insurance premiums paid
by the Company ($859).
(13) Includes monies received from the Value Appreciation Agreement
($390,000), Thrift Plan contributions ($2,400) and insurance premiums
paid by the Company ($854).
(14) Includes Thrift Plan contributions ($2,400) and insurance premiums paid
by the Company ($791).
(15) Includes Thrift Plan contributions ($2,250) and insurance premiums paid
by the Company ($733).
(16) Includes monies received from the Value Appreciation Agreement
($384,800), Thrift Plan contributions ($2,400) and insurance premiums
paid by the Company ($1,721).
(17) Includes Thrift Plan contributions ($2,400) and insurance premiums paid
by the Company ($1,631).
(18) Includes Thrift Plan contributions ($2,250) and insurance premiums paid
by the Company ($1,512).
(19) Includes moving expenses ($98,728) and Thrift Plan contributions ($319)
and insurance premiums paid by the Company ($247).
STOCK OPTIONS
None of the executive officers were granted stock options in 1998.
The following table provides certain information regarding the number and
the value of stock options exercised during 1998 and the value of stock options
held by the named executive officers at fiscal year end.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
------------------------------ ---------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE REALIZED
NAME (#) ($) (6) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - --------------------- ------------ ---------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Smialek(1) N/A(2) $3,120,010 - - - -
David A. Kauer N/A(3) $ - - - - -
Kenneth H. Koch(1) N/A(4) $ 17,530 - - - -
Leslie G. Jacobs(1) N/A(5) $ 271,790 - - - -
Michael R. Elia N/A $ - - - - -
</TABLE>
- - - --------------
(1) Messrs. Smialek, Koch, and Jacobs resigned from the Company in June 1999.
(2) Option gain of $999,990 rolled over into Equity Unit Plan.
- 7 -
<PAGE> 11
(3) Option gain of $322,500 rolled over into Equity Unit Plan.
(4) Option gain of $299,970 rolled over into Equity Unit Plan.
(5) Option gain of $99,990 rolled over into Equity Unit Plan.
(6) Represents gain from Option Cash Payments net of amounts rolled over into
Equity Unit Plan.
The following table provides certain information regarding long-term
incentive plan awards of the Company's Common Stock granted to executive
officers named in the summary compensation table in 1998 under the Incentive
Plan.
<TABLE>
LONG -TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
Number of Shares,
Units or Other Performance or Other Period
Name Rights (#) Until Maturation or Payout(1)
- - - -------------------- ----------------- -----------------------------
<S> <C> <C>
Robert L. Smialek(2) 22,222 --
David A. Kauer 14,000 --
Kenneth H. Koch(2) 6,666 --
Leslie G. Jacobs(2) 4,444 --
Michael R. Elia 3,777 --
</TABLE>
- - - --------------
(1) The shares of the Company's Common Stock were sold to such persons at a
purchase price of $45 per share. Holders of such common stock are not
permitted to transfer it until (i) sixty days after they are terminated
from Insilco or (ii) a Significant Event (as defined) occurs. Upon the
occurrence of any Significant Event prior to August 17, 2008, or the
person's termination, the Company has a right to purchase from such
person, and the holder has a right to sell to the Company, the Company's
Common Stock at a price equal to the common stock's Fair Market Value (as
defined) thereof or, if such holder was terminated for Cause (as
defined), at the lesser of $45 and the Fair Market Value. Holders of the
equity units purchased them for a price equal to their Fair Market Value
(which could have been paid for in cash, the termination of options or
the agreement to forego future salary and bonus payments). Such equity
units are cancelled upon the occurrence of a Significant Event or the
holder's termination from Insilco, at which time the holder will receive
a payment equal to the Fair Market Value of the equity units or, if such
holder was terminated for Cause (as defined), a payment equal to the
lesser of $45 and the Fair Market Value (which amount may be paid, at the
committee's discretion, either in cash or shares of the Company's Common
Stock).
(2) Messrs. Smialek, Koch, and Jacobs resigned from the Company in June 1999.
The Company has agreed to redeem the shares held by Messrs. Smialek,
Koch, and Jacobs at their original purchase price of $45 per share paid
by each of them.
RETIREMENT PLAN AND SUPPLEMENTAL ARRANGEMENTS
The Company's Retirement Plan for Salaried Employees (the "Retirement
Plan") provides retirement benefits for salaried employees, including officers.
The Company compensates employees for the loss of benefits which otherwise would
result because of the limitations the Internal Revenue Code places on pensions
that may be paid under tax-qualified retirement plans such as the Retirement
Plan. The unfunded supplemental retirement payments are accounted for as
operating expenses when earned.
- 8 -
<PAGE> 12
The following table shows the estimated annual retirement allowances
payable after retirement at normal retirement age to persons in the following
specified remuneration and years-of-service classifications (before any
deductions for joint or survivorship payments) without regard to any statutory
limitations imposed by the Internal Revenue Code. Normal retirement allowances,
beginning at age 65, equal (i) 50% of final average compensation minus (ii) 50%
of the retiree's primary social security benefit, pro-rated if total service is
less than 25 years or, in certain cases, is less than 35 years. Five years of
service is required for vesting.
<TABLE>
FINAL YEARS OF SERVICE
AVERAGE
EARNINGS(1) 15 20 25 30 35
- - - ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 33,385 $ 44,514 $ 55,642 $ 55,642 $ 55,642
150,000 40,885 54,514 68,142 68,142 68,142
175,000 48,385 64,514 80,642 80,642 80,642
200,000 55,885 74,514 93,142 93,142 93,142
250,000 70,885 94,514 118,142 118,142 118,142
300,000 85,885 114,514 143,142 143,142 143,142
350,000 100,885 134,514 168,142 168,142 168,142
400,000 115,885 154,514 193,142 193,142 193,142
450,000 130,885 174,514 218,142 218,142 218,142
500,000 145,885 194,514 243,142 243,142 243,142
550,000 160,885 214,514 268,142 268,142 268,142
600,000 175,885 234,514 293,142 293,142 293,142
650,000 190,885 254,514 318,142 318,142 318,142
</TABLE>
- - - ---------------
(1) The higher of (i) average annual compensation for any five consecutive
calendar years during the final 10 years of employment or (ii) the
average annual compensation for the last 60 months of employment.
Compensation consists of salary (including voluntary salary deferrals)
and bonus. Supplemental payments are based on average earnings in excess
of $160,000.
At December 31, 1998, Messrs. Smialek, Koch, Kauer, Jacobs and Elia were
credited, under the Retirement Plan and various supplemental arrangements, with
approximately 4.7, 4.2, 4.3, 7.9, and 9.7 years of service, respectively, for
purposes of determining their pensions. Messrs. Smialek, Koch, and Jacobs
resigned from the Company in June 1999.
EMPLOYMENT AND SEVERANCE BENEFIT AGREEMENTS
The following is a description of the employment agreements with certain
of Insilco's executive officers at the end of the 1998 fiscal year. Messrs.
Smialek, Koch, and Jacobs resigned from the Company in June 1999.
The Company employs Mr. Smialek under an agreement providing that Mr.
Smialek will serve indefinitely as President and Chief Executive Officer of the
Company. Under the agreement, Mr. Smialek receives an annual base salary of
$550,000. Mr. Smialek will be eligible to receive annual bonuses and salary
increases in such amounts as may be reasonably determined by the Board of
Directors. Mr. Smialek received no bonus in 1998. Mr. Smialek also is entitled
to participate in all incentive, savings, retirement and welfare benefit plans
and arrangements in which certain other senior executive officers are eligible
to participate, other than any restricted stock or option plans in which his
participation will be at the discretion of the Company.
If Mr. Smialek's employment is terminated by the Company without "Cause"
or by Mr. Smialek for "Good Reason" (as the quoted terms are used in the
agreement), he will be entitled to a lump sum amount equal to his accrued
salary, pro rated annual bonus and vacation pay and any compensation previously
deferred by him (collectively, the "Accrued Obligations") as well as a severance
payment equal to his annual salary plus the greater of $150,000 or his most
currently determined annual bonus, together with the continuation of certain
benefits for a one-year period.
- 9 -
<PAGE> 13
In December 1996, the Company entered into a Value Appreciation Agreement
with Messrs. Jacobs, Koch, Kauer and certain other officers. The Value
Appreciation Agreement provided that the executives would be entitled to receive
a commission from the Company in certain circumstances following a transaction
giving rise to a change in control. Upon consummation of the Mergers, a
commission on the sale of $2.6 million was paid and the Value Appreciation
Agreement was terminated.
In December 1996, the Company entered into Income Protection Agreements
with Messrs. Jacobs, Koch, Kauer and certain other officers. The Income
Protection Agreements provide that in the event of termination of an executive's
employment by the Company without cause, or, in certain circumstances, by the
executive, the executive will be entitled to receive certain severance benefits.
The benefits payable to the executive in the event of a termination of
employment covered by the Income Protection Agreement are as follows: (i) one
year's base salary; (ii) a bonus equal to the bonus paid to executive in 1996 or
the target bonus for the year in which employment is terminated; (iii) continued
participation in the Company's benefit plans for the duration of the severance
period; (iv) continuation of any rights to indemnification from the Company; and
(v) certain outplacement services. The Income Protection Agreements have three
year terms and automatically renew for subsequent one year terms, unless
terminated by either party.
- 10 -
<PAGE> 14
The following Compensation Committee Report and Performance Graph will
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any of the Company's filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
information by reference, and will not otherwise be deemed filed under such
Acts.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Board of Directors, with the advice of the Chief Executive Officer,
reviews and evaluates individual executive officers and determines the
compensation for each executive officer. In general, the Board's philosophy is
to attract, motivate and retain qualified key executives, reward individual
performance, relate compensation to Company goals and objectives and enhance
stockholder value. The Company's compensation program includes competitive base
salaries, annual bonus opportunities, competitive benefits and long-term awards
under the Insilco Holding Co. Stock Option Plan (the "Plan").
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Robert L. Smialek became the Company's Chief Executive Officer effective
May 1, 1993. The Compensation Committee then in place, by approval of the Second
Extension Agreement between the Company and Mr. Smialek, dated September 25,
1997, extended the employment agreement indefinitely. In 1998, Mr. Smialek
received a base salary of $550,000. Determination of Mr. Smialek's base salary
was primarily based on Mr. Smialek's background and experience, and compensation
levels of executives in similar positions in comparable businesses. Although Mr.
Smialek did not receive a bonus in 1998, he is eligible to receive annual
bonuses in such amounts as may be reasonably determined from time to time by the
Board of Directors. Mr. Smialek resigned from the Company in June 1999, and
David A. Kauer was appointed as President and Chief Executive Officer of the
Company in June 1999.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's compensation program for its executive officers is based on
the following objectives:
o Total compensation of the executive officers should be linked to
the financial performance of the Company and enhancement of
stockholder value.
o The compensation paid to the executive officers of the Company
should be competitive with executive compensation levels of
similar companies so that the Company can attract, motivate and
retain qualified key executives.
o The compensation program should reward outstanding individual
performance and contributions to the Company as well as
experience.
Compensation for executive officers in 1998 consisted of base salary,
bonuses and related stock option and incentives related to the Merger. Base
salaries and bonuses were paid to executive officers (excluding the Chief
Executive Officer) based upon each such executive officer's individual
performance, duties, responsibilities, experience and tenure, general economic
conditions, the recent financial performance of the Company, and other factors.
Bonuses paid to the executive officers were determined in accordance with a
bonus plan that required 70% of the bonus to be determined on the basis of the
Company's achieving certain specified financial performance goals, and 30% on
the basis of the Board of Directors' and the Chief Executive Officer's
evaluation of the performance of each executive officer. In addition, the Chief
Executive Officer has the discretion to make performance-related individual
awards.
The Plan was adopted in 1998, but no stock options were awarded under the
plan to executive officers in 1998. The future determination of such awards will
be based on: (i) the executive officer's length of service; (ii) the levels of
options awarded to executives in similar positions and at similar salary levels
as compared to surveys
- 11 -
<PAGE> 15
published by compensation consulting firms; and (iii) the executive's
contributions, performance and perceived ability to impact overall business
results.
IMPACT OF 1993 TAX ACT CHANGES
The Budget Reconciliation Act of 1993 (the "Act") amended the Internal
Revenue Code to add Section 162(m) that bars a deduction to any publicly held
corporation for compensation paid to a "covered employee" in excess of
$1,000,000 per year (the "Dollar Limitation"). A covered employee of the Company
is any employee who appears in the Summary Compensation Table who is also
employed by the Company on December 31. The Dollar Limitation applies to tax
years beginning after 1993.
The legislation potentially impacts three components of the Company's
executive compensation package. These include base salaries, bonuses, and awards
under the Plan. The Company does not believe that the legislation as amended
will have any effect on the deductibility of compensation payable in 1998 to any
of its executive officers.
The Company believes that the Plan currently qualifies for the exemption
provided for performance based compensation and awards under the Plan will not
be subject to the Dollar Limitation.
BOARD OF DIRECTORS:
Thompson Dean
William F. Dawson, Jr.
David Y. Howe
Randall E. Curran
Keith Palumbo
John F. Fort III
- 12 -
<PAGE> 16
PERFORMANCE GRAPHS
As a result of the Mergers on August 17, 1998, the holders of Insilco
Common Stock received $43.48 in cash and 0.03378 of a share of Company Common
Stock for each share of Insilco Common Stock.
The following Performance Graph compares the performance of the Company
with that of the Russell 2000 Index and the Standard & Poor's Conglomerates
Index. The comparison of cumulative total return to stockholders assumes that
$100 was invested in the Common Stock of the Company and in the Russell 2000
Index and the Standard & Poor's Conglomerates Index on August 17, 1998, the date
of the Mergers and that all dividends were reinvested.
<TABLE>
COMPARISON OF 4 MONTH CUMULATIVE TOTAL RETURN
AMONG INSILCO HOLDING CO., THE S&P CONGLOMERATE INDEX
AND THE RUSSELL 2000 INDEX
<CAPTION>
Insilco S&P
Holding Co. Russell 2000 Conglomerates
----------- ------------ -------------
<S> <C> <C> <C>
8/17/98 100 100 100
12/98 49 102 108
</TABLE>
- 13 -
<PAGE> 17
The following Performance Graph compares the performance of Insilco with
that of the Russell 2000 Index and the Standard & Poor's Conglomerates Index
through the date of the Merger, August 17, 1998. The comparison of cumulative
total return to shareholders assumes that $100 was invested in the Common Stock
of Insilco on September 15, 1993 (the effective date of the registration of the
Insilco's Common Stock under the Securities Exchange Act of 1934, as amended),
and in the Russell 2000 Index and the Standard & Poor's Conglomerates Index on
August 31, 1993, and that all dividends were reinvested.
<TABLE>
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN
AMONG INSILCO CORPORATION, THE S&P CONGLOMERATE INDEX
AND THE RUSSELL 2000 INDEX
<CAPTION>
Insilco S&P
Corporation Russell 2000 Conglomerates
----------- ------------ -------------
<S> <C> <C> <C>
8/93 100 100 100
12/93 113 105 99
12/94 207 104 94
12/95 268 129 122
12/96 323 148 139
12/97 277 181 156
8/17/98 369 168 155
</TABLE>
- 14 -
<PAGE> 18
BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION
The DLJMB Funds own approximately 71.0% of the outstanding shares of the
Company's Common Stock (67.0% on a fully diluted basis after giving effect to
the issuance of the Warrants). Messrs. Dean and Dawson are officers of DLJMB and
directors of Insilco and the Company. Neither the Company nor Insilco is aware
of any transaction or of any currently proposed transaction, in which DLJ has
any material direct or indirect interest as a result of its ownership position
in a party to the transaction other than Insilco, except as follows:
Donaldson Lufkin & Jenrette Securities Corporation ("DLJSC") received
customary fees in connection with the distribution, as part of the financing of
the Merger, by Silkworm of units (which were converted into units of the Company
(the "Company Units") in the Merger), each unit consisting of $1,000 principal
amount at maturity of 14% Senior Discount Notes due 2008 (the "Old Notes"),
received customary fees in connection with the arranging of the syndication of
the new credit facility, received customary fees in connection with the
distribution of the Company's Units and received an advisory fee in connection
with the Mergers. In connection with the sale of the Company's Units, the
Company granted registration rights to DLJSC in connection with its
market-making activities and agreed to indemnify DLJSC against certain
liabilities, including liabilities under the Securities Act of 1933. In
addition, DLJ Capital Funding is an agent and lender under the new credit
facility. DLJ Capital Funding and DLJSC have and will receive customary fees in
connection with the provision of the new credit facility. Further, DLJ Capital
Funding, Inc., an affiliate of DLJSC, acted as syndication agent in connection
with the new credit facility for which it received certain customary fees and
expenses and DLJ Bridge Finance Inc., an affiliate of DLJSC, purchased the
bridge notes, for which it received customary fees and expenses. DLJSC has, from
time to time, provided investment banking and other financial advisory services
to Insilco in the past for which it has received customary compensation, and
will provide such services and financial advisory services to Insilco in the
future. DLJSC acted as purchaser in connection with the initial sale of the Old
Notes and received an underwriting discount of approximately $3.6 million in
connection therewith. In addition, DLJSC received a merger advisory fee of $3.5
million in cash from the Company after the consummation of the Merger. The
aggregate fees to be received by DLJ entities for its various services in 1998
were approximately $15.6 million.
DLJ Investment Partners, L.P., DLJ ESC II, L.P. and DLJ Investment
Funding, Inc. (the "DLJ Mezzanine Investors"), each of which is an affiliate of
DLJMB, purchased and aggregate of approximately 50% of the Company Units and are
entitled to certain registration rights in connection therewith.
In connection with the Mergers, DLJMB and the Company entered into an
agreement with respect to registration and certain other rights.
Prior to the Mergers, Water Street Corporate Recovery Fund I, L.P.
("Water Street"), an affiliate of Goldman, Sachs & Co. ("Goldman Sachs"),
beneficially owned approximately 45% (62% prior to the Share Repurchase) of
Insilco's common stock. Neither the Company nor Insilco is aware of any
transaction or of any currently proposed transaction in which Goldman Sachs has
any material direct or indirect interest as a result of its ownership position
in a party to the transaction other than the Company, except as follows:
Goldman Sachs advised Insilco in connection with the Mergers and received
a fee of $2.0 million payable on the consummation of the Mergers. In the
Mergers, Water Street received approximately $81.0 million and retained 62,962
shares of the Company. The Company entered into a Registration Rights Agreement
with Water Street in which Water Street has certain registration rights with
respect to such 62,962 shares.
Currently, none of the directors of the Company, with the exception of
Mr. Kauer, are employees of the Company. Mr. Kauer serves as the Company's
President and Chief Executive Officer.
- 15 -
<PAGE> 19
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN TO
ALLOW THE GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS UNDER THE PLAN
The proposed amendment to the Insilco Holding Co. Stock Option Plan (the
"Plan") would allow the grant of stock options to non-employee directors under
the Plan. Approval of this amendment requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented at the 1999
Annual Meeting. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE INSILCO HOLDING CO.
STOCK OPTION PLAN.
THE STOCK OPTION PLAN
The Company's Board of Directors believes that providing selected persons
with an opportunity to invest in the Company will give them additional incentive
to increase their efforts on behalf of the Company and will enable the Company
to attract and retain the best available employees. Therefore, the Company's
Board of Directors has approved an amendment to the Plan to extend the
availability of stock options grants to the Company's non-employee directors.
The Plan provides for the grant of stock options ("Awards") to officers,
employees, and employee-directors of the Company or any of its subsidiaries who
are selected by the Board of Directors or a designated committee (the
"Committee") to receive options (each, a "Participant"). The Plan was adopted by
the Company's Board of Directors and the Company's sole stockholder on June 8,
1998. The proposed amendment to the Plan was approved by the Company's Board of
Directors on April 21, 1999.
The Plan is administered by the Committee, which presently consists of
the Company's full Board of Directors. With respect to all eligible persons, the
Committee has full power and authority to determine:
- to whom, when, and to what extent Awards may be granted;
- the type(s) of Awards, and the number of shares covered by Awards;
- the restrictions (if any) on an Award;
- the exercise price of each option; and
- the conditions and limitations on the exercise of each option.
The Committee also has exclusive authority to interpret the Plan and any
agreement under the Plan. Unless the Plan specifically provides to the contrary,
the Committee's designations, determinations, and other decisions under the Plan
are binding on the Company, Participants, and on the holder or beneficiary of
any Award.
Each Award under the Plan is or will be embodied in a written agreement
(the "Award Agreement") that contains the terms and conditions of the Award as
determined by the Committee, including provisions regarding the vesting and
termination of options. The Award Agreement has or will be delivered to the
Participant, although the Participant need not execute or acknowledge it. A
Participant may not assign, sell, pledge, or otherwise transfer an Award other
than by will or the laws of descent and distribution, or except and to the
extent provided in the Award Agreement.
Options may be exercised at such times and on such terms as the Committee
provides in the Award Agreement. Payment of options may be in the form of cash,
the Company's Common Stock, or a combination of cash and the Company's Common
Stock and may include such restrictions as the Committee has determined. At the
Committee's sole discretion, a Participant may receive dividends or dividend
equivalent rights with an Award, which are payable in cash, shares, other
securities, or other property. A Participant will not receive any shares
pursuant to an exercise of stock options until the Company receives payment in
full of the exercise price, or until adequate provision has been made for such
payment.
The Board may amended or terminate the Plan at any time, except that such
amendment or termination will not be effective without the prior approval of the
Company's stockholders, where such approval is required by any applicable legal,
tax or regulatory requirement, including Section 16(b) of the Exchange Act. In
addition, subject to the Plan's provisions, the Committee may amend, alter or
terminate any Award granted under the Plan, except that no amendment,
alteration, or termination may impair the rights of any Participant under any
Award previously granted without such Participant's consent.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences with respect to
Incentive Stock Options and Non-Statutory Stock Options granted under
- 16 -
<PAGE> 20
the Plan are as described below. The following discussion is not intended to be
a complete statement of applicable law and is based upon the federal income tax
laws as in effect on the date of this proxy statement.
Incentive Stock Options. In general, a participant who is granted an
Incentive Stock Option does not recognize taxable income either on the date of
grant or on the date of exercise. Upon the exercise of an Incentive Stock
Option, however, the difference between the fair market value of the shares of
the Company's Common Stock received and the option price is a tax preference
item potentially subject to the alternative minimum tax. On the later sale or
other disposition of the shares of the Company's Common Stock, generally only
the difference between the fair market value of the Company's Common Stock on
the exercise date and the amount realized on the sale or disposition is
includable in alternative minimum taxable income.
Upon disposition of the shares of the Company's Common Stock acquired
from exercise of an Incentive Stock Option, long-term capital gain or loss is
generally recognized in an amount equal to the difference between the amount
realized on the sale or disposition and the exercise price. However, if the
Participant disposes of the shares of the Company's Common Stock within two
years of the date of grant or within one year from the date of the issuing of
the shares of the Company's Common Stock to the Participant (a "Disqualifying
Disposition"), then the Participant will recognize ordinary income, as opposed
to capital gain, at the time of disposition. In general, the amount of ordinary
income recognized will be equal to the lesser of: (i) the amount of gain
realized on the disposition, or (ii) the difference between the fair market
value of the shares of the Company's Common Stock received on the date of
exercise and the exercise price. Any remaining gain or loss is treated as a
short-term or long-term capital gain or loss, depending upon the period of time
the shares of the Company's Common Stock have been held.
The Company is not entitled to a tax deduction upon either exercise of an
Incentive Stock Option or disposition of the shares of the Company's Common
Stock acquired pursuant to such exercise, except to the extent that the
participant recognizes ordinary income in a Disqualifying Disposition.
If the holder of an Incentive Stock Option pays the exercise price, in
whole or in part, with previously acquired shares of the Company's Common Stock,
the exchange should not effect the Incentive Stock Option tax treatment of the
exercise. Upon such exchange, and except for Disqualifying Dispositions, no gain
or loss is recognized by the Participant upon the delivery of the previously
acquired shares of the Company's Common Stock to the Company for the payment of
the exercise price. The shares of the Company's Common Stock received by the
Participant, equal in number to the previously acquired shares of the Company's
Common Stock exchanged therefor, will have the same basis and holding period for
long-term capital gain purposes as the previously acquired shares of the
Company's Common Stock. The Participant, however, will not be able to utilize
the prior holding period for the purpose of satisfying the Incentive Stock
Option statutory holding period requirements. Shares of the Company's Common
Stock received by the Participant in excess of the number of previously acquired
shares of the Company's Common Stock will have a basis of zero (unless there was
gain recognized or cash paid upon the exercise) and a holding period which
commences as of the date the shares of the Company's Common Stock are issued to
the Participant upon exercise of the Incentive Stock Option. If the exercise of
an Incentive Stock Option is effected using shares of the Company's Common Stock
previously acquired through the exercise of an Incentive Stock Option, the
exchange of the previously acquired shares of the Company's Common Stock will be
considered a disposition of such shares of the Company's Common Stock for the
purposes of determining whether a Disqualifying Disposition has occurred.
Non-Statutory Stock Options. A Participant receiving a Non-Statutory
Stock Option does not recognize taxable income on the date of grant of the
Non-Statutory Stock Option, provided that the Non-Statutory Stock Option does
not have a readily ascertainable fair market value at the time it is granted. In
general, the Participant must recognize ordinary income at the time of exercise
of the Non-Statutory Stock Option in the amount equal to the difference between
the fair market value of the Company's Common Stock on the date of exercise and
the option price. The ordinary income received will constitute compensation for
which tax withholding generally will be required. The amount of ordinary income
recognized by a Participant will be deductible by the Company in the year that
the Participant recognizes the income if the Company complies with the
applicable withholding and reporting requirements.
Shares of the Company's Common Stock acquired upon exercise of a
Non-Statutory Stock Option will have a tax basis equal to their fair market
value on the exercise date or other relevant date on which ordinary income is
recognized, and the holding period for the shares of the Company's Common Stock
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the shares of the Company's Common Stock, the
Participant will recognize long-term capital gain or loss if the Participant has
held the shares of the Company's Common Stock for more than one year prior to
disposition, or short-term capital gain or loss if the Participant has held the
shares of the Company's Common Stock for one year or less.
- 17 -
<PAGE> 21
If the holder of a Non-Statutory Stock Option pays the exercise price, in
whole or in part, with previously acquired shares of the Company's Common Stock,
the holder will recognize ordinary income in the amount by which the fair market
value of the shares of the Company's Common Stock received exceeds the exercise
price. The Participant will not recognize gain or loss upon delivery of the
previously acquired shares of the Company's Common Stock to the Company. The
shares of the Company's Common Stock received by the holder of the Non-Statutory
Stock Option equal in number to the previously acquired shares of the Company's
Common Stock exchanged therefor will have the same basis and holding period for
capital gain purposes as the previously acquired shares of the Company's Common
Stock. Shares of the Company's Common Stock received by the holder of the
Non-Statutory Stock Option in excess of the number of previously acquired shares
of the Company's Common Stock will have a basis equal to the fair market value
of such additional shares of the Company's Common Stock as of the date ordinary
income is recognized. Generally, the holding period for such additional shares
of the Company's Common Stock will commence as of the date of exercise.
1993 Tax Act. The Budget Reconciliation Act of 1993 (the "1993 Act") has
increased the difference between the maximum ordinary income tax rate and the
preferential tax rate on long-term capital gains. The 1993 Act has also limited
a corporation's ability to deduct certain non-qualifying compensation.
Section 162(m). Section 162 (m) of the Code no longer permits the Company
to deduct non-performance-based compensation in excess of $1,000,000 per year
paid to certain covered officers. The Company believes that compensation paid
pursuant to the Plan should qualify as performance-based compensation and
therefore, Section 162(m) should not cause the Company to be denied a deduction
for compensation paid to certain covered officers pursuant to the Plan.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP served as the Company's independent accountants and
audited the Company's financial statements for the year ending December 31,
1998. It is expected that a representative of KPMG Peat Marwick LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
he desires to do so, and will be available to respond to appropriate questions.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1998, containing financial statements for such year and the signed
opinion of KPMG Peat Marwick LLP, independent certified public accountants, with
respect to such financial statements, has been simultaneously sent to
stockholders with this Proxy Statement. The Annual Report is not to be regarded
as proxy soliciting material, and management does not intend to ask, suggest or
solicit any action from the stockholders with respect to such report.
A copy of the Company's Annual Report on Form 10-K/A No. 1 for the fiscal
year ended December 31, 1998, is available without charge to stockholders on
request to:
Insilco Holding Co.
Attn: Corporate Secretary
425 Metro Place North
Dublin, Ohio 43017
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and greater than 10% stockholders, to file
reports of ownership and changes in ownership of the Company's securities with
the Securities and Exchange Commission ("SEC"). Copies of the reports are
required by SEC regulation to be furnished to the Company. Based on its review
of such reports and written representations from reporting persons, the Company
believes that all reporting persons complied with all filing requirements during
fiscal 1998.
- 18 -
<PAGE> 22
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. In addition to
the solicitation of proxies by mail, the directors, officers and employees of
the Company may solicit proxies personally or by telephone. The Company may
request persons holding shares in their names for others to forward soliciting
materials to their principals to obtain authorization for the execution of
proxies, and the Company may reimburse such persons for their expenses in doing
so.
STOCKHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election of
directors at the Annual Meeting of Stockholders. Other proposals may be
submitted by the Board of Directors or the stockholders for inclusion in the
Proxy Statement for action at the Annual Meeting of Stockholders. Any proposal
submitted by a stockholder for inclusion in the Proxy Statement for the 2000
Annual Meeting of Stockholders which is expected to be held on April 21, 2000
must be received by the Company (addressed to the attention of the Corporate
Secretary) on or before March 7, 2000. To be submitted at the meeting, any such
proposal must be a proper subject for stockholder action under the laws of the
state of Delaware.
OTHER MATTERS
The only business which management intends to present at the meeting
consists of the matters set forth in this statement. Management knows of no
other matters to be brought before the meeting by any other person or group. If
any other matter should properly come before the meeting, the proxy holders will
vote thereon in their discretion. All proxies received duly executed will be
voted. You are requested to sign and date the enclosed proxy and mail it
promptly in the enclosed envelope. If you later desire to vote in person, you
may revoke your proxy, either by written notice to the Company or in person at
the meeting, without affecting any vote previously taken.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID A. KAUER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
- 19 -
<PAGE> 23
COMMON STOCK
PROXY - INSILCO HOLDING CO.
The undersigned stockholder of Insilco Holding Co. (the "Company") hereby
appoints David A. Kauer and Robert J. Tannous, or either one of them, as
attorneys and proxies with full power of substitution to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the offices of
Donaldson, Lufkin & Jenrette at 277 Park Avenue, New York, New York, on
Thursday, July 22, 1999, at 9:00 a.m., local time, and at any adjournment or
adjournments thereof as follows:
1. THE ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
Randall E. Curran o William F. Dawson, Jr. o Thompson Dean
John F. Fort III o David Y. Howe o David A. Kauer
Keith Palumbo
2. TO CONSIDER AND ACT UPON A PROPOSED AMENDMENT TO THE COMPANY'S STOCK OPTION
PLAN TO ALLOW THE GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS UNDER
THE PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, dated July 8, 1999 and the Proxy Statement furnished
therewith. Any proxy heretofore given to vote said shares hereby is revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED ENVELOPE.
Dated: , 1999
---------------------
---------------------------------
(Signature)
---------------------------------
(Signature)
Signature(s) must agree with the
name(s) printed on this Proxy. If
shares are registered in two
names, both stockholders should
sign this Proxy. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
