As filed with the Securities and Exchange Commission on May 9, 2000
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Registration No. 333-65039
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
ON
FORM S-3
UNDER
THE SECURITIES ACT OF 1933
INSILCO HOLDING CO.
(Exact name of Registrant as specified in its charter)
Delaware 346, 361, 367, 3714 06-1158291
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(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
425 Metro Place North, Fifth Floor
Dublin, Ohio 43017
(614) 792-0468
--------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Michael R. Elia
Senior Vice President and Chief Financial Officer
Insilco Corporation
425 Metro Place North, Fifth Floor
Dublin, Ohio 43017
(614) 792-0468
--------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
Robert J. Tannous, Esq.
Porter, Wright, Morris & Arthur LLP
41 South High Street
Columbus, Ohio 43215
--------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earliest effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE>
PROSPECTUS
$138,000,000
INSILCO HOLDING CO.
425 METRO PLACE NORTH, FIFTH FLOOR
DUBLIN, OHIO 43017
(614) 792-0468
14% Senior Discount Notes due 2008
This prospectus relates to the offering of $138,000,000 of our 14% Senior
Discount Notes.
THE ORIGINAL OFFERING:
o We issued the notes in a private offering on August 12, 1998, and used the
proceeds from the notes to finance the cash component of the mergers
(described elsewhere in this document) and to pay fees and expenses
incurred in connection with the Mergers.
THE NOTES:
o Maturity: August 15, 2008.
o Principal Accretion: issued at a substantial discount to par, the notes
will accrete at a rate of 14%, compounded semi-annually to a total
principal amount of $138 million on August 15, 2003.
o Interest Payment: semi-annually on February 15 and August 15, beginning on
February 15, 2004.
o Redemption: The notes will be redeemable at the prices set forth in this
prospectus (1) on or after August 15, 2003, and (2) under certain
circumstances, following a public equity offering or a change of control.
In addition, you have the right to require us to purchase the notes if a
change of control event occurs, at the prices set forth in this prospectus.
We are also required to use the proceeds of certain public offerings of our
common stock to make an offer to purchase the notes at the prices set forth
in this prospectus.
o Ranking of Notes: The notes are senior unsecured obligations, ranking pari
passu with all of our future senior indebtedness and senior to all of our
future indebtedness subordinated to the notes. We have provided a guarantee
of the indebtedness of Insilco Corporation, our wholly-owned operating
subsidiary, under a bank credit facility which is secured by a pledge of
all of the common stock of Insilco Corporation. The notes are also
effectively subordinated to all liabilities of Insilco Corporation and its
subsidiaries.
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is to be used by (a) Donaldson, Lufkin & Jenrette Securities
Corporation in connection with offers and sales in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale and
(b) by DLJ Investment Partners, L.P., DLJ ESC II, L.P. , DLJ Investment Funding,
Inc., and Alliance Capital Management, L.P. or other selling security holder
named in an accompanying prospectus supplement, in the over-the-counter market,
in privately negotiated transactions, in underwritten offerings or by a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices relating to such
prevailing prices or at negotiated prices. There is currently no public market
for the notes. We do not intend to list the notes on any securities exchange.
Donaldson, Lufkin & Jenrette Securities Corporation has advised us that it is
currently making a market in the notes; however, it is not obligated to do so
and may stop at any time. Donaldson, Lufkin & Jenrette Securities Corporation
may act as principal or agent in any such transaction. We will not receive the
proceeds of the sale of the notes but will bear the expenses of registration.
Donaldson, Lufkin & Jenrette
The date of this prospectus is _____________.
<PAGE>
TABLE OF CONTENTS
Page
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Available Information .................................................... 2
Incorporation of Certain Documents by Reference .......................... 2
Forward-Looking Statements ............................................... 3
Summary .................................................................. 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 14
Capitalization............................................................ 15
Description of Certain Indebtedness....................................... 16
Description of Notes...................................................... 19
Plan of Distribution...................................................... 48
Legal Matters............................................................. 49
Experts .................................................................. 49
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We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
<PAGE>
AVAILABLE INFORMATION
This prospectus, which constitutes a part of a Registration Statement on
Form S-3 filed by the Company with the Securities and Exchange Commission, does
not contain all the information included in the Registration Statement and the
exhibits and schedules thereto. You will find additional information about us
and the notes in the Registration Statement. The Registration Statement and the
exhibits and schedules thereto may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the public reference
facilities of the SEC's Regional Offices: New York Regional Office, Seven World
Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
this material may also be obtained from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC also maintains a site on the World Wide Web
(HTTP://WWW.SEC.GOV) that contains reports, proxy and information statements and
other information regarding registrants, including Insilco, that file
electronically with the SEC. Statements made in this prospectus about legal
documents may not necessarily be complete and you should read the documents
which are filed as exhibits to the Registration Statement or otherwise filed
with the SEC.
If for any reason we are not required to comply with the reporting
requirements of the Securities Exchange Act of 1934, we are still required under
the indenture to furnish the holders of the notes with the information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. In addition, we have agreed that, for so long as any notes remain
outstanding, we will furnish to the holders of the notes and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act if we are
not then filing such informatory documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act with the SEC.
-------------------
Certain of the titles and logos of our products referenced herein are our
trademarks. Each trade name, trademark or servicemark of any other company
appearing in this Prospectus is the property of its holder.
-------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to other documents. The information we incorporate by reference is
an important part of this prospectus, and later information that we file with
the Commission automatically will update and supersede this information.
We incorporate by reference into this prospectus the following documents
and information filed with the Commission:
o Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
filed on March 27, 2000;
o Definitive Proxy Statement filed on April 17, 2000.
In addition, we incorporate by reference the description of our common
stock contained in the Registration Statement on Form 10, filed with the
Commission under Section 12 of the Exchange Act, as updated in any amendment or
report filed for such purpose.
Finally, we incorporate by reference any future filings that we make with
the Commission under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act
after the date of this prospectus and before the filing of a post-effective
amendment (which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold). Such documents are a part of
this prospectus from the date of its filing.
2
<PAGE>
FORWARD-LOOKING STATEMENTS
Our actual results could differ materially from those projected in
forward-looking statements in this prospectus. All statements other than
statements of historical facts are forward-looking statements. Although we
believe that the expectations reflected in the forward-looking statements
contained herein are reasonable, we can give no assurance that such expectations
will prove to be correct. Factors that could cause actual results to differ
materially include, but are not limited to the following:
o delays in new product introductions
o lack of market acceptance of new products
o changes in demand for our products
o changes in market trends
o operating hazards
o general competitive pressures from existing and new competitors
o effects of governmental regulations
o changes in interest rates
o adverse economic conditions that could affect the amount of cash
available for debt servicing and capital investments.
All subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these
cautionary factors.
SUMMARY
BECAUSE VARIOUS ENTITIES DISCUSSED IN THIS PROSPECTUS HAVE SIMILAR SOUNDING
NAMES, WE REFER TO OURSELVES AS "HOLDINGS," "WE," "US," "THE COMPANY" OR "OUR
COMPANY," AND WE REFER TO INSILCO CORPORATION, OUR WHOLLY-OWNED SUBSIDIARY AS
"INSILCO." FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS, SEE "RISK FACTORS."
THE COMPANY
We are the parent company of Insilco Corporation, a diversified
manufacturer of vehicle, electronic and telecommunications components. Our
business units service the automobile, electronics, telecommunications and other
industrial markets. We own and operate a number of subsidiaries that operate in
two primary business segments: Automotive Components and Technologies.
Our Automotive Components segment consists of two business units: tubing
and heat transfer products and transmission and suspension components.
TUBING AND HEAT TRANSFER PRODUCTS. Through our Thermal Components
Group, we are a vertically integrated manufacturer of heat exchangers for the
automotive, specialty vehicle, truck, heavy equipment and off-road vehicle and
industrial equipment markets. Our products include thin wall aluminum and brass
tubes used principally in heat transfer applications and heat exchanger products
such as radiators, air conditioning condensers, oil coolers and heaters.
We design and assemble heat transfer products to customer
specifications for use in a broad range of applications. The markets for
heat-exchanger products are highly competitive and have many participants,
including OEMs who produce for their own use and several large independent
manufacturers. We have manufacturing facilities in Alabama, Michigan, South
Carolina, Wisconsin and Germany.
TRANSMISSION AND SUSPENSION COMPONENTS. We manufacture automotive parts
consisting of close-tolerance precision metal stampings at our Steel Parts
facility in Indiana. Our products include clutch plates for automatic
transmissions, suspension parts for vibration-reducing assemblies and engine
mounts.
We sell most of our products to the domestic automobile industry,
either directly or indirectly through other independent automotive parts
suppliers. Accordingly, the demand for our products depends on the level of new
car production by the domestic automobile industry. We have also seen our
production content per automobile increase in recent years as automobile
manufacturers have moved from three-speed to four- and five-speed automatic
transmissions.
In our Technologies Segment, we manufacture telecommunication and
electrical component products for the computer networking, telephone digital
switching, premises wiring, main frame computer, automotive and medical
equipment markets. Our Technologies segment consists of four business units:
o specialized connector systems
o power transformers
o precision stampings and wireforms
o cable and wire assemblies
Our principal executive offices are located at 425 Metro Place North, Fifth
Floor, Dublin, Ohio 43017, and our telephone number is (614) 792-0468.
3
<PAGE>
SUMMARY DESCRIPTION OF THE NOTES
Maturity Date...................August 15, 2008
Interest Payment Dates..........Every February 15 and August 15, beginning
February 15, 2004.
Optional Redemption.............We may redeem any of the notes at our option on
or after August 15, 2003 at the redemption
prices set forth elsewhere in this prospectus,
plus accrued interest.
Change of Control...............Upon the occurrence of a Change of Control, you
may require us to repurchase your notes at 101%
of their principal amount, plus accrued
interest. We cannot assure you that we will have
sufficient resources to satisfy our repurchase
obligation in such circumstances. See "Risk
Factors--Possible Inability to Repurchase Notes
upon Change of Control" and "Description of
Notes."
Ranking.........................The notes are senior unsecured obligation
ranking pari passu with all of our future senior
indebtedness and senior to all of our future
indebtedness subordinated to the notes. We have
provided a guarantee of the indebtedness of
Insilco Corporation, our wholly-owned operating
subsidiary, under a bank credit facility which
is secured by a pledge of all of the common
stock of Insilco Corporation. The notes are also
subordinated to all liabilities of Insilco
Corporation and its subsidiaries.
Certain Covenants...............The indenture governing the notes contains
certain covenants limiting our ability and our
subsidiaries' ability to:
o incur additional indebtedness or issue
preferred stock;
o pay dividends or make distributions on, and
to redeem or repurchase, capital stock;
o engage in transactions with affiliates;
o engage in sale and leaseback transactions;
o make investments and sell assets and engage
in certain mergers and consolidations.
See "Description of Notes--Certain Covenants."
4
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND
OPERATING DATA
The summary historical consolidated financial data presented below are
derived from our audited consolidated financial statements. You should read the
information contained in this table in conjunction with the consolidated
financial statements, related notes, and other financial information of the
Company that we have incorporated in this document by reference.
The unaudited pro forma condensed consolidated financial data of Insilco
and our subsidiaries for the year ended December 31, 1999 are based upon
historical information that has been adjusted to give effect to the transactions
described in footnote 1.
<TABLE><CAPTION>
Year Ended December 31,
Pro Forma
1995 1996 1997 1998 1999 1999(1)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations Data:
Net Sales $350.9 $393.4 $430.10 $434.3 $476.4 $535.4
Operating Income (2) 33.1 44.8 44.0 9.1 22.1 25.3
Other income (expenses):
Interest expense (19.0) (17.8) (20.0) (32.3) (47.3) (54.9)
Interest income 1.5 0.7 2.8 1.0 0.4 0.6
Other income, net (3) 14.4 8.1 3.8 6.6 13.1 13.1
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income taxes
and extraordinary items 30.0 35.8 30.6 (15.6) (11.7) (15.9)
Income tax (expense) benefit (15.1) (12.3) (11.1) 2.0 8.1 8.2
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before extraordinary
items 14.9 23.5 19.5 (13.6) (3.6) (7.7)
Income loss from discontinued
operations, net of tax (4) (12.4) 15.5 62.9 1.5 5.6 ---
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary items 2.5 39.0 82.4 (12.1) 2.0 (7.7)
Extraordinary items, net of tax
--- --- (0.7) (5.9) --- ---
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) 2.5 39.0 81.7 (18.0) 2.0 (7.7)
Preferred stock dividend --- --- --- (2.1) (6.0) (6.0)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) available to common $2.5 $39.0 $81.7 $(20.1) $(4.0) $(13.7)
Other Data:
EBITDA(5) $59.7 $57.4 $59.4 $25.9 $41.6
Adjusted EBITDA (6) 55.8 60.8 60.9 56.4 58.7
Cash interest expense 17.6 17.2 17.8 31.7 32.0
Depreciation and amortization 10.4 12.6 15.4 16.8 19.5
Amortization of Reorganization
Goodwill 16.2 --- --- --- ---
Capital Expenditures 17.4 17.1 20.4 18.0 15.1
Balance sheet data (at period end):
Cash and cash equivalents $10.0 $4.2 $10.4 $7.5 $6.6
Working capital 54.7 60.9 46.3 81.6 83.1
Total assets 264.1 273.1 231.0 291.9 322.7
Operating company debt 186.5 161.0 257.7 312.4 319.1
Total debt 186.5 161.0 257.7 384.3 401.9
Stockholders' equity (deficit) (17.9) 34.7 (101.1) (236.3) (240.0)
</TABLE>
5
<PAGE>
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(1) Pro forma results reflect the acquisition of Thermal Transfer Products, LTD
and TAT as if the purchases occurred at the beginning of the period.
(2) Operating income in 1995 includes the deduction for the amortization of our
reorganization value over the aggregate fair value of its tangible and
identified intangible assets at March 31, 1993 ("Reorganization Goodwill")
of $16.2 million, due to the adoption of "fresh start" accounting
principles. Operating income in 1995 includes a gain of $4.3 million
related to a change in our pension plan.
(3) Other income, net in 1995 includes favorable adjustments of $3.6 million
related to our environmental liabilities, $1.5 million related to the
resolution of several legal disputes and a $4.0 million gain on the sale of
idle corporate assets. Other income, net in 1996 includes a $2.2 million
adjustment related to the satisfaction of certain of our environmental
liabilities following completion of a site clean-up for an amount less than
previously estimated. Other income, net in 1999 includes a gain of $9.5
from the sales of our stainless tubing and our welded tube mill businesses.
(4) In March 1997, we completed the sale of our Office Products Business (as
defined below) with the divestiture of our traditional office products
business (the "Rolodex Business") for $112.6 million, net of transaction
costs, resulting in a gain of $57.8 million, net of taxes of $37.2 million.
The divestiture of the Rolodex Business was preceded in 1996 by the
divestiture of the Rolodex electronics product line ("Rolodex Electronics")
and our computer accessories business ("Curtis"). The proceeds from these
sales aggregated $21.8 million (see Note 22 to the Consolidated Financial
Statements for unaudited pro forma financial information with respect to
these divestitures). Rolodex, Rolodex Electronics and Curtis are referred
to collectively as the "Office Products Business." In July 1998, we amended
our Form 10-K for the year ended December 31, 1997 (the "Form 10- K") 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 years 1995, 1996 and 1997 were $111.7 million, $80.1
million and $10.8 million, respectively.
On February 11, 2000, we sold our publishing business, Taylor Publishing
Company to TPA Acquisition Corp., newly created, wholly-owned subsidiary of
Castle Harlan Partners III, L.P, for gross proceeds of approximately $93.5
million. The net proceeds of approximately $70.0 million from this
transaction plus approximately $21.2 million in retained customer deposits,
net of other working capital adjustments were used to reduce borrowings
under our Term Credit Facility. The consolidated statements of operations
and cash flows were reclassified to account for the sale of the publishing
business as a discontinued operation. Revenues associated with the
discontinued publishing business for the years 1995, 1996, 1997, 1998 and
1999 were $98.6 million, $99.0 million, $98.2 million, $101.3 million and
$103.7 million, respectively.
6
<PAGE>
(5) "EBITDA" is defined as net income before interest expense, interest income,
income taxes, depreciation and amortization, other income, equity in net
income of Thermalex and net gain or net loss on sale of assets. EBITDA is
not intended to represent and should not be considered more meaningful
than, or an alternative to, operating income, cash flows from operating
activities or other measures of performance in accordance with generally
accepted accounting principles. EBITDA data are included because we
understand that such information is used by certain investors as one
measure of an issuer's historical ability to service debt. While EBITDA is
frequently used as a measure of operations and the ability to meet debt
service requirements, it is not necessarily comparable to other similarly
titled captions of other companies, or to the defined term "Consolidated
Cash Flow" used in "Description of Notes--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock", due to the potential
inconsistencies in the method of calculation.
(6) "Adjusted EBITDA" equals EBITDA plus dividends received from Thermalex of
$0.4 million, $3.4 million, $1.5 million, $1.3 million and $9.2 million for
the years ended December 31, 1995, 1996, 1997, 1998 and 1999, respectively,
and excluding the effect of: (i) a $4.3 million gain relating to a change
in our pension plan in the year ended December 31, 1995 (see Note 12 to the
Consolidated Financial Statements); (ii) $1.8 million and $0.9 million of
legal expenses related to significant legal cases the years ended December
31, 1998 and 1999, respectively, (iii) $1.3 million in rationalization
expenses related to our corporate office and our operating units for the
year ended December 31, 1998, and $4.7 million in expenses relating to the
restructuring of our corporate office and rationalization at our operating
locations; (iv) merger expenses recorded and paid of $25.5 million for the
year ended December 31, 1998; (v) $0.9 million of facility
rationalization/consolidation expenses for the year ended December 31,
1998; (vi) $1.8 million of consulting fees for the analysis of establishing
a separate legal entity to better manage our health care costs; (vii) $5.8
million of costs related to the shutdown of our heat exchanger machinery
and equipment business; and (viii) $1.1 million costs related to the
closing of our Duncan, South Carolina heat exchanger tubing manufacturer.
7
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following risk factors before purchasing any notes.
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
We are a holding company, and our ability to make payments in respect
of the notes is dependent upon the receipt of dividends or other distributions
from our direct and indirect subsidiaries. We do not have, and may not in the
future have, any assets other than shares of common stock of Insilco, which are
pledged to secure the obligations of Insilco under the new credit facility.
Insilco and its subsidiaries are parties to the credit facility and Insilco is
party to the indentures governing the 10 1/4% notes and the 12% notes, each of
which imposes substantial restrictions on Insilco's ability to pay dividends or
make other distributions to us. Any payment of dividends or other distributions
will be subject to the satisfaction of certain financial conditions set forth in
such indentures and is subject to certain prohibitions contained in the new
credit facility. The ability of Insilco and its subsidiaries to comply with such
conditions or prohibitions may be affected by events that are beyond our
control. If the maturity of the 10 1/4% notes, the 12% notes or the loans under
the existing credit facility and the new credit facility were to be accelerated,
all such outstanding debt would be required to be paid in full before Insilco or
its subsidiaries would be permitted to distribute any assets or cash to us.
There can be no assurance that our assets would be sufficient to repay all of
such outstanding debt and to meet our obligations under the indenture. In
addition, under Delaware law, a company is permitted to pay dividends or make
other distributions on its capital stock only out of its surplus or, in the
event that it has no surplus, out of its net profits for the year in which a
dividend or distribution is declared or for the immediately preceding fiscal
year. Surplus is defined as the excess of a company's total assets over the sum
of its total liabilities plus the par value of its outstanding capital stock. In
determining Insilco's ability to pay dividends or make other distributions to
us, Delaware law will permit the Board of Directors of Insilco to revalue its
assets and liabilities from time to time to their fair market values in
determining surplus. We cannot predict what the value of Insilco's or its other
subsidiaries' assets or the amount of their liabilities will be in the future
and, accordingly, there can be no assurance that we will be able to receive
dividends from Insilco in order to pay our debt service obligations on the
notes.
As a result of our holding company structure, the holders of the notes will
be structurally junior to all creditors of our subsidiaries, including Insilco.
In the event of insolvency, liquidation, reorganization, dissolution or other
winding-up of the our subsidiaries, we will not receive any funds from our
subsidiaries until their creditors are paid in full. As of December 31, 1999,
the aggregate amount of indebtedness and other obligations of our subsidiaries
was $401.9 million. Further, we have $82.8 million of aggregate liquidation
preference of PIK Preferred Stock outstanding, which will increase as dividends
are paid in kind on the PIK Preferred Stock through August 1, 2003, after which
dividends will be payable in cash, and which will be mandatorily redeemable in
cash on August 1, 2010 at the aggregate liquidation preference of the PIK
Preferred Stock.
8
<PAGE>
SUBSTANTIAL LEVERAGE; LIQUIDITY
LEVERAGE
In connection with the Mergers, the Merger Financing and the Refinancing,
we incurred significant indebtedness. As of December 31, 1999, we had: (a) total
consolidated indebtedness of approximately $401.9 million; and (b) $75.5 million
of additional revolving borrowings available under the credit facility, subject
to customary conditions. In addition, subject to the restrictions in the credit
facility and the indentures relating to the notes and Insilco's 12% notes and 10
1/4% notes, we may incur significant additional indebtedness, which may be
secured, from time to time.
The level of our indebtedness could have important consequences,
including:
o limiting cash flow available for general corporate purposes, including
acquisitions, because a substantial portion of our cash flow from
operations must be dedicated to debt service;
o limiting our ability to obtain additional debt financing in the future
for working capital, capital expenditures or acquisitions;
o limiting our flexibility in reacting to competitive and other changes in
the industry and economic conditions generally; and
o exposing us to risks inherent in interest rate fluctuations because
certain of our borrowings may be at variable rates of interest, which
could result in higher interest expense in the event of increases in
interest rates.
CONDITIONS THAT MAY IMPACT OUR ABILITY TO REPAY OUR DEBT
Our ability to pay or to refinance our indebtedness will depend upon
our future operating performance, which will be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors
beyond our control.
We anticipate that our operating cash flow, together with money we can
borrow under our new credit facility, will be sufficient to meet anticipated
future operating expenses, capital expenditures and to service debt as it
becomes due. However, if our future operating cash flows are less than currently
anticipated we may be forced, in order to meet our debt service obligations, to
reduce or delay acquisitions or capital expenditures, sell assets or reduce
operating expenses. If we were still unable to meet our debt service
obligations, we could attempt to restructure or refinance our indebtedness or
seek additional equity capital. There can be no assurance that we will be able
to accomplish that on satisfactory terms, if at all.
In addition, subject to the restrictions and limitations contained in
our debt agreements, we may incur significant additional indebtedness to finance
future acquisitions, which could adversely affect our operating cash flows and
our ability to service indebtedness.
RESTRICTIVE COVENANTS
The indenture governing the notes contains various covenants that limit
our ability to engage in certain transactions. These covenants limit our and
certain of our subsidiaries' ability to:
o borrow and to place liens on assets
o pay dividends or make certain other restricted payments
o enter into certain transactions with affiliates; or
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o merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our
assets or the assets of Insilco.
In addition, our credit facility contains other and more restrictive
covenants and prohibits us from prepaying our other indebtedness (including the
notes). Our credit facility also requires us to maintain specified financial
ratios and satisfy certain other financial condition tests. Our ability to meet
those financial ratios and tests can be affected by events beyond our control,
and there can be no assurance that we will meet those tests. A breach of any of
these covenants could result in a default under our credit facility and/or the
notes or Insilco's 12% notes or 10 1/4% notes. Upon the occurrence of an event
of default under our credit facility, the lenders could elect to declare all
amounts outstanding under our credit facility to be immediately due and payable
and terminate all commitments to extend further credit. If we were unable to
repay those amounts, the lenders could proceed against the collateral granted to
them to secure that indebtedness. We have pledged substantially all of our
assets, other than assets of our foreign subsidiaries, as security under our
credit facility. We cannot assure you that, if the lenders under our credit
facility accelerate the repayment of borrowings thereunder, we will have
sufficient assets to repay our credit facility and our other indebtedness,
including your notes. See "Description of Certain Indebtedness--Credit
Facility."
POSSIBLE INABILITY TO REPURCHASE NOTES UPON CHANGE OF CONTROL
Upon the occurrence of certain change of control events, you may
require us to purchase your notes at 101% of their principal amount, plus
accrued interest. Please note that the terms of Insilco's 12% notes, 10 1/4%
notes and our credit facility limit our ability to purchase your notes in such
circumstances. Any of our future debt agreements may contain similar
restrictions and provisions. Accordingly, we may not be able to satisfy our
obligations to purchase your notes unless we are able to refinance or obtain
waivers with respect to our credit facility and certain other indebtedness. We
cannot assure that we will have the financial resources to purchase your notes,
particularly if such change of control event triggers a similar repurchase
requirement for, or results in the acceleration of, other indebtedness. Our
credit facility currently provides that certain change of control events will
constitute a default and could result in the acceleration of our indebtedness
under the credit facility.
CUSTOMER CONCENTRATION; ABSENCE OF LONG-TERM CONTRACTS
A significant portion of our sales are made to a relatively small group
of major customers. In 1999, sales to Ford represented approximately 10% of our
net sales and sales to a group of our nine next largest customers represented
approximately 27% of net sales.
Our reliance on these major customers exposes us to
o the risk of changes in the business condition of our major customers
and
o the risk that the loss of a major customer could adversely affect
Insilco's results of operations.
While we have supplied Ford for 40 years, Ford is not contractually
bound to purchase supplies from us in the future. Thus, our relationship with
Ford is subject to termination at any time. If we were to lose Ford as a
customer, our results of operations would be adversely affected.
CYCLICAL MARKETS
A substantial portion of our revenues derive from sales to markets that
have been historically, and are likely to continue to be, cyclical. For example,
our Automotive Components Segment, which accounted for approximately 48% of our
net sales and 64% of adjusted operating income before the allocation of
corporate overhead for the year ended December 31, 1999, primarily serves the
automobile OEM market and the automobile parts aftermarket through the
manufacture of automotive heat exchangers and related tubing, and automatic
transmission and suspension components. (For the year ended December 31, 1999,
however, approximately 18% and 52% of the Automotive Components Segment's net
sales were attributable to the automotive aftermarket and non-automotive OEMs,
respectively.) The automobile industry has experienced recessionary or slow
growth conditions for substantial
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in the past and may experience recessionary conditions in the future. Any
substantial weakening of the automobile industry would have an adverse effect on
our results of operations.
PRODUCTION DISRUPTION
In certain of our businesses in which there is high customer
concentration we would be exposed to potentially significant revenue losses if
we (or our customers) were to experience substantial disruption in production.
With the continued emphasis on reductions in component inventories and
"just-in-time" deliveries, especially in the automotive industry, any disruption
in our production or by our major customers, through work stoppages or
otherwise, could have an immediate and adverse effect on our results of
operations.
COMPETITION
The businesses in which we are engaged are highly competitive and in
some cases highly fragmented, with many small manufacturers. In some of our
businesses, especially the data grade connector business and the heat exchanger
business, we compete with entities having significantly more resources. In
certain other businesses we compete with entities that have a greater share of
the relevant market and lower costs. As competition increases, profit margins on
some of our significant business lines could decrease, and in the more
fragmented markets consolidation could occur, resulting in the creation of
larger and financially stronger competitors.
We believe that, to remain competitive and maintain or increase
profitability, we must pursue a strategy focusing on growth and product
innovation. However, our competitors can be expected to continue to seek their
own growth, to improve the design and performance of their products, to reduce
costs of existing competitive products and to introduce new products with
competitive price and performance characteristics. Although we believe that,
with respect to most of our businesses, we have certain technological,
manufacturing and other advantages over our competitors, maintaining these
advantages will require continued investment in research and development, sales
and marketing, productivity improvements and information systems. We cannot
assure you that we will have sufficient resources to continue to make such
investments, that such investments will be successful or that we will be able to
maintain our existing competitive advantages.
TECHNOLOGY AND THE DEVELOPMENT OF NEW PRODUCTS
The markets for many of our products, particularly the data grade
connector products, are characterized by technological change, evolving industry
standards, product customization and frequent new product introductions, which
may render existing or proposed products noncompetitive or obsolete.
Many of our products require significant planning, design, development
and testing at the technological, product and manufacturing process levels.
Moreover, many of our customers use our products and proprietary technologies as
components of other products which they manufacture or assemble, which may
become uncompetitive or obsolete.
Although we work closely with our customers to stay informed with
respect to product development, we cannot assure you that any of the products we
are currently developing or those to be developed in the future, will be
completed in any particular time frame or that our or our customers' products or
proprietary technologies will not become uncompetitive or obsolete.
ACQUISITION GROWTH STRATEGY; MANAGEMENT AND FUNDING OF GROWTH
We have historically pursued an acquisition strategy and recently
completed acquisitions of T.A.T., which will become part of our cable and wire
assembly business unit. There are various risks associated with pursuing a
growth strategy of this nature.
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o Any future growth will require us to manage our expanding domestic and
international operations, integrate new businesses and adapt our
operational and financial systems to respond to changes in our business
environment, while maintaining a competitive cost structure.
o The acquisition strategy will continue to place demands on our management
to improve our operational, financial and management information systems,
to develop further the management skills of our managers and supervisors,
and to continue to retain, train, motivate and effectively manage our
employees.
Our failure to manage growth effectively could have a material adverse
effect on us. We also cannot assure you that suitable acquisition candidates
will be available or that acquisitions can be completed on reasonable terms.
Additionally, our ability to maintain and increase our revenue base and
to respond to shifts in customer demand and changes in industry trends will be
partially dependent on our ability to generate sufficient cash flow or obtain
sufficient capital for the purpose of, among other things, financing
acquisitions, satisfying customer contractual requirements and financing
infrastructure growth. We cannot assure you that we will be able to generate
sufficient cash flow or that financing will be available on acceptable terms (or
permitted to be incurred under the terms of our new credit facility, the
indenture and any future indebtedness) to fund our future growth.
ENVIRONMENTAL MATTERS
Our operations are subject to federal, state, local and foreign laws
and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes. As a
result, we are involved from time to time in administrative or legal proceedings
relating to environmental matters and have incurred in the past and will
continue to incur capital costs and other expenditures relating to environmental
matters.
Certain properties now or previously owned by us are undergoing
remediation. Liability under environmental laws may be imposed on current and
prior owners of property or businesses without regard to fault or to knowledge
about the condition or action causing the liability. As an owner and operator of
those properties, we may be required to incur costs relating to the remediation,
and environmental conditions could lead to claims for personal injury, property
damage or damages to natural resources.
We have also in the past and may in the future be named a potentially
responsible party ("PRP") at off-site third-party disposal sites to which our
businesses have sent waste.
We believe, based on current information, that any costs we may incur
relating to environmental matters will not have a material adverse effect on our
business, financial condition or result of operations. We cannot assure you,
however, that we will not incur significant fines, penalties or other
liabilities associated with noncompliance or clean-up liabilities or that future
events, such as changes in laws or the interpretation thereof, the development
of new facts or the failure of other PRPs to pay their share, will not cause us
to incur additional costs that could have a material adverse effect on our
business, financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
Our success depends to a significant extent upon the services of our
senior management and other management in our various businesses. We could be
adversely affected if any of these persons were unwilling or unable to continue
in our employ.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS; EXCHANGE RATE FLUCTUATIONS
Our products are manufactured and assembled at facilities in the United
States, the Dominican Republic, Germany, Ireland, the United Kingdom and Mexico
and sold in many foreign countries. In 1999, less than 13% of our net sales and
costs of goods sold occurred outside the United States and Canada. International
manufacturing and sales are subject to inherent risks, including changes in
local economic or political conditions, the impositions of
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currency exchange restrictions, unexpected changes in regulatory environments,
potentially adverse tax consequences and exchange rate risk. We cannot assure
you that these factors will not have a material adverse impact on our production
capabilities or otherwise adversely affect our business and operating results.
CONTROL BY PRINCIPAL SHAREHOLDERS
Approximately 71.5% of the outstanding shares of our common stock is
held by the DLJMB Funds. As a result of their stock ownership, the DLJMB Funds
control us and (subject to any agreement they may have with CVC as described in
"Description of Capital Stock--Other Stockholder Arrangements") have the power
to elect all of our directors, appoint new management and approve any action
requiring the approval of the holders of common stock, including adopting
amendments to the certificate of incorporation and approving acquisitions or
sales of all or substantially all of our assets.
The general partners of each of the DLJMB Funds are affiliates or
employees of Donaldson, Lufkin & Jenrette, Inc. ("DLJ, Inc."). DLJ Capital
Funding, Inc., which is an agent and lender under our credit facility, and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC"), which was the
initial purchaser of the Old Notes, are also affiliates of DLJ, Inc.
Circumstances may occur in which the interests of such principal
shareholders could be in conflict with your interests. In addition, such
shareholders may have an interest in pursuing transactions that, in their
judgment, enhance the value of their equity investment in Insilco, even though
such transactions may involve risks to the holders of the notes.
TAX CONSEQUENCES OF ORIGINAL ISSUE DISCOUNT; LIMITATIONS ON HOLDERS' CLAIMS
For U.S. federal income tax purposes, the issue price of a unit,
consisting of $1,000 principal amount at maturity of 14% Senior Discount notes
due 2008 and one warrant to purchase 0.325 of a share of our common stock at an
exercise price of $0.01 per share, was allocated between the respective fair
market values of the warrant and the note. For this reason, and because cash
interest will not be payable on the notes prior to February 15, 2004, the notes
have original issue discount from their principal amount at maturity.
Consequently, purchasers of the notes will be required to include amounts in
gross income for federal income tax purposes in advance of receipt of the cash
payments to which the income is attributable. Because only a portion of the
issue price of a unit was allocated to a note, the rate at which a holder will
be required to accrue original issue discount for U.S. federal income tax
purposes will exceed the stated yield on the notes. In addition, the notes
constitute "applicable high yield discount obligations" ("AHYDOs") for federal
income tax purposes because the yield to maturity of the notes exceeds the
relevant applicable federal rate (the "AFR") at the time of issue by more than
five percentage points. Because the notes constitute AHYDOs, we (i) will not be
entitled to deduct original issue discount ("OID") accruing with respect thereto
until such amounts are actually paid, and (ii) may be precluded from ever
deducting a portion of the OID that accrues on the notes.
Under the indenture, in the event of an acceleration of the maturity of
the notes upon the occurrence of an event of default, the holders of the notes
may be entitled to recover only the amount which may be declared due and payable
pursuant to the indenture, which prior to August 15, 2003, will be less than the
principal amount at maturity of such notes.
If a bankruptcy case is commenced by or against us under the United
States Bankruptcy Code, the claim of a holder of notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (i) the
original issue price of the notes and (ii) that portion of the original issue
discount (as determined on the basis of such issue price) which is not deemed to
constitute "unmatured interest" for purposes of the Bankruptcy Code.
Accordingly, holders of the notes under such circumstances may, even if
sufficient funds are available, receive a lesser amount than they would be
entitled to under the express terms of the indenture. In addition, there can be
no assurance that a bankruptcy court would compute the accrual of interest under
the same rules as those used for the calculation of original issue discount
under federal income tax law and, accordingly, a holder might be required to
recognize gain or loss in the event of a distribution related to such a
bankruptcy case.
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FRAUDULENT TRANSFER STATUTES
Federal or state fraudulent transfer laws permit a court, if it makes
certain findings, to:
o avoid all or a portion of our obligations to you;
o subordinate our obligations to you to other existing and future
indebtedness, entitling other creditors to be paid in full before any
payment is made on the notes; and
o take other action detrimental to you, including, in certain
circumstances, invalidating the notes.
In that event, there would be no assurance that you would ever be repaid.
Under federal and state fraudulent transfer laws, in order to take any of
the actions described above, courts will typically need to find that, at the
time the notes were issued, we:
(a) issued the notes with the intent of hindering, delaying or defrauding
current or future creditors; or
(b) received less than fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the notes and
(1) were insolvent or were rendered insolvent by reason of the issuance
of the notes,
(2) were engaged, or about to engage, in a business or transaction for
which our assets were unreasonably small; or
(3) intended to incur, or believed (or should have believed) we would
incur, debts beyond our ability to pay as such debts mature (as all
of the foregoing terms are defined in or interpreted under such
fraudulent transfer statutes).
Different jurisdictions define "insolvency" differently. However, we
generally would be considered insolvent at the time we incurred the indebtedness
constituting the notes if (a) the fair market value (or fair saleable value) of
our assets is less than the amount required to pay our total existing debts and
liabilities (including the probable liability on contingent liabilities) as they
become absolute or matured or (b) we were incurring debts beyond our ability to
pay as such debts mature. We cannot assure you as to what standard a court would
apply in order to determine whether we were "insolvent" as of the date the notes
were issued, and we cannot assure you that, regardless of the method of
valuation, a court would not determine that we were insolvent on that date. Nor
can we assure you that a court would not determine, regardless of whether we
were insolvent on the date the notes were issued, that the payments constituted
fraudulent transfers on another ground.
TRADING MARKET FOR THE NOTES
There is no existing trading market for the notes, and we cannot assure
you about the future development of a market for the notes or your ability to
sell their New Notes or the price at which you may be able to sell your notes.
If such market were to develop, the notes could trade at prices that may be
higher or lower than their initial offering price depending on many factors,
including prevailing interest rates, our operating results and the market for
similar securities. Although it is not obligated to do so, DLJSC currently makes
a market in the notes. Any such market-making activity may be discontinued at
any time, for any reason, without notice at the sole discretion of DLJSC. No
assurance can be given as to the liquidity of or the trading market for the
notes.
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes
by DLJSC in market-making transactions or by DLJ Investment Partners, L.P., DLJ
ESC II, L.P. and DLJ Investment Funding, Inc. (the "DLJ Mezzanine Investors"),
Alliance Capital Management, L.P. or other selling securityholder named in an
accompanying prospectus supplement in resale transactions. We will not receive
any of the proceeds from such transactions.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1999. This table should be read in conjunction with
the consolidated financial statements, related notes, and other financial
information of the Company that we have incorporated in this document by
reference.
As of December
31, 1999
Actual
(in millions)
---------------
Cash and cash equivalents $ 6.5
===============
Long-term debt:
Bank Term Loan $ 120.0
Credit Facility 79.1
12% Senior Subordinated Notes 119.8
14% Senior Subordinated Notes 82.8
Miscellaneous .2
---------------
Total long-term debt (including current portion) $ 401.9
---------------
PIK Preferred Stock 40.1
Stockholders' deficit (240.0)
---------------
Total capitalization $ 202.0
===============
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DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITY
On November 24, 1998 a credit facility was provided by a syndicate of
banks and other financial institutions led by Donaldson, Lufkin & Jenrette
Securities Corporation, as arranger, DLJ Capital Funding, as syndication agent,
and The First National Bank of Chicago, as administrative agent. The credit
facility includes a $125 million term loan facility and a $175 million revolving
credit facility (subject to adjustment as provided below), which provides for
revolving loans and up to $50 million of letters of credit. The term loan
facility has a maturity of seven years. The revolving credit facility will
terminate on July 8, 2003.
Borrowings under the credit facility generally bear interest, at
Insilco's option, at the Administrative Agent's alternate base rate or at the
reserve-adjusted London Interbank Offered Rate ("LIBOR") plus, in each case,
applicable margins of
(1) in the case of alternate base rate loans,
(x) 1.75% for revolving and
(y) 2.50% for term loans and
(2) in the case of LIBOR loans,
(x) 3.00% for revolving and
(y) 3.75% for term loans.
Insilco pays a commitment fee calculated at a rate of 0.625% per annum
on the daily average unused commitment under the revolving credit facility. Such
fee will be payable monthly in arrears and upon termination of the revolving
credit facility.
Beginning May of 1999, the applicable margins for the revolving credit
facility, as well as the commitment fee and letter of credit fee, were subject
to possible reductions based on the ratio of consolidated Debt to EBITDA (each
as defined in the credit facility).
Insilco will pay a letter of credit fee on all outstanding letters of
credit, at a rate per annum equal to the then applicable margin for LIBOR loans
under the revolving credit facility. Such fees will be payable monthly in
arrears. In addition, Insilco will pay customary transaction charges in
connection with any letters of credit.
Availability under the revolving credit facility will decrease:
(1) on the six month anniversary of the credit facility closing date by
an amount equal to $46.0 million less the aggregate consideration paid
in connection with acquisitions or committed to be paid pursuant to a
signed definitive acquisition agreement entered into prior to such
date, and
(2) by $20.0 million on each of July 10, 2000, July 10, 2001 and July 10,
2002. The term loan facility will be subject to the following
amortization schedule:
Year Percentage Reduction
---- --------------------
1 . . . . . . . . . . . . . . . . . . . . . . 1.0%
2 . . . . . . . . . . . . . . . . . . . . . . 1.0%
3 . . . . . . . . . . . . . . . . . . . . . . 1.0%
4 . . . . . . . . . . . . . . . . . . . . . . 1.0%
5 . . . . . . . . . . . . . . . . . . . . . . 1.0%
6 . . . . . . . . . . . . . . . . . . . . . . 1.0%
7 . . . . . . . . . . . . . . . . . . . . . . 94.0%
-----
100.0%
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The term loan facility is subject to mandatory prepayment:
(1) with 100% of the net cash proceeds from the issuance of debt, subject
to certain exceptions;
(2) with 100% of the net cash proceeds of asset sales and casualty events,
subject to certain exceptions;
(3) with 50% of Insilco's Excess Cash Flow (as defined in the new credit
facility) to the extent that the Leverage Ratio (as defined in the new
credit facility) exceeds 3.5 to 1.0; and
(4) with 50% of the net cash proceeds from the issuance of equity to the
extent that the Leverage Ratio exceeds 3.5 to 1.0.
Insilco's obligations under the credit facility are secured by a
first-priority perfected lien on:
(1) substantially all domestic property and assets, tangible and intangible
(other than accounts receivable sold or to be sold into the accounts
receivable program and short term real estate leases), of Insilco and
its domestic subsidiaries;
(2) the capital stock of:
(a) Insilco held by Holdings; and
(b) substantially all subsidiaries of Insilco (provided that no more
than 65% of the equity interest in non- U.S. subsidiaries held by
Insilco and its domestic subsidiaries and no equity interests in
subsidiaries held by foreign subsidiaries are required to be
pledged); and
(3) all intercompany indebtedness.
Holdings has guaranteed the obligations of Insilco under the credit
facility. In addition, obligations under the credit facility are guaranteed by
substantially all domestic subsidiaries.
The credit facility contains customary covenants and restrictions on
Insilco's ability to engage in certain activities, including, but not limited
to:
(1) limitations on the incurrence of liens and indebtedness;
(2) restrictions on sale lease-back transactions, consolidations, mergers,
sale of assets, capital expenditures, transactions with affiliates and
investments; and
(3) strict restrictions on dividends, and other similar distributions.
The credit facility also contains financial covenants requiring Insilco
to maintain a minimum Interest Coverage Ratio (as defined in the credit
facility); a minimum Fixed Charge Coverage Ratio (as defined in the credit
facility); and a maximum Leverage Ratio.
12% NOTES
The 12% Notes were issued under the 12% Note Indenture, dated as of
November 9, 1998, between Insilco and Star Bank, N.A., as trustee (the
"Trustee"). The 12% Notes are unsecured senior subordinated obligations of
Insilco, are limited to $120 million aggregate principal amount, will mature on
August 15, 2007, and bear interest at the rate of 12% per annum, payable
semi-annually on February 15 and August 15 of each year commencing February 15,
1999. The 12% Notes are redeemable, in whole or in part, at the option of
Insilco, at any time on or after August 15, 2002, at redemption prices
(expressed as percentages of the principal amount redeemed), plus accrued
interest to but excluding the redemption date, if redeemed during the
twelve-month period commencing on August 15 in the years set forth below:
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Year Redemption Price
---- ----------------
2002 . . . . . . . . . . . . . . . . . . . . . . 106.000%
2003 . . . . . . . . . . . . . . . . . . . . . . 104.000%
2004 . . . . . . . . . . . . . . . . . . . . . . 102.000%
2005 and thereafter. . . . . . . . . . . . . . . 100.000%
The 12% Note Indenture contains covenants that, among other things:
o limit the ability of Insilco and its Restricted Subsidiaries (as
defined) to incur additional indebtedness and contingent obligations;
o limit the ability of Insilco to grant liens on debt which is
subordinate or junior to the 12% Notes;
o limit the ability of Insilco and its Restricted Subsidiaries to pay
dividends or make other distributions on account of, or purchase,
redeem or otherwise acquire, any shares of any class of its capital
stock or, prior to any scheduled maturity, repayment or sinking fund
payment, any indebtedness of Insilco that (subject to certain o
exceptions) is subordinate in right of payment to the 12% Notes, or
make any Investment (as defined) which is not a Permitted Investment
(as defined);
o limit the incurrence of any debt or the issuance of preferred stock by
Insilco's Restricted Subsidiaries;
o prohibit the issuance by Insilco of any indebtedness that is by its
terms subordinated in right of payment to any senior debt and senior in
right of payment to the 12% Notes;
o prohibit Insilco's Restricted Subsidiaries, directly or indirectly from
assuming, guaranteeing or in any other manner becoming liable with
respect to any debt that by its terms is pari passu with or junior in
right of payment to the 12% Notes;
o limit the ability of Insilco and its Restricted Subsidiaries to engage
in transactions with Insilco's affiliates;
o limit the ability of Insilco to merge, consolidate or sell all or
substantially all its assets;
o prohibit, subject to certain exceptions, Insilco or its Restricted
Subsidiaries from creating or permitting to exist any consensual
encumbrance or restriction on the ability of such subsidiaries to pay
dividends, repay certain indebtedness owed to Insilco or any such
subsidiary thereof or transfer assets to Insilco or its Restricted
Subsidiaries; and
o limit the ability of Insilco and Insilco's Restricted Subsidiaries from
making certain asset sales and in connection with permitted asset sales
require that the proceeds thereof be used to make an offer to
repurchase the 12% Notes at 100% of their principal amount unless such
proceeds have been reinvested in the business of Insilco or used to
repay indebtedness.
The 12% Note Indenture contains certain events of default which include
the failure to pay interest and principal on the 12% Notes, the failure to
comply with covenants in the 12% Notes or the 12% Note Indenture, a payment
default under, or acceleration of, certain other indebtedness of Insilco and
Insilco's Restricted Subsidiaries, the rendering of certain final judgments and
certain events occurring under bankruptcy laws.
The 12% Notes are subordinate in right of payment to all "senior
indebtedness" of Insilco, as such term is defined in the 12% Note Indenture. As
defined in the 12% Note Indenture, "senior indebtedness" includes, among other
things, indebtedness and other obligations owing in respect of the Existing
Credit Facility as well as amendments, modifications, renewals, extensions,
refinancing and refundings of any such indebtedness. All senior indebtedness
shall be and remain senior indebtedness for all purposes of the 12% Note
Indenture, whether or not subordinated in any insolvency proceeding.
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DESCRIPTION OF NOTES
The notes were issued under the Indenture dated as of August 17, 1998
between Silkworm and Star Bank, N.A., as trustee (the "Trustee"), as amended by
The First Supplemental Indenture dated as of August 17, 1998 between Holdings
and the Trustee (as amended, the "Indenture"). The Indenture has been filed as
an exhibit to the registration statement (the "Registration Statement") of which
this Prospectus forms a part. The Indenture is qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of the material provisions of the Indenture does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act. The definitions of certain general terms used in the
following summary are set forth below under "--Certain Definitions."
The notes are general unsecured obligations of Holdings and are senior
in right of payment to all future Indebtedness of Holdings that is subordinated
to the notes and pari passu in right of payment with all future Indebtedness of
Holdings that is not subordinated to the notes. Holdings is the sole obligor
with respect to the notes; however, the operations of Holdings are conducted
entirely through its Subsidiaries and, therefore, Holdings is completely
dependent upon the operations and cash flow of its Subsidiaries to meet its
obligations, including its obligations under the notes. The Credit Facility, the
10 1/4% Note Indenture and the 12% Note Indenture significantly restrict
Insilco's ability to pay dividends or make any other distributions to Holdings.
The ability of Insilco to comply with the conditions in the Credit Facility, the
10 1/4% Note Indenture and the 12% Note Indenture may be affected by certain
events that are beyond Holdings' control. The notes are effectively subordinated
to all Indebtedness and other liabilities (including, without limitation, trade
payables and lease obligations) of Holdings' Subsidiaries, including, without
limitation, to Insilco's obligations under the Credit Facility, the 10 1/4% Note
Indenture and the 12% Note Indenture. Any right of Holdings to receive assets of
any of its Subsidiaries upon such Subsidiary's liquidation or reorganization
(and the consequent right of Holders of the notes to participate in those
assets) is effectively subordinated to the claims of that Subsidiary's creditors
except to the extent that Holdings itself is recognized as a creditor of such
Subsidiary, in which case the claims of Holdings would still be subordinate to
the claims of such creditors who hold security in the assets of such Subsidiary
and to the claims of such creditors who hold Indebtedness of such Subsidiary
senior to that held by Holdings. As of December 31, 1999, Holdings and its
subsidiaries had Indebtedness of approximately $400.6 million and Holdings'
Subsidiaries had approximately $522.4 million of outstanding liabilities. The
Indenture will permit the incurrence of certain additional Indebtedness of
Holdings and Holdings' Subsidiaries in the future. See "Risk Factors--Limitation
on Access to Cash Flow of Subsidiaries; Holding Company Structure," "Risk
Factors--Substantial Leverage; Liquidity; Stockholders' Deficit" and "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
We refer to Holdings as the Issuer of the notes in this section of the
prospectus.
All of the Issuer's Subsidiaries are Restricted Subsidiaries. However,
under certain circumstances, the Issuer is permitted to designate current or
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are
subject to the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount at maturity to
$138.0 million and will mature on August 15, 2008. The notes were issued at a
substantial discount from their principal amount at maturity in order to
generate gross proceeds of $68.2 million. Until August 15, 2003, no interest
will accrue on the notes, but the Accreted Value will increase (representing
amortization of original issue discount) between the date of original issuance
and August 15, 2003, on a semi-annual bond equivalent basis using a 360-day year
comprised of twelve 30-day months, such that the Accreted Value shall be equal
to the full principal amount at maturity of the notes on August 15, 2003.
Beginning on August 15, 2003, interest on the notes will accrue at the rate of
14% per annum and will be payable in cash semi-annually in arrears on February
15 and August 15, commencing on February 15, 2004, to Holders of record on the
immediately preceding February 1 and August 1. Interest on the notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from August 15, 2003. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal of, premium, if any,
and interest and Liquidated Damages, if any, on the notes will be payable at the
office or agency of the Issuer maintained for such purpose within the City and
State of New York or, at the option of the Issuer, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the notes at
their respective addresses set forth in the
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register of Holders of notes; provided that (i) all payments of principal,
premium, interest and Liquidated Damages with respect to notes represented by
one or more permanent global notes will be paid by wire transfer of immediately
available funds to the account of DTC or any successor thereto and (ii) any
Liquidated Damages attributable to periods ending on or before August 15, 2003
shall be payable through the issuance of additional notes (valued at 100% of the
Accreted Value thereof on the date of any such payment). Until otherwise
designated by the Issuer, the Issuer's office or agency in New York will be the
office of the Trustee maintained for such purpose. The notes were issued in
denominations of $1,000 and integral multiples thereof.
Subject to the covenants described below, the Issuer may issue
additional notes under the Indenture having the same terms in all respects as
the notes (or in all respects except for the payment of interest on the notes
(i) scheduled and paid prior to the date of issuance of such notes or (ii)
payable on the first Interest Payment Date following such date of issuance). The
notes and any such additional notes would be treated as a single class for all
purposes under the Indenture.
OPTIONAL REDEMPTION
Except as provided below, the notes are not redeemable at the Issuer's
option prior to August 15, 2003. Thereafter, the notes will be subject to
redemption at any time at the option of the Issuer, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount at maturity) set forth below, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . . . . . . 107.000%
2003 . . . . . . . . . . . . . . . . . . . . . . 104.667%
2004 . . . . . . . . . . . . . . . . . . . . . . 102.333%
2005 and thereafter. . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, on or prior to August 15, 2001, the
Issuer may redeem up to 100% of the aggregate principal amount at maturity of
notes ever issued under the Indenture at a redemption price of 114% of the
Accreted Value thereof, plus Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that, such redemption shall occur within 365 days of the
date of the closing of any such Public Equity Offering.
In addition, at any time prior to August 15, 2003, the Issuer may, at
its option upon the occurrence of a Change of Control, redeem the notes, in
whole but not in part, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 60 days after the
occurrence of such Change of Control), in cash at a redemption price equal to
(i) the present value at such time of the optional redemption price of such note
at August 15, 2003 (such redemption price being described under "--Optional
Redemption") computed using a discount rate equal to the Treasury Rate plus 75
basis points, plus (ii) accrued and unpaid interest and Liquidated Damages, if
any, to the date of redemption.
"Treasury Rate" means, as of any redemption date, the yield to maturity
as of such redemption date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to August 15, 2003; provided
that if the period from the redemption date to August 15, 2003 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, selection
of notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
notes are listed, or, if the notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no notes having a principal amount at maturity of $1,000 or less shall be
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redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
notes to be redeemed at its registered address. Notices of redemption may not be
conditional. If any note is to be redeemed in part only, the notice of
redemption that relates to such note shall state the portion of the principal
amount at maturity thereof to be redeemed. A new note in principal amount at
maturity equal to the unredeemed portion thereof will be issued in the name of
the Holder thereof upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Issuer is not required to make mandatory redemption of, or sinking
fund payments with respect to, the notes.
REPURCHASE AT THE OPTION OF HOLDERS
PUBLIC COMMON STOCK OFFERINGS
Upon the occurrence of a Public Common Stock Offering prior to August
15, 2001, the Issuer is required to make an offer to all Holders of notes
pursuant to the offer described below (the "Public Common Stock Offering Offer")
to purchase the maximum principal amount at maturity of notes that may be
purchased with the net cash proceeds of the Public Common Stock Offering at an
offer price in cash equal to 114% of the Accreted Value thereof, plus accrued
and unpaid Liquidated Damages, if any, thereon to the date of repurchase (the
"Public Common Stock Offering Payment"). Within 65 days following any such
Public Common Stock Offering, the Issuer will (or will cause the Trustee to)
mail a notice to each Holder describing the transaction or transactions that
constitute the Public Common Stock Offering and offering to repurchase notes,
pursuant to the procedures required by the Indenture and described in such
notice. If the aggregate Public Common Stock Offering Payment of notes
surrendered by Holders thereof in connection with a Public Common Stock Offering
offer exceeds the net cash proceeds of the Public Common Stock Offering, the
Trustee shall select the notes to be purchased as set forth under "--Selection
and Notice." The Issuer will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Public Common Stock Offering. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of the Indenture relating to such Public Common Stock Offering
Offer, the Issuer will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
On the Public Common Stock Offering Payment Date, the Issuer will, to
the extent lawful, (a) accept for payment all notes or portions thereof properly
tendered pursuant to the Public Common Stock Offering Offer, (b) deposit with
the Paying Agent an amount equal to the Public Common Stock Offering Payment in
respect of all notes or portions thereof so tendered and (c) deliver or cause to
be delivered to the Trustee the notes so accepted together with an Officers'
Certificate stating the aggregate principal amount at maturity of notes or
portions thereof being purchased by the Issuer. The Paying Agent will promptly
mail to each Holder of notes so tendered the Public Common Stock Offering
Payment for such notes, and the Trustee will promptly authenticate and mail (or
cause to be transferred by book-entry) to each Holder a new note equal in
principal amount at maturity to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount at maturity of $1,000 or an integral multiple thereof. The Issuer will
publicly announce the results of the Public Common Stock Offering Offer on or as
soon as practicable after the Public Common Stock Offering Payment Date.
The Indenture will provide that the Issuer will fix the Public Common
Stock Offering Payment Date no earlier than 30 but no more than 60 days after
the Public Common Stock Offering Offer is mailed as set forth above. Prior to
complying with the provisions of the preceding sentence, but in any event within
60 days following a Public Common Stock Offering, the Issuer will either repay
all outstanding Indebtedness of the Issuer or any of its Subsidiaries that
restricts the ability of the Issuer to repurchase, or obtain funds to
repurchase, the notes or obtain the requisite consents, if any, under all
agreements governing all such outstanding Indebtedness to permit the repurchase,
or the obtaining of funds for the repurchase, of the notes required by this
covenant. The Existing Credit Facility contains provisions that currently
prohibit the use of the proceeds of a Public Common Stock Offering to repurchase
notes. In the event of a Public Common Stock Offering, the Company will be
required to obtain an amendment or waiver to the Existing Credit Facility in
order to satisfy its obligations to purchase notes with the net cash proceeds of
a Public Common Stock Offering. No assurance can be given that the Issuer will
be able to obtain
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any such amendment or waiver with respect to a Public Common Stock Offering. The
Issuer's failure to make a Public Common Stock Offering Offer when required or
to purchase tendered notes when tendered would constitute an Event of Default
under the Indenture. See "Risk Factors."
The Public Common Stock Offering provisions described above will be
applicable whether or not any other provisions of the Indenture are applicable
and shall apply to each Public Common Stock Offering occurring during the
three-year period ending on August 15, 2001.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of notes will
have the right to require the Issuer to repurchase all or any part (equal to
$1,000 principal amount at maturity or an integral multiple thereof) of such
notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the Accreted Value thereof, in the case
of any such purchase prior to August 15, 2003, or 101% of the aggregate
principal amount at maturity thereof, in the case of any such purchase on or
after August 15, 2003, in each case plus accrued and unpaid interest, if any,
and Liquidated Damages, if any, thereon to the date of repurchase (the "Change
of Control Payment"). Within 65 days following any Change of Control, the Issuer
will (or will cause the Trustee to) mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes, pursuant to the procedures required by the Indenture and
described in such notice. The Issuer will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the notes as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of the Indenture relating to such Change of Control Offer, the
Issuer will comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations described in the Indenture by
virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (a) accept for payment all notes or portions thereof property tendered
pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all notes or
portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the notes so accepted together with an Officers' Certificate stating the
aggregate principal amount at maturity of notes or portions thereof being
purchased by the Issuer. The Paying Agent will promptly mail to each Holder of
notes so tendered the Change of Control Payment for such notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book-entry)
to each Holder a new note equal in principal amount at maturity to any
unpurchased portion of the notes surrendered, if any; provided that each such
new note will be in a principal amount at maturity of $1,000 or an integral
multiple thereof. The Issuer will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Indenture provides that the Issuer will fix the Change of Control
Payment Date no earlier than 30 but no more than 60 days after the Change of
Control Offer is mailed as set forth above. Prior to complying with the
provisions of the preceding sentence, but in any event within 60 days following
a Change of Control, the Issuer will either repay all outstanding Indebtedness
of the Issuer or any of its Subsidiaries that restricts the ability of the
Issuer to repurchase, or obtain funds to repurchase, the notes or obtain the
requisite consents, if any, under all agreements governing all such outstanding
Indebtedness to permit the repurchase, or the obtaining of funds for the
repurchase, of the notes required by this covenant. The Existing Credit Facility
and the 10 1/4% Note Indenture restrict Insilco from paying any dividends or
making any other distributions to the Issuer. If the Issuer does not obtain the
consent of the lenders under agreements governing outstanding Indebtedness of
its Subsidiaries, including under the Existing Credit Facility and the 10 1/4%
Note Indenture, to permit the repurchase of the notes or does not refinance such
Indebtedness, the Issuer will likely not have the financial resources to
purchase notes and the Issuer's Subsidiaries will be restricted by the terms of
such Indebtedness from paying dividends to the Issuer or otherwise lending or
distributing funds to the Issuer for the purpose of such purchase. In any event,
there can be no assurance that the Issuer's Subsidiaries will have the resources
available to pay any such dividend or make any such distribution. The Issuer's
failure to make a Change of Control Offer when required or to purchase tendered
notes when tendered would constitute an Event of Default under the Indenture.
See "Risk Factors."
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the notes to require that the
Issuer repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
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The Issuer will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (a)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Subsidiaries, taken as a
whole, to any "person" or "group" (as such terms are used in Section 13(d) of
the Exchange Act), other than the Principals and their Related Parties; (b) the
adoption of a plan for the liquidation or dissolution of the Issuer, (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d) of the Exchange Act), other than the Principals
and their Related Parties, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of 50% or more of the voting
power of the outstanding voting stock of the Issuer; or (d) the first day on
which a majority of the members of the Board of Directors of the Issuer are not
Continuing Directors.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Issuer and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of notes to require the Issuer to
repurchase such notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Issuer and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Issuer who (a) was a member of such
Board of Directors immediately after consummation of the Merger or (b) was
nominated for election or elected to such Board of Directors with the approval
of, or whose election to the Board of Directors was ratified by, at least a
majority of the Continuing Directors who were members of such Board of Directors
at the time of such nomination or election.
ASSET SALES
The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (a) the
Issuer or such Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value
(evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (b) at least 75% of the consideration
therefor received by the Issuer or such Restricted Subsidiary is in the form of
(i) cash or Cash Equivalents or (ii) property or assets that are used or useful
in a Permitted Business, or the Capital Stock of any Person engaged in a
Permitted Business if, as a result of the acquisition by the Issuer or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary;
provided that the amount of (x) any liabilities (as shown on the Issuer's or
such Restricted Subsidiary's most recent balance sheet), of the Issuer or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Issuer or such Restricted Subsidiary from further
liability, (y) any securities, notes or other obligations received by the Issuer
or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Issuer or such Restricted Subsidiary into cash or Cash Equivalents (to the
extent of the cash or Cash Equivalents received), and (z) any Designated Noncash
Consideration received by the Issuer or any of its Restricted Subsidiaries in
such Asset Sale having an aggregate fair market value, taken together with all
other Designated Noncash Consideration received pursuant to this clause (z) that
is at that time outstanding, not to exceed 15% of Total Assets at the time of
the receipt of such Designated Noncash Consideration (with the fair market value
of each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value), shall be
deemed to be cash for purposes of this provision; and provided further that the
75% limitation referred to in clause (b) above will not apply to any Asset Sale
in which the after-tax cash or Cash Equivalents portion of the consideration
received therefrom, determined in accordance with the foregoing proviso, is
equal to or greater than what the after-tax cash or cash equivalent portion of
the consideration would have been had such Asset Sale complied with the
aforementioned 75% limitation.
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Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Issuer or any such Restricted Subsidiary shall apply such Net
Proceeds, at its option, to (a) repay or purchase Pari Passu Indebtedness of the
Issuer or any Indebtedness of any Restricted Subsidiary, provided that, if the
Issuer shall so repay or purchase Pari Passu Indebtedness of the Issuer, it will
equally and ratably reduce Indebtedness under the notes if the notes are then
redeemable, or, if the notes may not then be redeemed, the Issuer shall make an
offer (in accordance with the procedures set forth below for an Asset Sale
Offer) to all Holders of notes to purchase at a purchase price equal to 100% of
the principal amount at maturity of the notes (or, in the case of purchases of
notes prior to August 15, 2003, at a purchase price equal to 100% of the
Accreted Value thereof), plus accrued and unpaid interest and Liquidated
Damages, if any, thereon as of the date of purchase of the notes that would
otherwise be redeemed, or (b) make an investment in property, make a capital
expenditure or acquire assets that are used or useful in a Permitted Business,
or Capital Stock of any Person primarily engaged in a Permitted Business if (i)
as a result of the acquisition by the Issuer or any Restricted Subsidiary
thereof, such Person becomes a Restricted Subsidiary or (ii) the Investment in
such Capital Stock is permitted by clause (f) of the definition of Permitted
Investments. Pending the final application of any such Net Proceeds, the Issuer
may temporarily reduce Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0
million, the Issuer will be required to make an offer to all Holders of notes
(an "Asset Sale Offer") to purchase the maximum principal amount at maturity of
notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount at maturity thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase (or, in the case of repurchases of notes prior to August 15,
2003, at a purchase price equal to 100% of the Accreted Value, plus Liquidated
Damages, if any, thereon as of the date of repurchase), in accordance with the
procedures set forth in the Indenture. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Issuer may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount at maturity or Accreted Value (as applicable) of
notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the notes to be
purchased as set forth under "--Selection and Notice." Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the Indenture relating to such Asset Sale Offer, the Issuer will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in the Indenture by virtue thereof.
The Existing Credit Facility and the 10 1/4% Note Indenture restrict
Insilco from paying any dividends or making any other distributions to the
Issuer to permit the Issuer to make an Asset Sale Offer. If the Issuer does not
obtain the consent of the lenders under agreements governing outstanding
Indebtedness of its Subsidiaries, including under the Existing Credit Facility
and the 10 1/4% Note Indenture, to permit the repurchase of the notes or does
not refinance such Indebtedness, the Issuer will likely not have the financial
resources to purchase notes and the Issuer's Subsidiaries will be restricted by
the terms of such Indebtedness from paying dividends to the Issuer or otherwise
lending or distributing funds to the Issuer for the purpose of such purchase. In
any event, there can be no assurance that the Issuer's Subsidiaries will have
the resources available to pay any such dividend or make any such distribution.
The Issuer's failure to make an Asset Sale Offer when required or to purchase
tendered notes when tendered would constitute an Event of Default under the
Indenture. See "Risk Factors."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any other payment or distribution on account of the
Issuer's or any of its Restricted Subsidiaries' Equity Interests (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Issuer or dividends or distributions payable to the Issuer or any
Wholly Owned Restricted Subsidiary of the Issuer); (b) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Issuer, any of
its Restricted Subsidiaries or any other Affiliate of the Issuer (other than any
such Equity Interests owned by the Issuer or any Restricted Subsidiary of the
Issuer); (c) make any principal payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value, any Indebtedness of
the
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Issuer (other than the notes and Indebtedness in respect of the Existing Credit
Facility) that is pari passu or subordinated in right of payment to the notes,
except in accordance with the mandatory redemption or repayment provisions set
forth in the original documentation governing such Indebtedness or in accordance
with the covenant described under the caption entitled "--Repurchase at the
Option of Holders--Asset Sales" (but not pursuant to any other mandatory offer
to repurchase upon the occurrence of any event); or (d) make any Restricted
Investment (all such payments and other actions set forth in clauses (a) through
(d) above being collectively referred to as Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(ii) the Issuer would, immediately after giving pro forma effect thereto as
if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least
$1.00 of additional indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described
under caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments
permitted by clauses (a) (to the extent that the declaration of any
dividend referred to therein reduces amounts available for Restricted
Payments pursuant to this clause (iii)), (b), (c), (e) through (h),
(j), (k), and (m) through (o) and (q) of the next succeeding
paragraph), is less than the sum, without duplication, of (A) 50% of
the Adjusted Consolidated Net Income of the Issuer for the period
(taken as one accounting period) commencing October 1, 1998 to the end
of the Issuer's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Adjusted Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (B) 100% of the
Qualified Proceeds received by the Issuer on or after the Issue Date
from contributions to the Issuer's capital or from the issue or sale on
or after the Issue Date of Equity Interests of the Issuer or of
Disqualified Stock or convertible debt securities of the Issuer to the
extent that they have been converted into such Equity Interests (other
than Equity Interests, Disqualified Stock or convertible debt
securities sold to a Subsidiary of the Issuer and other than
Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (C) the amount equal to the
net reduction in Investments in Persons after the date of the Indenture
who are not Restricted Subsidiaries (other than Permitted Investments)
resulting from (x) Qualified Proceeds received as a dividend, repayment
of a loan or advance or other transfer of assets (valued at the fair
market value thereof) to the Issuer or any Restricted Subsidiary from
such Persons, (y) Qualified Proceeds received upon the sale or
liquidation of such Investment and (z) the redesignation of
Unrestricted Subsidiaries (excluding any increase in the amount
available for Restricted Payments pursuant to clause (i) or (m) below
arising from the redesignation of such Unrestricted Subsidiary) whose
assets are used or useful in, or which is engaged in, one or more
Permitted Business as Restricted Subsidiaries (valued (proportionate to
the Issuer's equity interest in such Subsidiary) at the fair market
value of the net assets of such Subsidiary at the time of such
redesignation).
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(b) (i) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu Indebtedness, Subordinated Indebtedness
or Equity Interests of the Issuer (the "Retired Capital Stock") in
exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Issuer) of, other
Equity Interests of the Issuer (other than any Disqualified Stock) (the
"Refunding Capital Stock"), provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from
clause (iii)(B) of the preceding paragraph, and (ii) if immediately
prior to the retirement of Retired Capital Stock, the declaration and
payment of dividends thereon was permitted under clause (f) of this
paragraph, the declaration and payment of dividends on the Refunding
Capital Stock in an aggregate amount per year no greater than the
aggregate amount of dividends per annum that was declarable and payable
on such Retired Capital Stock immediately prior to such retirement;
provided that, at the time of the declaration of any such dividends, no
Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
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(c) the defeasance, redemption, repurchase, retirement or other acquisition
of Subordinated Indebtedness of the Issuer with the net cash proceeds
from an incurrence of, or in exchange for, Permitted Refinancing
Indebtedness;
(d) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Issuer or Insilco held by any member of
Insilco's or the Issuer's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement, provided that (i) the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed (x) $7.5 million in any calendar year (with unused
amounts in any calendar year being carried over to succeeding calendar
years subject to a maximum (without giving effect to the following
clause (y)) of $15.0 million in any calendar year), plus (y) the
aggregate cash proceeds received by the Issuer during such calendar
year from any reissuance of Equity Interests by the Issuer or Insilco
to members of management of the Issuer and its Restricted Subsidiaries
and (ii) no Default or Event of Default shall have occurred and be
continuing immediately after such transaction;
(e) payments and transactions in connection with the Recapitalization and
the application of the proceeds thereof, and the payment of fees and
expenses with respect thereto;
(f) the declaration and payment of dividends to holders of any class or
series of preferred stock (other than Disqualified Stock), provided
that, at the time of such issuance, after giving effect to such
issuance on a pro forma basis, the Fixed Charge Coverage Ratio for the
Issuer for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date of such issuance would have been no less than 1.5 to 1;
(g) the payment of dividends by a Restricted Subsidiary on any class of
common stock of such Restricted Subsidiary if (i) such dividend is paid
pro rata to all holders of such class of common stock and (ii) at least
51% of such class of common stock is held by the Issuer or one or more
of its Restricted Subsidiaries;
(h) the repurchase of any class of common stock of a Restricted Subsidiary
if (i) such repurchase is made pro rata with respect to such class of
common stock and (ii) at least 51% of such class of common stock is
held by the Issuer or one or more of its Restricted Subsidiaries;
(i) any other Restricted Investment made in a Permitted Business which,
together with all other Restricted Investments made pursuant to this
clause (i) since the date of the Indenture, does not exceed $25.0
million (in each case, after giving effect to all subsequent reductions
in the amount of any Restricted Investment made pursuant to this clause
(i), either as a result of (A) the repayment or disposition thereof for
cash or (B) the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued proportionate to the Issuer's equity
interest in such Subsidiary at the time of such redesignation at the
fair market value of the net assets of such Subsidiary at the time of
such redesignation), in the case of clause (A) and (B), not to exceed
the amount of such Restricted Investment previously made pursuant to
this clause (i)); provided that no Default or Event of Default shall
have occurred and be continuing immediately after making such
Restricted Investment;
(j) the declaration and payment of dividends to holders of any class or
series of Disqualified Stock of the Issuer or any Restricted Subsidiary
issued on or after the date of the Indenture in accordance with the
covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; provided that no Default or Event of
Default shall have occurred and be continuing immediately after making
such Restricted Payment;
(k) repurchases of Equity Interests deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise
price of such options;
(l) the payment of dividends on the Issuer's or Insilco's common stock,
following the first public offering of the Issuer's or Insilco's common
stock after the date of the Indenture, of up to 6.0% per annum of the
net proceeds received by the Issuer or Insilco from such public
offering of its common stock, other than, in each case, with respect to
public offerings with respect to the Issuer's or Insilco's common stock
registered on Form S-8; provided that no Default or Event of Default
shall have occurred and be continuing immediately after any such
payment of dividends;
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(m) any other Restricted Payment which, together with all other Restricted
Payments made pursuant to this clause (m) since the date of the
Indenture, does not exceed $25.0 million (in each case, after giving
effect to all subsequent reductions in the amount of any Restricted
Investment made pursuant to this clause (m) either as a result of (i)
the repayment or disposition thereof for cash or (ii) the redesignation
of an Unrestricted Subsidiary as a Restricted Subsidiary (valued
proportionate to the Issuer's equity interest in such Subsidiary at the
time of such redesignation at the fair market value of the net assets
of such Subsidiary at the time of such redesignation), in the case of
clause (i) and (ii), not to exceed the amount of such Restricted
Investment previously made pursuant to this clause (m)) provided that
no Default or Event of Default shall have occurred and be continuing
immediately after making such Restricted Payment;
(n) the pledge by the Issuer of the Capital Stock of an Unrestricted
Subsidiary of the Issuer to secure Non- Recourse Debt of such
Unrestricted Subsidiary;
(o) the purchase, redemption or other acquisition or retirement for value
of any Equity Interests of any Restricted Subsidiary issued after the
date of the Indenture, provided that the aggregate price paid for any
such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed the sum of (i) the amount of cash and Cash Equivalents
received by such Restricted Subsidiary from the issue or sale thereof
and (ii) any accrued dividends thereon the payment of which would be
permitted pursuant to clause (j) above;
(p) any Investment in an Unrestricted Subsidiary that is funded by
Qualified Proceeds received by the Issuer on or after the date of the
Indenture from contributions to the Issuer's capital or from the issue
and sale on or after the date of the Indenture of Equity Interests of
the Issuer or of Disqualified Stock or convertible debt securities to
the extent they have been converted into such Equity Interests (other
than Equity Interests, Disqualified Stock or convertible debt
securities sold to a Subsidiary of the Issuer and other than
Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock) in an amount (measured at the time
such Investment is made and without giving effect to subsequent changes
in value) that does not exceed the amount of such Qualified Proceeds;
and
(q) distributions or payments of Receivables Fees.
The Board of Directors may designate any Restricted Subsidiary (other
than Insilco) to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such designation, all outstanding
Investments by the Issuer and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Restricted Investments in
an amount equal to the greater of (i) the net book value of such Investments at
the time of such designation and (ii) the fair market value of such Investments
at the time of such designation. Such designation will only be permitted if such
Restricted Investment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of (i) all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Issuer or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment and (ii)
Qualified Proceeds (other than cash) shall be the fair market value on the date
of receipt thereof by the Issuer of such Qualified Proceeds. The fair market
value of any non-cash Restricted Payment in excess of $1.0 million shall be
determined by the Board of Directors whose resolution with respect thereto shall
be delivered to the Trustee. Not later than the date of making any Restricted
Payment that exceeds $2.0 million, the Issuer shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that (a) the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness), (b) the Issuer will not, and
will not permit any of its Restricted Subsidiaries to, issue any shares of
Disqualified Stock and (c) the Issuer will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided that the Issuer or
any Restricted Subsidiary may incur Indebtedness (including Acquired
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Indebtedness) or issue shares of Disqualified Stock if the Fixed Charge Coverage
Ratio for the Issuer's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 1.5 to 1, determined on a consolidated pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The Indenture also provides that the Issuer will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Issuer unless such Indebtedness is also contractually
subordinated in right of payment to the notes on substantially identical terms;
provided that no Indebtedness of the Issuer shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Issuer solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Indebtedness"):
(i) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Indebtedness under the Existing Credit Facility; provided that the
aggregate principal amount of all Indebtedness (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Issuer and such Restricted Subsidiaries thereunder)
then classified as having been incurred in reliance upon this clause
(i) that remains outstanding under the Existing Credit Facility
(together with any outstanding Indebtedness then classified as
Permitted Refinancing Indebtedness to the extent the proceeds of which
were used to refinance any Indebtedness classified at the time of such
refinancing as (x) having been incurred in reliance upon this clause
(i) or (y) Permitted Refinancing Indebtedness described in the
preceding clause (x) or this clause (y)) after giving effect to such
incurrence does not exceed an amount equal to $250.0 million (it being
understood that the use of the defined term Permitted Refinancing
Indebtedness in this clause (i) does not affect the defined term
"Existing Credit Facility" or the types of indebtedness that may be
incurred thereunder);
(ii) the incurrence by the Issuer and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Issuer of Indebtedness represented by the notes
and the Indenture;
(iv) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Expenditure Indebtedness, Capital
Lease Obligations or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment
used in the business of the Issuer or such Restricted Subsidiary, in an
aggregate principal amount (or accreted value, as applicable),
including any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any such Indebtedness, not to exceed $40.0 million
outstanding after giving effect to such incurrence;
(v) Indebtedness arising from agreements of the Issuer or any Restricted
Subsidiary providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, assets or a Subsidiary, other
than guarantees of Indebtedness incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition; provided that (A) such
Indebtedness is not reflected on the balance sheet of the Issuer or any
Restricted Subsidiary (contingent obligations referred to in a footnote
or footnotes to financial statements and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such balance sheet
for purposes of this clause (A)) and (B) the maximum assumable
liability in respect of such Indebtedness shall at no time exceed the
gross proceeds including non-cash proceeds (the fair market value of
such non-cash proceeds being measured at the time received and without
giving effect to any subsequent changes in value) actually received by
the Issuer and/or such Restricted Subsidiary in connection with such
disposition;
(vi) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by the Indenture to
be incurred;
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(vii) the incurrence by the Issuer or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Issuer and/or any of its
Restricted Subsidiaries; provided that (i) if the Issuer is the obligor
on such Indebtedness and such Indebtedness is owed to a Subsidiary
other than Insilco or a Subsidiary of Insilco, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the notes and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Issuer or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Issuer or a
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Issuer or such
Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vii);
(viii) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging (A) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding and (B) exchange rate risk with respect to agreements or
Indebtedness of such Person payable denominated in a currency other
than U.S. dollars, provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder;
(ix) the guarantee by the Issuer or any of its Restricted Subsidiaries of
Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer
that was permitted to be incurred by another provision of this
covenant;
(x) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Acquired Indebtedness in an aggregate principal amount (or accreted
value, as applicable), including any Permitted Indebtedness incurred to
refund, refinance or replace any such Indebtedness, not to exceed $25.0
million outstanding after giving effect to such incurrence;
(xi) obligations in respect of performance and surety bonds and completion
guarantees provided by the Issuer or any Restricted Subsidiary in the
ordinary course of business;
(xii) the incurrence by the Issuer or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) outstanding after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (xii), not to exceed $50.0 million; and
(xiii) any Indebtedness or other liabilities in connection with obligations
to pay premiums for corporate life insurance policies in an aggregate
amount not to exceed the aggregate cash value of such policies.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xiii)
above or is entitled to be incurred pursuant to the first paragraph of this
covenant, the Issuer shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. In addition, the Issuer
may, at any time, change the classification of an item of Indebtedness (or any
portion thereof) to any other clause or to the first paragraph hereof, provided
that the Issuer would be permitted to incur such item of Indebtedness (or such
portion thereof) pursuant to such other clause or the first paragraph hereof, as
the case may be, at such time of reclassification. Accrual of interest,
accretion or amortization of original issue discount will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant. In addition, in the
event the Issuer repays, redeems or otherwise retires any Indebtedness portions
of which are then classified as having been incurred under more than one of the
categories of Permitted Indebtedness described above or pursuant to the first
paragraph of this covenant and any category of Permitted Indebtedness, the
Issuer shall, in its sole discretion, designate which portions of such
Indebtedness were retired.
Indebtedness under the Existing Credit Facility outstanding on the date on
which notes were first issued and authenticated was not incurred on such date in
reliance on clause (i) of the definition of "Permitted Indebtedness." As a
result, the Issuer will be permitted to incur significant additional secured
indebtedness under clause (i) of the definition of "Permitted Indebtedness." See
"Risk Factors."
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LIENS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien, other than a Permitted Lien, that secures obligations
under any Pari Passu Indebtedness or Subordinated Indebtedness of the Issuer on
any asset or property now owned or hereafter acquired by the Issuer or any of
its Restricted Subsidiaries, or any income or profits therefrom or assign or
convey any right to receive income therefrom, unless the notes are equally and
ratably secured with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a)(i) pay dividends or make any
other distributions to the Issuer or any of its Restricted Subsidiaries (A) on
its Capital Stock or (B) with respect to any other interest or participation in,
or measured by, its profits, or (ii) pay any Indebtedness owed to the Issuer or
any of its Restricted Subsidiaries, (b) make loans or advances to the Issuer or
any of its Restricted Subsidiaries or (c) transfer any of its properties or
assets to the Issuer or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the terms of any Indebtedness or Disqualified Stock permitted by
the Indenture to be incurred by any Restricted Subsidiary of the Issuer, (c) the
Indenture and the notes, (d) the Existing Credit Facility, (e) applicable law
and any applicable rule, regulation or order, (f) any agreement or instrument of
a Person acquired by the Issuer or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent created in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (g) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (h) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(f) above on the property so acquired, (i) contracts for the sale of assets,
including, without limitation, customary restrictions with respect to a
Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary, (j) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are, in the good faith judgment of the Issuer's Board of Directors,
not materially less favorable, taken as a whole, to the Holders of the notes
than those contained in the agreements governing the Indebtedness being
refinanced, (k) secured Indebtedness otherwise permitted to be incurred pursuant
to the covenants described under "--Incurrence of Indebtedness and Issuance of
Preferred Stock" and "--Liens" that limit the right of the debtor to dispose of
the assets securing such Indebtedness, (l) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business, (m) customary provisions in joint venture
agreements and other similar agreements entered into in the ordinary course of
business, and (n) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the Board of Directors of the
Issuer, are necessary or advisable to effect such Receivables Facility.
The Existing Credit Facility, the 10 1/4% Notes and the 12% Notes
significantly restrict, and the Credit Facility are expected to significantly
restrict, Insilco's ability to pay dividends or make other distributions to the
Issuer. The existence of such restrictions could have an adverse effect on the
Issuer's ability to pay interest and principal on the notes. See "Risk Factors."
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (a) the Issuer is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia, (b) the Person
formed by or surviving any such consolidation or merger (if other than the
Issuer) or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the Issuer
under the Registration Rights Agreement, the notes and the Indenture pursuant to
a supplemental
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indenture in a form reasonably satisfactory to the Trustee, (c) immediately
after such transaction no Default or Event of Default exists and (d) the Issuer
or the Person formed by or surviving any such consolidation or merger (if other
than the Issuer), or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made (i) will, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" or (ii)
would (together with its Restricted Subsidiaries) have a higher Fixed Charge
Coverage Ratio immediately after such transaction (after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period) than the Fixed Charge Coverage Ratio of the Issuer and its
Restricted Subsidiaries immediately prior to such transaction. The foregoing
clause (d) will not prohibit (a) a merger between the Issuer and an Affiliate of
the Issuer created for the purpose of holding the Capital Stock of the Issuer,
(b) a merger between the Issuer and a Wholly Owned Restricted Subsidiary or (c)
a merger between the Issuer and an Affiliate incorporated solely for the purpose
of reincorporating the Issuer in another State of the United States so long as,
in each case, the amount of Indebtedness of the Issuer and its Restricted
Subsidiaries is not increased thereby. The Indenture provides that the Company
shall not lease all or substantially all of its assets to any Person.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Issuer (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Issuer or such Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Issuer or such Restricted
Subsidiary with an unrelated Person and (b) the Issuer delivers to the Trustee,
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $7.5 million, either
(i) a resolution of the Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors or (ii) an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing.
Notwithstanding the foregoing, the following items shall not be deemed to
be Affiliate Transactions: (a) customary directors' fees, indemnification or
similar arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Issuer or any of its Restricted Subsidiaries in
the ordinary course of business (including ordinary course loans to employees
not to exceed (i) $5.0 million outstanding in the aggregate at any time and (ii)
$2.0 million to any one employee) and consistent with the past practice of the
Issuer or such Restricted Subsidiary; (b) transactions between or among the
Issuer and/or its Restricted Subsidiaries; (c) payments of customary fees by the
Issuer or any of its Restricted Subsidiaries to DLJMB and its Affiliates made
for any financial advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which are approved by a majority
of the Board of Directors in good faith; (d) any agreement as in effect on the
date of the Indenture or any amendment thereto (so long as such amendment is not
disadvantageous to the Holders of the notes in any material respect) or any
transaction contemplated thereby; (e) payments and transactions in connection
with the Recapitalization (including underwriting discounts and commissions in
connection therewith) and the application of the proceeds thereof, and the
payment of the fees and expenses with respect thereto; (f) Restricted Payments
that are permitted by the provisions of the Indenture described under the
caption "--Restricted Payments" and any Permitted Investments; (g) sales of
accounts receivable, or participations therein, in connection with any
Receivables Facility and (h) any payments pursuant to the terms of the Existing
Credit Facility.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction
the Attributable Indebtedness in respect of which is in excess of the aggregate
sum of $20 million from the date of the Indenture; provided that the Issuer or
any Restricted Subsidiary may enter into a sale and leaseback transaction in
excess of said sum if (a) the Issuer or such Restricted Subsidiary, as the case
may be, could have (i) incurred Indebtedness in an amount equal to the
Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the
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covenant described under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock" and (ii) incurred a Lien to secure such Indebtedness
pursuant to the covenant described under the caption "--Liens," (b) for any
transaction involving in excess of $2 million, the gross cash proceeds of such
sale and leaseback transaction are at least equal to the fair market value (as
determined in good faith by the Board of Directors and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (c) the transfer of assets in such sale
and leaseback transaction is permitted by, and the Issuer applies the proceeds
of such transaction in compliance with, the covenant described under the caption
"--Asset Sales."
ACCOUNTS RECEIVABLE FACILITY
The Indenture provides that no Accounts Receivable Subsidiary will incur
any Indebtedness if immediately after giving effect to such incurrence the
aggregate outstanding Indebtedness of all Accounts Receivable Subsidiaries
(excluding any Indebtedness owed to the Issuer or any Restricted Subsidiary)
would exceed $50.0 million.
NO WAIVER OF TRANSFER RESTRICTIONS
The Indenture provides that the Issuer will not modify, amend, waive or
otherwise fail to enforce the provisions of the Unit Lock-Up Agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any notes are outstanding, the Issuer will furnish to the Holders of
notes (a) 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
Issuer 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 Issuer's certified
independent accountants and (b) all current reports that would be required to be
filed with the Commission on Form 8-K if the Issuer were required to file such
reports, in each case, within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the Commission, the Issuer will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Issuer has agreed that, for so long as any notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes; (b) default in payment when due
of the principal of or premium, if any, on the notes at maturity, upon
redemption or otherwise; (c) failure by the Issuer or any of its Restricted
Subsidiaries for 30 days after receipt of notice from the Trustee or Holders of
at least 25% in principal amount at maturity of the notes then outstanding to
comply with the provisions described under the captions "Repurchase at the
Option of Holders--Change of Control," "--Asset Sales;" or "Merger,
Consolidation or Sale of Assets"; (d) failure by the Issuer for 60 days after
notice from the Trustee or the Holders of at least 25% in principal amount at
maturity of the notes then outstanding to comply with any of its other
agreements in the Indenture or the notes; (e) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Issuer or any of
its Restricted Subsidiaries (or the payment of which is guaranteed by the Issuer
or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (i) is
caused by a failure to pay Indebtedness at its stated final maturity (after
giving effect to any applicable grace period provided in such Indebtedness) (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its stated final maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $15.0 million or more; (f) failure by
the Issuer or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $15.0 million (net of any amounts with
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respect to which a reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged or stayed for a
period of 60 days; and (g) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Restricted Subsidiaries that is a
Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of the then outstanding
notes may declare all the notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Issuer or any
Significant Subsidiary, all outstanding notes will become due and payable
without further action or notice. Upon any acceleration of maturity of the
notes, all principal of and accrued interest on (if on or after August 15, 2003)
or Accreted Value of (if prior to August 15, 2003) the notes shall be due and
payable immediately. Holders of the notes may not enforce the Indenture or the
notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount
at maturity of the then outstanding notes may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of the notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount at maturity of the
notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the notes.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Issuer,
as such, shall have any liability for any obligations of the Issuer under the
notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of notes by accepting a note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. Such waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for (a) the rights of Holders of outstanding notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such notes when such payments are due from
the trust referred to below, (b) the Issuer's obligations with respect to the
notes concerning issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties and immunities of the Trustee, and the Issuer's obligations in
connection therewith and (d) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have the
obligations of the Issuer released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (a)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Issuer must specify whether the
notes are being defeased to maturity or to a particular redemption date, (b) in
the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an
opinion of counsel in the
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United States reasonably acceptable to the Trustee confirming that (i) the
Issuer has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of the Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, subject to
customary assumptions and exclusions, the Holders of the outstanding notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred, (c) in the case of Covenant Defeasance,
the Issuer shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, the Holders of the outstanding notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred, (d) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or, insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 123rd
day after the date of deposit, (e) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than the Indenture) to which the Issuer
or any of its Subsidiaries is a party or by which the Issuer or any of its
Subsidiaries is bound, (f) the Issuer must have delivered to the Trustee an
opinion of counsel to the effect that, subject to customary assumptions and
exclusions, after the 123rd day following the deposit, the trust funds will not
be subject to the effect of Section 547 of the United States Bankruptcy Code or
any analogous New York State law provision or any other applicable federal or
New York bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (g) the Issuer must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuer with
the intent of preferring the Holders of notes over the other creditors of the
Issuer with the intent of defeating, hindering, delaying or defrauding creditors
of the Issuer or others, and (h) the Issuer must deliver to the Trustee an
Officers' Certificate and an opinion of counsel (which opinion may be subject to
customary assumptions and exclusions), each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuer may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuer is not required to transfer or exchange any note selected
for redemption. Also, the Issuer is not required to transfer or exchange any
note for a period of 15 days before a selection of notes to be redeemed. The
registered Holder of a note will be treated as the owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture and
the notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount at maturity of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the Indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount at maturity of the
then outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder) (a) reduce the
principal amount at maturity of notes whose Holders must consent to an
amendment, supplement or waiver, (b) reduce the principal of or change the fixed
maturity of any note or alter the provisions with respect to the redemption of
the notes (other than the provisions described under the caption "--Repurchase
at the Option of Holders") or amend or modify the calculation of the Accreted
Value so as to reduce the amount of the Accreted Value of the notes, (c) reduce
the rate of or change the time for payment of interest on any note, (d) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest or Liquidated Damages, if any, on the notes (except a rescission of
acceleration of the notes by the Holders of at least a majority in aggregate
principal amount at maturity of the notes and a waiver of the payment default
that resulted from such acceleration), (e) make any note payable in money other
than that stated in the notes, (f) make any change in the provisions of the
Indenture relating to waivers of past Defaults, (g) waive a redemption payment
with respect
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to any note (other than the provisions described under the caption "--Repurchase
at the Option of Holders"), (h) make any change in the foregoing amendment and
waiver provisions, (i) modify any provision of the Indenture with respect to the
priority of the notes in right of payment or (j) make any change to the right of
Holders to waive an existing Default or Event of Default or the right of Holders
to receive payments of principal, premium, if any, and interest and Liquidated
Damages, if any, on the notes. Notwithstanding the foregoing, any amendment to
or waiver of the covenant described under the caption "--Repurchase at the
Option of Holders--Change of Control" will require the consent of the Holders of
at least two-thirds in aggregate principal amount at maturity of the notes then
outstanding if such amendment would materially adversely affect the rights of
Holders of notes.
Notwithstanding the foregoing, without the consent of any Holder of notes,
the Issuer and the Trustee may amend or supplement the Indenture or the notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated notes
in addition to or in place of certificated notes, to provide for the assumption
of the Issuer's obligations to Holders of notes in the case of a merger or
consolidation or sale of all or substantially all of the Issuer's assets, to
make any change that would provide any additional rights or benefits to the
Holders of notes or that does not materially adversely affect the legal rights
under the Indenture of any such Holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for guarantees of the notes or to
provide for the issuance of additional notes in accordance with the limitations
set forth in the Indenture.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount at maturity of the then
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
BOOK-ENTRY; DELIVERY AND FORM
Certificates representing notes will be issued in fully registered form,
without coupons. Except as described below, the notes will be deposited with, or
on behalf of, the Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co. ("Cede") as DTC's nominee, in the form of a
global note certificate (the "Global Note").
The Global Note. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Note, DTC or its custodian
will credit on its internal system interests in the Global Notes to the accounts
of persons who have accounts with DTC ("Participants") and (b) ownership of the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons other than Participants). Ownership of beneficial interests
in the Global Note will be limited to Participants or persons who hold interests
through Participants.
So long as DTC or its nominee is the registered owner or holder of the
notes, DTC or such nominee will be considered the sole owner or holder of the
notes represented by the Global Note for all purposes under the Indenture. No
beneficial owner of an interest in the Global Note will be able to transfer such
interest except in accordance with DTC's procedures, in addition to those
provided for under the Indenture with respect to the Notes.
Payments of the principal of or premium and interest on the Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
thereof. None of Holdings, the Trustee or any paying agent under the Indenture
will have any responsibility or liability for any aspect of the records relating
to or payments made on
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account of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
Holdings expects that DTC or its nominee, upon receipt of any payment of
the principal of or premium and interest on the Global Note, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in the Global Note
held through such Participants will be governed by standing instructions and
customary practice as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated note for any reason, including to
sell notes to persons in states which require physical delivery of the notes or
to pledge such securities, such holder must transfer its interest in the Global
Note in accordance with the normal procedures of DTC and with the procedures set
forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of notes (including the presentation of notes for exchange as
described below) only at the direction of one or more Participants to whose
account at DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for certificated notes, which it will distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interest in the Global Notes among Participants, it is under no
obligation to perform such procedures, and such procedures may be discontinued
at any time. Neither Holdings nor the Trustee will have any responsibility for
the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated Notes. Interests in the Global Notes will be exchangeable or
transferable, as the case may be, for certificated notes if (i) DTC notifies
Holdings that it is unwilling or unable to continue as depositary for such
Global Notes, or DTC ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by Holdings within 90
days, or (ii) an Event of Default has occurred and is continuing with respect to
such notes. Upon the occurrence of any of the events described in the preceding
sentence, the Company will cause the appropriate certificated notes to be
delivered.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Subsidiary" means an Unrestricted Subsidiary of the
Issuer or any of its Restricted Subsidiaries to which the Issuer or any of its
Restricted Subsidiaries sells any of its accounts receivable pursuant to a
Receivables Facility.
"Accreted Value" means, as of any date of determination prior to August 15,
2003, with respect to any note, the sum of (a) the initial offering price (which
shall be calculated by discounting the aggregate principal amount at maturity of
such note at a rate of 14% per annum, compounded semi-annually on each February
15 and August 15
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from August 15, 2003 to the date of issuance) of such note and (b) the portion
of the excess of the principal amount at maturity of such note over such initial
offering price which shall have been accreted thereon through such date, such
amount to be so accreted on a daily basis at a rate of 14% per annum of the
initial offering price of such note, compounded semi-annually on each February
15 and August 15 from the date of issuance of the notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months.
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (b) Indebtedness secured by a Lien
encumbering an asset acquired by such specified Person at the time such asset is
acquired by such specified Person.
"Adjusted Consolidated Net Income" means, which respect to any Person
for any period, the Consolidated Net Income of such Person for such period plus,
to the extent deducted in calculating Consolidated Net Income, 100% of non-cash
compensation expense for such period incurred by such Person and its Restricted
Subsidiaries related to stock options, stock appreciation rights, phantom stock
units or other Equity Interests granted to the employees or directors of such
Person and its Restricted Subsidiaries.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means (a) the sale, lease, conveyance, disposition or other
transfer (a "disposition") of any properties, assets or rights (including,
without limitation, by way of a sale and leaseback) (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuer and its Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described under the caption "--Change of Control"
and/or the provisions described under the caption "--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and (b)
the issuance, sale or transfer by the Issuer or any of its Restricted
Subsidiaries of Equity Interests of any of the Issuer's Restricted Subsidiaries,
in the case of either clause (a) or (b), whether in a single transaction or a
series of related transactions (i) that have a fair market value in excess of
$5.0 million or (ii) for net proceeds in excess of $5.0 million. Notwithstanding
the foregoing, the following items shall not be deemed to be Asset Sales: (a)
dispositions in the ordinary course of business; (b) a disposition of assets
(including, without limitation, capital stock) by the Issuer to a Restricted
Subsidiary or by a Restricted Subsidiary to the Issuer or to another Restricted
Subsidiary; (c) a disposition of Equity Interests by a Restricted Subsidiary to
the Issuer or to another Restricted Subsidiary; (d) the sale and leaseback of
any assets within 180 days of the acquisition thereof; (e) foreclosures on
assets; (f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Permitted Business; (g)
any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary; (h) a Permitted Investment or a Restricted Payment that
is permitted by the covenant described under the caption "--Restricted
Payments"; and (i) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"Attributable Indebtedness" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
Person to finance the purchase or construction or any property or assets
acquired or constructed by such Person which have a useful life of more than one
year so long as (a) the purchase or construction price for such property or
assets is included in "addition to property, plant or equipment" in accordance
with GAAP, (b) the acquisition or construction of such property or assets is not
part of any acquisition of a Person or line of business and (c) such
Indebtedness is incurred within 90 days of the acquisition or completion of
construction of such property or assets.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) Government Securities, (ii) any
certificate of deposit maturing not more than 365 days after the date of
acquisition issued by, or demand deposit or time deposit of, an Eligible
Institution or any lender under the Existing Credit Facility, (iii) commercial
paper maturing not more than 365 days after the date of acquisition of an issuer
(other than an Affiliate of the Issuer) with a rating, at the time as of which
any investment therein is made, of "A-3" (or higher) according to S&P or "P-2"
(or higher) according to Moody's or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments, (iv) any bankers acceptances of money
market deposit accounts issued by an Eligible Institution, (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above and (vi) in the case of any Subsidiary organized or having
its principal place of business outside the United States, investments
denominated in the currency of the jurisdiction in which such Subsidiary is
organized or has its principal place of business which are similar to the items
specified in clauses (i) through (v) above (including without limitation any
deposit with a bank that is a lender to any Restricted Subsidiary).
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period plus, to the extent deducted in computing
Consolidated Net Income, (a) an amount equal to any extraordinary or
non-recurring loss plus any net loss realized in connection with an Asset Sale,
(b) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (c) Fixed Charges of such Person for
such period, (d) depreciation, amortization (including amortization of goodwill
and other intangibles) and all other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period, (e) other income or expense net as set forth on the face of
such Person's statement of operations, (f) expenses and charges of the Issuer
and Insilco related to the Recapitalization and the application of the proceeds
thereof which are paid, taken or otherwise accounted for within 120 days of the
consummation of the Mergers, (g) non-cash charges for net periodic
post-retirement benefits and (h) any non-capitalized transaction costs incurred
in connection with actual or proposed financings, acquisition or divestitures
(including, but not limited to, financing and refinancing fees and costs
incurred in connection with the Recapitalization), in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, the Fixed
Charges of, and the depreciation and amortization and other non-cash charges of,
a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (a) the interest expense of such Person
and its Restricted Subsidiaries for such period (net of interest income), on a
consolidated basis, determined in accordance with GAAP (including amortization
of original issue discount, non-cash interest payments, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments, if any, pursuant to Hedging Obligations; provided that in no event
shall any amortization of deferred financing costs be included in Consolidated
Interest Expense); and (b) the consolidated capitalized interest of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued;
provided, however, that Receivables Fees shall be deemed not to constitute
Consolidated Interest Expense. Notwithstanding the foregoing, the Consolidated
Interest Expense with respect to any Restricted Subsidiary that is not a Wholly
Owned Restricted Subsidiary shall be included only to the extent (and in the
same proportion) that the net income of such Restricted Subsidiary was included
in calculating Consolidated Net Income.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance
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with GAAP; provided that (a) the Net Income (or loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (b) the Net Income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (c) the cumulative effect of a change in accounting principles
shall be excluded.
"Existing Credit Facility" means, collectively, the Credit Agreement dated
as of July 3, 1997, as amended pursuant to the First Amendment to Credit
Agreement dated as of August 25, 1997, and a Second Amendment to Credit
Agreement dated as of August 17, 1998, among the Company, certain of its
Subsidiaries, the financial institutions from time to time party thereto as
Lenders and Issuing Banks, DLJ Capital Funding, Inc., in its separate capacity
as syndication agent, The First National Bank of Chicago, in its separate
capacity as documentation agent, and Citicorp USA, Inc., in its separate
capacity as collateral and administrative agent for the Lenders and Issuing
Banks, and the Loan Documents (as defined therein) (or other analogous documents
entered into in connection with any refinancing thereof), in each case as the
same may from time to time be amended, renewed, supplemented or otherwise
modified at the option of the parties thereto, including any credit agreement
increasing the amount that may be borrowed under such agreement or any successor
agreement, whether or not among the same parties; and any other credit agreement
pursuant to which any of the Indebtedness, commitments, Obligations, costs,
expenses, fees, reimbursements and other indemnities payable or owing under the
Existing Credit Facility may be refinanced, restructured, renewed, extended,
refunded or increased, as any such other agreement may from time to time at the
option of the parties thereto be amended, supplemented, renewed or otherwise
modified.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by the Issuer or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officer's Certificate, setting
forth the basis of such valuation, executed by the principal executive officer
and the principal financial officer of the Issuer, less the amount of cash or
Cash Equivalents received in connection with a sale of such Designated Noncash
Consideration.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable), or upon the happening of any event (other than any event solely
within the control of the issuer thereof), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, is exchangeable for
Indebtedness (except to the extent exchangeable at the option of such Person
subject to the terms of any debt instrument to which such Person is a party) or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the notes mature; provided that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Issuer to repurchase such Capital Stock upon the occurrence
of a Change of Control or an Asset Sale shall not constitute Disqualified Stock
if the terms of such Capital Stock provide that the Issuer may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described under the caption "--Certain
Covenants--Restricted Payments," and provided further that, if such Capital
Stock is issued to any plan for the benefit of employees of the Issuer or its
Subsidiaries or by any such plan to such employees, such Capital Stock shall not
constitute Disqualified Stock solely because it may be required to be
repurchased by the Issuer in order to satisfy applicable statutory or regulatory
obligations.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its
Affiliates. "Eligible Institution" means a commercial banking institution that
has combined capital and surplus not less than $500.0 million or its equivalent
in foreign currency and having a peer group rating of B or better (or the
equivalent thereof) by Thompson Bankwatch, Inc. or having outstanding short-term
debt rated "A-3" or higher according to Standard & Poor's Ratings Group ("S&P")
or "P-2" or higher according to Moody's Investor Services, Inc. ("Moody's") or
carrying an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing ratings of investments.
"Equity Interests" of any Person means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock) of any
Person and any stock appreciation rights or phantom stock units granted to
employees or directors of such Person and its Restricted Subsidiaries.
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"Existing Indebtedness" means Indebtedness of the Issuer and its
Restricted Subsidiaries, including Insilco and its Subsidiaries, in existence on
the date of the Indenture, other than Indebtedness under the Existing Credit
Facility, if any, that could not have been incurred on the date of the Indenture
pursuant to the Fixed Charge Coverage Ratio set forth in the first paragraph of
the covenant described under "Incurrence of Indebtedness and Issuance of
Preferred Stock" if such covenant were applicable, until such amounts are
repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (a) the Consolidated Interest Expense of such
Person for such period and (b) all dividend payments on any series of preferred
stock of such Person (other than dividends payable solely in Equity Interests
that are not Disqualified Stock), in each case, on a consolidated basis and in
accordance with GAAP
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
(exclusive of amounts attributable to discontinued operations, as determined in
accordance with GAAP, or operations and businesses disposed of prior to the
Calculation Date (as defined)) to the Fixed Charges of such Person for such
period (exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses disposed of
prior to the Calculation Date). In the event that the referent Person or any of
its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other
than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock and the application of the proceeds
therefrom, as if the same had occurred at the beginning of the applicable
four-quarter reference period and the Consolidated Interest Expense attributable
to interest on any Indebtedness computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the
Calculation Date (taking into account any Hedging Obligations applicable to such
Indebtedness) had been the applicable rate for the entire period. In addition,
for purposes of making the computation referred to above, acquisitions that have
been made by the Issuer or any of its Subsidiaries, including all mergers or
consolidations and any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated to include the consolidated Cash Flow of the acquired
entities on a pro forma basis after giving effect to cost savings resulting from
employee terminations, facilities consolidations and closings, standardization
of employee benefits and compensation practices, consolidation of property,
casualty and other insurance coverage and policies, standardization of sales and
distribution methods, reductions in taxes other than income taxes and other cost
savings reasonably expected to be realized from such acquisition, as determined
in good faith by an officer of the Issuer (regardless of whether such cost
savings could then be reflected in pro forma financial statements under GAAP,
Regulation S-X promulgated by the Commission or any other regulation or policy
of the Commission) and without giving effect to clause (c) of the proviso set
forth in the definition of Consolidated Net Income.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit or
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or foreign exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the
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foregoing Indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a Lien on
any asset of such Person (whether or not such Indebtedness is assumed by such
Person) and, to the extent not otherwise included, the guarantee by such Person
of any Indebtedness of any other Person, provided that Indebtedness shall not
include the pledge by the Issuer of the Capital Stock of an Unrestricted
Subsidiary of the Issuer to secure Non-Recourse Debt of such Unrestricted
Subsidiary. The amount of any Indebtedness outstanding as of any date shall be
(a) the accreted value thereof (together with any interest thereon that is more
than 30 days past due), in the case of any Indebtedness that does not require
current payments of interest, and (b) the principal amount thereof, in the case
of any other Indebtedness, provided that the principal amount of any
Indebtedness that is denominated in any currency other than United States
dollars shall be the amount thereof, as determined pursuant to the foregoing
provision, converted into United States dollars at the Spot Rate in effect on
such date of determination.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on any
assets of the referent Person securing, Indebtedness or other obligations of
other Persons), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP, provided that an investment by the Issuer for consideration consisting of
common equity securities of the Issuer shall not be deemed to be an Investment.
If the Issuer or any Restricted Subsidiary of the Issuer sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Issuer such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Issuer, the Issuer shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described under the caption "--Restricted Payments."
"Issue Date" means the date of issuance of the Old Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
(other than a financing statement filed by a "true lessor" pursuant to Section
9-408 of the Uniform Commercial Code) under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Mergers" means, collectively, the transactions resulting in Insilco
becoming a subsidiary of the Insilco Holding Co. and the merger of the Issuer
with and into lnsilco Holding Co. on or prior to the date of issuance of the Old
Notes.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP after reduction in respect of
preferred stock dividends, excluding, however, (a) any gain (or loss), together
with any related provision for taxes on such gain (or loss), realized in
connection with (i) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (ii) the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries and (b) any
extraordinary or nonrecurring gain (or loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (or loss).
"Net Proceeds" means the aggregate cash proceeds received by the Issuer
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of, without duplication,
(a) the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions, recording
fees, title transfer fees and appraiser fees and cost of preparation of assets
for sale) and any relocation expenses incurred as a result thereof, (b) taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), (c) amounts required to
be applied to the repayment of Indebtedness (other than as required by clause
(a) of the second paragraph of the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales") secured by a Lien on the
asset or assets that were the subject of such Asset Sale, (d) any reserve
established in accordance with GAAP or any amount placed in escrow, in either
case for adjustment in respect of the sale price of such asset or assets until
such time as
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such reserve is reversed or such escrow arrangement is terminated, in which case
Net Proceeds shall include only the amount of the reserve so reversed or the
amount returned to the Issuer or its Restricted Subsidiaries from such escrow
arrangement, as the case may be, and (e) all distributions and other payments
made to minority interest holders in Restricted Subsidiaries or joint ventures
as a result of such Asset Sale.
"Non-Recourse Debt" means Indebtedness (i) no default with respect to,
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (ii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock (other than the stock
of an Unrestricted Subsidiary pledged by the Issuer to secure debt of such
Unrestricted Subsidiary) or assets of the Issuer or any of its Restricted
Subsidiaries; provided that in no event shall Indebtedness of any Unrestricted
Subsidiary fail to be Non-Recourse Debt solely as a result of any default
provisions contained in a guarantee thereof by the Issuer or any of its
Restricted Subsidiaries if the Issuer or such Restricted Subsidiary was
otherwise permitted to incur such guarantee pursuant to the Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Old Notes by the Issuer.
"Pari Passu Indebtedness" means Indebtedness of the Issuer that ranks
pari passu in right of payment to the notes. "Permitted Business" means any
business in which the Issuer and its Restricted Subsidiaries are engaged on the
date of the Indenture or any business reasonably related, incidental or
ancillary thereto.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Restricted Subsidiary of the Issuer, (b) any Investment in cash or Cash
Equivalents, (c) any Investment by the Issuer or any Restricted Subsidiary of
the Issuer in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Issuer or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Issuer or a Wholly Owned
Restricted Subsidiary of the Issuer, (d) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described under the caption "--Repurchase at
the Option of Holders--Asset Sales," (e) any Investment acquired solely in
exchange for Equity Interests (other than Disqualified Stock) of the Issuer, (f)
any Investment in a Person engaged in a Permitted Business (other than an
Investment in an Unrestricted Subsidiary) having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (f) that
are at that time outstanding, not to exceed 15% of Total Assets at the time of
such Investment (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value), (g)
Investments relating to any special purpose Wholly Owned Subsidiary of the
Issuer organized in connection with a Receivables Facility that, in the good
faith determination of the Board of Directors of the Issuer, are necessary or
advisable to effect such Receivables Facility, (h) ordinary course loans to
employees not to exceed $5.0 million outstanding in the aggregate at any time,
(i) any Investment arising out of a Hedging Obligation or commodity price
agreement and (j) any Investment acquired by the Issuer or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts receivable
held by the Issuer or any such Restricted Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or the obligor with respect to such accounts
receivable or (B) as a result of a foreclosure by the Issuer or any of its
Restricted Subsidiaries with respect to any secured Investment or other transfer
of title with respect to any secured Investment in default.
"Permitted Liens" means: (i) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Issuer or any
Restricted Subsidiary, provided that such Liens were not incurred in
contemplation of such merger or consolidation and do not secure any property or
assets of the Issuer or any Restricted Subsidiary other than the property or
assets subject to the Liens prior to such merger or consolidation; (ii) Liens
existing on the date of the Indenture; (iii) Liens securing Indebtedness
consisting of Capital Lease Obligations, purchase money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary obligations, in each case
incurred solely for the purpose of financing all or any part of the purchase
price or cost of construction or installation of assets used in the business of
the Issuer or its Restricted Subsidiaries, or repairs, additions or improvements
to such assets, provided that (A) such Liens secure Indebtedness in an amount
not in excess of the original purchase price or the original cost of any such
assets or repair, addition or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (B) such
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Liens do not extend to any other assets of the Issuer or its Restricted
Subsidiaries (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (C) the Incurrence of such
Indebtedness is permitted by "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock" and (D) such Liens attach within 365 days of
such purchase, construction, installation, repair, addition or improvement; (iv)
Liens to secure any refinancings, renewals, extensions, modification or
replacements (collectively, "refinancing") (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto); (v) Liens securing letters of credit entered into in
the ordinary course of business and consistent with past business practice; (vi)
Liens on and pledges of the capital stock of any Unrestricted Subsidiary
securing Non-Recourse Debt of such Unrestricted Subsidiary; (vii) Liens securing
Indebtedness (including all Obligations) under the Existing Credit Facility; and
(viii) other Liens securing Indebtedness that is permitted by the terms of the
Indenture to be outstanding having an aggregate principal amount at any one time
outstanding not to exceed $50.0 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Issuer or any of its Restricted Subsidiaries issued within 60 days after
repayment of, in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Issuer or
any of its Restricted Subsidiaries; provided that (a) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
premium, if any, and accrued interest on the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith), (b) such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, and (c) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to, the notes on terms at least
as favorable, taken as a whole, to the Holders of notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Principals" means DLJMB and/or CVC.
"Public Common Stock Offering" means any issuance of common stock in an
underwritten public offering by the Issuer for cash that is registered pursuant
to the Securities Act.
"Public Equity Offering" means any issuance of common stock or
preferred stock by the Issuer (other than Disqualified Stock) or Insilco (other
than to the Issuer and other than Disqualified Stock) that is registered
pursuant to the Securities Act, other than issuances registered on Form S-8 and
issuances registered on Form S-4 and excluding issuances of common stock
pursuant to employee benefit plans of the Issuer or its Restricted Subsidiaries
or otherwise as compensation to employees of the Issuer or its Restricted
Subsidiaries.
"Qualified Proceeds" means any of the following or any combination of
the following: (i) cash; (ii) Cash Equivalents; (iii) assets that are used or
useful in a Permitted Business; and (iv) the Capital Stock of any Person engaged
in a Permitted Business if, in connection with the receipt by the Issuer or any
Restricted Subsidiary of the Issuer of such Capital Stock, (A) such Person
becomes a Restricted Subsidiary of the Issuer or any Restricted Subsidiary of
the Issuer or (B) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or any Restricted Subsidiary of the Issuer.
"Recapitalization" means the Mergers, the Offering, the amendment to
the Existing Credit Facility in connection therewith and any and all actions
taken in connection with the foregoing.
"Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Issuer or any of
its Restricted Subsidiaries sells its accounts receivable to an Accounts
Receivable Subsidiary.
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
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"Related Party" means, with respect to any Principal, (i) any
controlling stockholder or partner of such Principal on the date of the
Indenture, or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding
(directly or through one or more Subsidiaries) a 51% or more controlling
interest of which consist of the Principals and/or such other Persons referred
to in the immediately preceding clauses (i) or (ii).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Specified Agreements" means the Investors' Agreement and the Tax
Sharing Agreement.
"Spot Rate" means, for any currency, the spot rate at which such
currency is offered for sale against United States dollars as determined by
reference to the New York foreign exchange selling rates, as published in The
Wall Street Journal on such date of determination for the immediately preceding
business day or, if such rate is not available, as determined in any publicly
available source of similar market data.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Indebtedness" means all Obligations with respect to
Indebtedness if the instrument creating or evidencing the same, or pursuant to
which the same is outstanding, designates such Obligations as subordinated or
junior in right of payment to Senior Indebtedness.
"Subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (i) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (ii)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax Sharing Agreement" means any tax sharing agreement or arrangement
between the Issuer and its Subsidiaries, as the same may be amended from time to
time; provided that in no event shall the amount permitted to be paid pursuant
to all such agreements and/or arrangements exceed the amount the Issuer would be
required to pay for income taxes were it to file a consolidated tax return for
itself and its consolidated Restricted Subsidiaries.
"Total Assets" means the total consolidated assets of the Issuer and
its Restricted Subsidiaries, as shown on the most recent balance sheet
(excluding the footnotes thereto) of the Issuer.
"Unit Lock-Up Agreement" means the agreement dated as of August 17,
1998 among the Issuer and the DLJ Mezzanine Investors pursuant to which the DLJ
Mezzanine Investors have agreed with the Issuer not to offer, sell or otherwise
transfer any notes or Warrants for a period of one year following the date of
such agreement.
"Unrestricted Subsidiary" means any Subsidiary (other than Insilco)
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a board resolution, but only to the extent that such Subsidiary: (a)
has no Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with the Issuer or any
Restricted Subsidiary of the Issuer unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Issuer or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Issuer; (c) is a Person with respect to
which neither the Issuer nor any of its Restricted Subsidiaries has any direct
or indirect obligation (i) to subscribe for additional Equity Interests (other
than Investments described in clause (g) of the definition of Permitted
44
<PAGE>
Investments) or (ii) to maintain or preserve such Person's financial condition
or to cause such Person to achieve any specified levels, of operating results;
and (d) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Issuer or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the board
resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described under the caption entitled "--Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Issuer as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," the Issuer shall be in default of
such covenant). The Board of Directors of the Issuer may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Issuer of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption entitled "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii)
no Default or Event of Default would be in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries
of such Person or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
PLAN OF DISTRIBUTION
This prospectus is to be used by DLJSC in connection with offers and sales
of the notes in market-making transactions effected from time to time. DLJSC may
act as a principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be made
at prevailing market prices at the time of sale, at prices related thereto or at
negotiated prices.
In addition, this prospectus is to be used by the DLJ Mezzanine Investors,
Alliance Capital Management, L.P. or other selling securityholder named in an
accompanying prospectus supplement in connection with resales in the
over-the-counter market, in negotiated transactions, in underwritten offerings,
or a combination of such methods of sale, a fixed prices which may be changed,
at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The DLJ Mezzanine Investors, Alliance
Capital Management, L.P. or such other selling securityholder may effect such
transactions by selling the notes to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the DLJ Mezzanine Investors, Alliance Capital Management, L.P.
or such other selling securityholder and/or the purchasers of the notes for whom
such broker-dealer may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The address of each of the DLJ Mezzanine Investors is
277 Park Avenue, New York, NY 10172, and of Aliance Capital Management, L.P. is
1345 Avenue of the Americas, New York, NY 10105.
The DLJ Mezzanine Investors, Alliance Capital Management, L.P. or such
other selling securityholder and any broker-dealers or agents that participate
with the DLJ Mezzanine Investors or Alliance Capital Management, L.P. in
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<PAGE>
the distribution of the notes may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and any
profit on the resale of the notes purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each of the DLJ Mezzanine Investors or such other selling securityholder
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of purchases and
sales of the notes by the DLJ Mezzanine Investors and Alliance Capital
Management, L.P.
DLJMB, an affiliate of DLJSC, and certain of its affiliates beneficially
own approximately 71.5% of the common stock of Holdings. Thompson Dean and
William F. Dawson, Jr., each of whom is a principal of DLJMB, are members of the
board of directors of Holdings and Insilco. 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 original initial sale of the 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 Holdings after the consummation of the Merger.
Insilco has been advised by DLJSC that, subject to applicable laws and
regulations, DLJSC currently makes a market in the notes. However, DLJSC is not
obligated to do so and any such market-making may be interrupted or discontinued
at any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act. There
can be no assurance that an active trading market will develop or be sustained.
See "Risk Factors--Trading Market for the New Notes."
DLJSC and Insilco have entered into the Registration Rights Agreement with
respect to the use by DLJSC of this prospectus. Pursuant to such agreement,
Insilco agreed to bear all registration expenses incurred under such agreement,
and Insilco agreed to indemnify DLJSC against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the notes offered hereby has been passed upon for Holdings
by Davis Polk & Wardwell, New York, New York.
EXPERTS
The financial statements of Holdings as of December 31, 1999 and 1998, and
for each of the years in the three-year period ended December 31, 1999 have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants and upon
the authority of said firm as experts in accounting and auditing.
46
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
Registration fee........................................... $ 20,820
Legal fees and expenses ................................... $ 25,000
Accounting fees and expenses............................... $ 5,000
Exchange Agent fees and expenses........................... $ 3,500
Other ..................................................... $ 680
---------
Total ..................................................... $ 55,000
=========
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any of its directors or officers who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person is or was a director or officer of the corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe that such person's conduct was unlawful. In
a derivative action, i.e., one by or in the right of the corporation, the
corporation is permitted to indemnify directors and officers against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection with the defense or settlement of an action or suit if they acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors or officers are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability. Article Seventh of Insilco's
Certificate of Incorporation provides for full indemnification of its officers,
directors, employees and agents to the extent permitted by Section 145.
Insilco provides insurance from commercial carriers against certain
liabilities incurred by the directors and officers of Insilco.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the merger of Silkworm Acquisition Corporation
("Silkworm") with and into the Registrant, Silkworm issued 1,245,138 shares of
its common stock for approximately $56.1 million. In addition, the Registrant
issued 1,400,000 shares of its preferred stock and warrants to purchase 65,603
shares of its common stock for approximately $35.0 million. As a result of the
merger, each share of common stock of Silkworm became a share of common stock of
the Registrant, each share of preferred stock of Silkworm became a share of
preferred stock of the Registrant and each warrant to purchase common stock of
Silkworm became exercisable for an equal number of shares of common stock of the
Registrant.
On August 17, 1998, the Registrant sold 138,000 units (the "Units"), each
consisting of $1,000 principal amount at maturity of its 14% Senior Discount
Notes due 2008 (the "Old Notes") and one warrant
II-1
<PAGE>
to purchase 0.325 of a Share of common stock, par value $0.001 per share, at an
initial exercise price of $0.01 per share (the "Warrants"), to Donaldson, Lufkin
& Jenrette Securities Corporation (the "Initial Purchaser") in a private
placement in reliance on Section 4(2) under the Securities Act, at a price equal
to $508.73 per unit. The Old Notes and Warrants were immediately resold by the
Initial Purchaser in transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
Exhibit
Number
- ------
2.1 Agreement and Plan of Merger, dated as of March 24, 1998, among
Insilco, INR Holding Co., and Silkworm Acquisition Corporation
(incorporated by reference to Exhibit 10(n) to the Registration
Statement on Form S-4 (Reg. No. 333-51145) of Insilco).
2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated June 8,
1998, among Insilco, INR Holding Co. and Silkworm Acquisition
Corporation (incorporated by reference Exhibit 10(r) to the
Registration Statement on Form S-4 (Reg. No. 333-51145) of Insilco).
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1
to the Current Report on Form 8-K filed by the Company on August 18,
1998).
3.2 By laws incorporated by reference to Exhibit 3.2 to the Current Report
on Form 8-K filed by the Company on August 18, 1998).
4.1* Warrant Agreement dated as of August 17, 1998 between Silkworm
Acquisition Corporation and National City Bank, as Warrant Agent.
4.2* Assumption Agreement dated as of August 17, 1998 between Insilco
Holding Co. and National City Bank, as Warrant Agent.
4.3* Certificate of Designation with respect to Pay-in-kind 15% Senior
Exchangeable Preferred Stock due 2010.
4.4* Investors' Agreement, dated as of August 17, 1998, among Insilco
Holding Co. and the investors named therein.
4.5* Indenture, dated as of August 17, 1998 between Silkworm Acquisition
Corporation and the Trustee.
4.6* First Supplemental Indenture, dated as of August 17, 1998 between
Insilco Holding Co. and the Trustee.
5.1* Opinion of Davis Polk & Wardwell with respect to the Notes.
10.1 Insilco Holding Co. Direct Investment Program (incorporated by
reference to Exhibit 4(c) to the Registration Statement on Form S-8
(File No. 333-61809)).
10.2 Insilco Holding Co. Stock Option Plan (incorporated by reference to
Exhibit 4(d) to the Registration Statement on Form S-8 (File No.
333-61809)).
10.3 Insilco Holding Co. and Insilco Corporation Equity Unit Plan
(incorporated by reference to Exhibit 4(c) to the Registration
Statement on Form S-8 (File No. 333-61811)).
II-2
<PAGE>
10.4 Credit Agreement, among Insilco and a syndicate of banks and other
financial institutions led by Donaldson, Lufkin & Jenrette Securities
Corporation, DLJ Capital Funding and The First National Bank of Chicago
(incorporated by reference to Exhibit 10.4 to the Registration
Statement on Form S-1 (File No. 333-71947) of Insilco).
10.5 Purchase Agreement, between Insilco Corporation, Insilco Holding Co.
and Donaldson Lufkin & Jenrette Securities Corporation (incorporated by
reference to Exhibit 10(a) to Form 10-Q filed by Insilco on November
16, 1998 (File No. 0-22098)).
10.6 Employment Agreement dated as of May 1, 1993 between Insilco and Robert
L. Smialek, as amended and restated (incorporated by reference to
Exhibit 10(k) to Form 10/A, Amendment No. 1 to Form 10 (File No.
0-22098) of Insilco.
10.7 Form of Indemnification Agreement adopted by Insilco as of July 30,
1990, entered into between Insilco and certain of its officers and
directors individually, together with a schedule identifying the other
documents omitted and the material details in which such documents
differ (incorporated by reference to Exhibit 10(n) to the Form 10 (File
No. 0-22098) of Insilco).
10.8 Form for Income Protection Agreement adopted by Insilco as of December,
1996, entered into between Insilco and the officers identified in
Exhibit 10(g) (incorporated by reference to Exhibit 10(h) of the Form
10-K of Insilco for the Year Ended December 31, 1996 (File No.
0-22098)).
10.9 Extension Agreement between Insilco and Robert L. Smialek dated May 1,
1996 (incorporated by reference to Exhibit 10(l) to the Form 10-K of
Insilco for the Year Ended December 31, 1997 (File No. 0-22098)).
10.10 Second Extension Agreement between Insilco and Robert L. Smialek dated
September 25, 1997 (incorporated by reference to Exhibit 10(m) to the
Form 10-K of Insilco for the Year Ended December 31, 1997 (File No.
0-22098)).
12.1* Computation of Ratio of Earnings to Fixed Charges
21.1* Subsidiaries of the Company
23.1* Consent of Davis Polk & Wardwell (contained in their opinion filed as
Exhibit 5.1).
23.2** Consent of KPMG LLP.
24.1* Power of Attorney (Included in Part II of this Registration Statement
under the caption "Signatures").
25.1* Statement of Eligibility of Star Bank, N.A. on Form T-1.
25.2 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 (T-1) of The Bank of New York (bound separately)
(incorporated by reference to Exhibit 25.1 to the Registration
Statement on Form S-4 (File No. 333-36523) of Insilco).
- --------------
* Previously filed
** Filed herewith
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<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act of 1933 if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this post-effective amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dublin, State of Ohio, on
the 9th day of May, 2000.
INSILCO HOLDING CO.
By: /s/ David A. Kauer
-----------------------------------
David A. Kauer, Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE><CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President and Chief Executive May 9, 2000
- --------------------------- Officer (Principal Executive
David A. Kauer Officer)
* Senior Vice President and Chief Financial May 9, 2000
- --------------------------- Officer, Treasurer and Secretary
Michael R. Elia (Principal Financial and Accounting Officer)
* Director May 9, 2000
- ---------------------------
William F. Dawson
* Director May 9, 2000
- ---------------------------
Thompson Dean
Director May 9, 2000
- ---------------------------
Randall E. Curran
Director May 9, 2000
- ---------------------------
John F. Fort III
* Director May 9, 2000
- ---------------------------
David Y. Howe
*By: /s/ David A. Kauer
---------------------------
David A. Kauer, Attorney-in-fact,
pursuant to powers of attorney
previously filed as part of this
registration statement.
</TABLE>
II-5
CONSENT OF INDEPENDENT AUDITORS'
The Board of Directors
Insilco Holding Co.:
We consent to the use of our audit report included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG LLP
- -----------------------------
Columbus, Ohio
May 8, 2000
