<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
INSILCO CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
INSILCO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 22, 1997
AND
PROXY STATEMENT
==============================================================================
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE> 3
INSILCO CORPORATION
425 METRO PLACE NORTH
DUBLIN, OHIO 43017
(614) 792-0468
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
April 23, 1997
To the Stockholders of Insilco Corporation:
NOTICE is hereby given that the Annual Meeting of Stockholders of
Insilco Corporation, a Delaware corporation (the "Company"), will be held at the
Hyatt on Capitol Square, 75 East State Street, Columbus, Ohio, on Thursday, the
22nd of May, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect five directors, each for a one-year term expiring at
the annual meeting of stockholders in 1998.
2. To consider and act upon a proposal to amend the Insilco
Corporation 1993 Long-Term Incentive Plan to increase the
number of shares of Common Stock available for issuance under
the Plan from 1,500,000 to 2,000,000 shares.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Owners of Common Stock of the Company of record at the close of
business on April 11, 1997, will be entitled to vote at the meeting.
Whether or not you plan to attend the meeting, please date, sign and
mail the enclosed proxy in the envelope provided.
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1996, is enclosed. Thank you for your cooperation.
By Order of the Board of Directors
Robert L. Smialek
Chairman of the Board and President
<PAGE> 4
INSILCO CORPORATION
425 METRO PLACE NORTH
DUBLIN, OHIO 43017
(614) 792-0468
April 23, 1997
PROXY STATEMENT FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Insilco
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Hyatt on Capitol Square, 75 East State Street, Columbus, Ohio, on Thursday, May
22, 1997, at 9:00 a.m., local time, and at any adjournment thereof. The Proxy
Statement and the enclosed proxy are being mailed to the stockholders on or
about the date set forth above.
All shares represented by properly executed proxies received by the
Board of Directors pursuant to this solicitation will be voted in accordance
with the stockholder's directions specified on the proxy or, in the absence of
specific instructions to the contrary, will be voted in accordance with the
Board of Director's unanimous recommendations, which are FOR the election of
James J. Gaffney, Terence M. O'Toole, Thomas E. Petry, Robert L. Smialek and
Barry S. Volpert as directors of the Company; FOR amendment to the Insilco
Corporation 1993 Long-Term Incentive Plan to increase the number of shares of
Common Stock available under the Plan from 1,500,000 to 2,000,000 shares; and,
at the discretion of the persons acting under the proxy, to transact such other
business as may properly come before the meeting or any adjournment thereof.
A proxy may be revoked, without affecting any vote previously taken, by
written notice mailed to the Company (attention Chief Executive Officer or
Corporate Secretary) or delivered in person at the meeting, by filing a duly
executed, later dated proxy, or by attending the meeting and voting in person.
A majority of the outstanding shares of the Company will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. The election of each director nominee requires the favorable vote of a
plurality of all votes cast by the holders of Common Stock at a meeting at which
a quorum is present. Only shares that are voted for a particular nominee will be
counted towards such nominee's achievement of a plurality. Abstentions and
broker non-votes are not counted toward such nominee's achievement of a
plurality and, thus, will have no effect. Each other matter to be submitted to
the stockholders at this meeting requires the affirmative vote of the majority
of shares present in person or represented by proxy at the meeting and entitled
to vote. Therefore, on all matters other than the election of directors,
abstentions and broker non-votes will have the same effect as votes cast against
the proposal.
<PAGE> 5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS
Only stockholders of record at the close of business on April 11, 1997,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. At April 11, 1997, the Company had 9,451,329 outstanding shares of
Common Stock, $.001 par value (the "Common Stock"). Each stockholder is entitled
to one vote for each share held. There are no cumulative voting rights in the
election of directors. See also, "Information Concerning Directors, Executive
Officers and Principal Stockholders."
ELECTION OF DIRECTORS
Management intends to nominate James J. Gaffney, Terence M. O'Toole,
Thomas E. Petry, Robert L. Smialek and Barry S. Volpert for election as
directors of the Company, each to serve for a term of one year and until his
successor is duly elected and qualified. The shares represented by the enclosed
proxy, if returned duly executed and unless instructions to the contrary are
indicated thereon, will be voted FOR the nominees. If for any reason a nominee
should not be a candidate for election at the time of the meeting (which
management does not expect), the proxies may be voted for a substitute nominee
in the discretion of those named as proxies. The election of each nominee
requires the favorable vote of a plurality of all votes cast by the holders of
Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF EACH NOMINEE FOR DIRECTOR.
The following table sets forth name, age and business experience of the
nominees for election as directors of the Company. Each director has held the
occupation indicated for more than the past five years unless otherwise
indicated.
<TABLE>
<CAPTION>
NAME AND BUSINESS EXPERIENCE AGE
<S> <C>
James J. Gaffney 56
Mr. Gaffney specializes in the turnaround of financially troubled
companies, serving with such companies as the chief executive officer,
as a board director or as an independent consultant. He is currently the
President and Chief Executive Officer of General Aquatics, Inc., a
successor to KDI Corporation (September 1993 - Present). He
previously served as Chief Executive Officer of International Tropic-
Cal, Inc. (August 1991 - July 1992), and as an independent consultant
from September 1989 to August 1991, and from July 1992 to the
present. He also is a director of Koll Real Estate Group Inc. and C.R.
Anthony.
</TABLE>
- 2 -
<PAGE> 6
<TABLE>
<S> <C>
Terence M. O'Toole 38
Mr. O'Toole has been a Managing Director of Goldman, Sachs & Co.
("Goldman Sachs") and a Participating Limited Partner in the Goldman
Sachs Group, L.P. ("GS Group") since November 1996. Previously, he
was a general partner of Goldman Sachs and GS Group from 1992 to
1996. Mr. O'Toole is also a member of Goldman Sachs' Investment
Committee. He was previously a Vice President of Goldman Sachs.
Mr. O'Toole is a director of AMF Group Inc., Western Wireless
Corporation, and several private companies.
Thomas E. Petry 57
Mr. Petry is Chairman of the Board (since March 1989) of Eagle-Picher
Industries, Inc., which is engaged in, among other businesses, the
manufacture of earthmoving equipment and other machinery,
automotive parts and other industrial products. A voluntary petition
under Chapter 11 of the Federal Bankruptcy Laws was filed by Eagle-
Picher Industries, Inc. on January 7, 1991. An amended plan of
reorganization was filed during August 1996, and approved by U.S.
Bankruptcy Court during November 1996, whereby Eagle-Picher
emerged from bankruptcy reorganization. Mr. Petry is a director of The
Union Central Life Insurance Co., The William Powell Co., CINergy
Corp., Star Banc Corp., and Star Bank, N.A.
Robert L. Smialek 53
Mr. Smialek has served as Chairman of the Board, President and Chief
Executive Officer of the Company since May 1, 1993. From October
1992 to May 1993, Mr. Smialek served as the President and Chief
Operating Officer of the Temperature and Appliance Controls Group of
Siebe plc, a global controls and engineering firm. From September
1990 to October 1992, Mr. Smialek served as President and Chief
Operating Officer of Ranco, Inc., a subsidiary of Siebe, Inc. From May
1988 to May 1990, Mr. Smialek served as Group Vice President for
Tracor Instruments Group. For the prior 19 years, Mr. Smialek worked
for General Electric Company, most recently as the General Manager
of Manufacturing and Technology Operations for the General Electric
Medical Systems Group.
Barry S. Volpert 37
Mr. Volpert has been a Managing Director of Goldman Sachs and a
Participating Limited Partner in GS Group since November 1996. He
was a general partner of Goldman Sachs from 1994 to 1996. He was
previously a Vice President of Goldman Sachs from 1990 to 1994 and
the Manager of Water Street Corporate Recovery Fund I, L.P., an
investment partnership of which Goldman Sachs is the general partner
("Water Street"), from 1991 to 1994. From 1989 to 1991, Mr. Volpert
was the head of Goldman Sachs' workout and restructuring advisory
business. He also is a director of Elifin S.A. (Luxembourg), Mane
Investments, Ltd. (New Zealand), and Rockefeller Center Properties,
Inc.
</TABLE>
- 3 -
<PAGE> 7
The nonemployee directors were first elected to the Board of Directors
effective April 1, 1993. Mr. Smialek, as the Company's Chief Executive Officer,
became a director effective May 1, 1993. Each has served as director
continuously since his election.
INFORMATION CONCERNING THE DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the only persons known by the Company to
be the beneficial owners of more than five percent (5%) of the outstanding
shares of Common Stock of the Company on March 31, 1997:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
<S> <C> <C>
Water Street Corporate Recovery 5,866,494(1)(2) 61.7%
Fund I, L.P.
85 Broad Street
New York, NY 10004
Pioneer Management Corporation 763,800 8.1%
60 State Street
Boston, MA 02109
Continental Casualty Company 502,926(3) 5.3%
CNA Plaza
Chicago, Illinois 60685
</TABLE>
- -------------
(1) Represents shares beneficially owned by Water Street. Goldman Sachs is the
general partner of Water Street and thus may be deemed to be the beneficial
owner of shares held by Water Street. GS Group is a general partner of
Goldman Sachs and directly owns 334 shares of Common Stock not included in
the amount shown. The address of Goldman Sachs and GS Group is 85 Broad
Street, New York, NY 10004. Goldman Sachs disclaims beneficial ownership of
the shares held by Water Street except to the extent such ownership
corresponds to its interests in Water Street and disclaims beneficial
ownership of the shares held by GS Group. GS Group disclaims beneficial
ownership of the shares held by Water Street to the extent partnership
interests in Water Street are held by persons other than GS Group, Goldman
Sachs or their affiliates.
(2) Includes an aggregate of 40,000 shares of Common Stock acquired from the
Company by Water Street through Messrs. O'Toole and Volpert pursuant to the
director plan described under "Director Compensation." Also includes 64,000
shares subject to stock options exercisable within 60 days of March 31,
1997.
(3) Represents shares beneficially owned by Continental Casualty Company
("Continental"). Continental is a subsidiary of CNA Financial Corporation
("CNA") and Loews Corporation ("Loews"). As such, CNA and Loews may be
deemed to be the beneficial owner of shares held by Continental. Each of
CNA and Loews disclaim beneficial ownership of the shares held by
Continental. The address for CNA is CNA Plaza, Chicago, Illinois 60685. The
address for Loews is 667 Madison Avenue, New York, New York 10021.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 31, 1997, the beneficial
ownership of the Company's Common Stock by each officer named in the Summary
Compensation Table who owns
- 4 -
<PAGE> 8
shares of the Common Stock, each director of the Company and by all directors
and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
<S> <C> <C>
James J. Gaffney 20,000(1) *
Terence M. O'Toole 5,866,494(2) 61.7%
Thomas E. Petry 32,000(3) *
Robert L. Smialek 384,000(4) 3.9%
Barry S. Volpert 5,866,494(2) 61.7%
Robert F. Heffron 29,165(5) *
Kenneth H. Koch 9,965 (6) *
James D. Miller 32,405(7) *
Philip K. Woodlief 9,746(8) *
All directors and executive
officers as a group (11 persons) 6,404,083(9) 64.3%
</TABLE>
- --------------
* Less than 1%
(1) Includes 20,000 shares subject to stock options exercisable within 60 days
of March 31, 1997.
(2) The shares listed for Mr. O'Toole and Mr. Volpert are beneficially owned by
Water Street or by Goldman Sachs or GS Group of which Mr. O'Toole and Mr.
Volpert are general partners; however, Mr. O'Toole and Mr. Volpert disclaim
beneficial ownership of such shares except to the extent of their indirect
pecuniary interest in such shares. Includes 64,000 shares subject to stock
options exercisable within 60 days of March 31, 1997. Also includes an
aggregate of 40,000 shares of Common Stock acquired from the Company by
Water Street through Messrs. O'Toole and Volpert pursuant to the director
plan described under "Director Compensation."
(3) Includes 32,000 shares subject to stock options exercisable within 60 days
of March 31, 1997.
(4) Includes 320,000 shares subject to stock options exercisable within 60 days
of March 31, 1997, and 61,700 shares of Common Stock acquired from the
Company by Mr. Smialek pursuant to the restricted stock award described
under "Employment and Severance Benefit Agreements."
(5) Includes 26,665 shares subject to stock options exercisable within 60 days
of March 31, 1997. Also includes 1,600 shares owned by Mr. Heffron's three
children.
(6) Includes 8,665 shares subject to stock options exercisable within 60 days
of March 31, 1997.
(7) Includes 16,345 shares of Common Stock acquired from the Company by Mr.
Miller pursuant to the restricted stock award described under "Employment
and Severance Benefit Agreements," and 16,060 shares subject to stock
options exercisable within 60 days of March 31, 1997. Mr. Miller terminated
his employment with the Company on April 18, 1997.
(8) Includes 9,345 shares subject to stock options exercisable within 60 days
of March 31, 1997.
(9) Includes 516,043 shares subject to stock options exercisable within 60 days
of March 31, 1997. Also includes 118,045 shares of Common Stock acquired
from the Company by the directors and executive officers as a group
pursuant to the director plan described under "Director Compensation" and
the restricted stock awards described under "Employment and Severance
Benefit Agreements."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company had a total of six regular meetings
and five special meetings. Each of the directors attended 75% or more of the
total number of the Board of Directors
- 5 -
<PAGE> 9
meetings held during 1996. The Board of Directors has standing Audit and
Compensation Committees. The members of the Audit Committee are James J.
Gaffney, Terence M. O'Toole, Thomas E. Petry and Barry S. Volpert. The Audit
Committee oversees the work of the internal audit staff and external auditors
and met three times during 1996. All members of the Audit Committee attended 75%
or more of the total number of the Audit Committee meetings held during 1996.
The Compensation Committee, comprised of James J. Gaffney and Thomas E. Petry,
reviews officer compensation, administers the 1993 Long-Term Incentive Plan, and
met five times during 1996, with both members attending all meetings.
As required by the Company's Amended and Restated Plan of Reorganization
filed with the United States Bankruptcy Court for the Western District of Texas
in November 1992 (the "Plan of Reorganization"), a Litigation Committee,
comprised of Messrs. Gaffney and Petry, investigated potential claims against
Merrill Lynch & Co., Inc., and its subsidiary Merrill Lynch, Pierce, Fenner &
Smith Inc., in connection with certain aspects of the leveraged buyout of the
Company in 1988. The Litigation Committee concluded its task in March 1997.
DIRECTOR COMPENSATION
In 1993, the Company adopted the 1993 Nonemployee Director Stock
Incentive Plan (the "Director Plan") covering 360,000 shares of Common Stock for
nonemployee directors in lieu of paying annual or other directors' fees. Each
present nonemployee director, having purchased 6,666 shares of Common Stock
issued by the Company at $15 per share, has been awarded 13,334 shares of
restricted stock and has been granted options to purchase up to 40,000 shares of
Common Stock from the Company under the Director Plan. The terms of the options
and the restricted stock awards, including forfeiture provisions, generally are
the same as those described under "Employment and Severance Benefit Agreements"
respecting the options and restricted stock awarded Mr. Smialek. Water Street
owns the options granted to Messrs. O'Toole and Volpert and the stock sold or
awarded to them. During 1996, each nonemployee director participating in the
Director Plan became fully vested in 13,334 shares of the restricted stock
awarded to them under the Director Plan.
EXECUTIVE OFFICERS
Set forth below are the name, age and office of each "executive officer"
of the Company (as defined by the Securities and Exchange Commission).
<TABLE>
<S> <C>
Robert L. Smialek, age 53 President and Chief Executive Officer
Robert F. Heffron, age 51 Executive Vice President and Chief Operating Officer
Kenneth H. Koch, age 41 Vice President, General Counsel and Secretary
Les G. Jacobs, age 46 Vice President, Human Resources and Assistant Secretary
Philip K. Woodlief, age 43 Vice President and Corporate Controller
David A. Kauer, age 41 Vice President and Treasurer
</TABLE>
Executive officers are elected annually to serve for a year or until
their successors are elected. During the past five years, Mr. Smialek has had
the business experience set forth above under "Directors," while the other
executive officers have had the business experience described below. Unless
otherwise stated, positions are with the Company.
- 6 -
<PAGE> 10
Mr. Heffron: Executive Vice President and Chief Operating Officer (since
October 1996); Executive Vice President from July 1993 to October 1996; Vice
President and General Manager of the Grayson Division of Robertshaw Controls
Company (a subsidiary of Siebe, Inc.), January 1992 - June 1993; Vice President
and General Manager of Ranco, Inc. (a subsidiary of Siebe, Inc.), February 1991
- - January 1992; Vice President, Business Operations of the Control Systems
Division of Johnson Controls, Inc., October 1990 - February 1991; Vice President
and General Manager of the Control Products Division of Johnson Controls, Inc.
prior thereto. Each of the foregoing companies or divisions manufactures or
supplies control devices and systems for refrigeration, ventilation, air
conditioning, heating, appliance or automotive applications.
Mr. Koch: Vice President, General Counsel and Secretary (since October
1993); prior thereto, attorney and partner with the law firm of Porter, Wright,
Morris & Arthur.
Mr. Jacobs: Vice President, Human Resources (since August 1993); Director
of Human Resources from January 1990 to August 1993; prior thereto, Director,
Compensation and Employee Programs, of Rockwell International.
Mr. Woodlief: Vice President and Corporate Controller (since April 1997);
Controller from February 1989 to April 1997.
Mr. Kauer: Vice President and Treasurer (since April 1997); Treasurer from
September 1993 to April 1997; Controller and Treasurer of Johnson Yokogawa
Corporation (a joint venture of Yokogawa Electric Corporation and Johnson
Controls, Inc.), October 1989 - September 1993.
EXECUTIVE COMPENSATION
The aggregate remuneration of the Chief Executive Officer during 1996 and
the four other most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 for the fiscal year ended December 31, 1996,
is set forth in the following table:
- 7 -
<PAGE> 11
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------------- -------------------------------
(a) (b) (c) (d) (f) (g) (i)
Securities All Other
Name and Principal Restricted Stock Underlying Compensation
Position Year Salary ($) Bonus ($) Award(s) ($) Options (#) ($)
- ----------------------------- ---- ---------- --------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Smialek 1996 $537,499 $235,000 -- $13,251(1)
President and CEO 1995 500,000 180,000 -- 13,817(2)
1994 500,000 200,000 -- 11,104(3)
James D. Miller(4) 1996 302,500 180,000 5,000 8,374(5)
Executive Vice President 1995 292,500 135,000 -- 11,106(6)
and Chief Financial Officer 1994 154,375 95,000 360,000(7) 50,000 11,223(8)
Robert F. Heffron 1996 252,500 150,000 4,000 5,920(9)
Executive Vice President 1995 237,500 110,000 -- 3,671(10)
and Chief Operating Officer 1994 222,500 163,059 8,000 3,821(11)
Kenneth H. Koch 1996 151,167 78,373 2,500 3,114(12)
Vice President, General 1995 138,667 50,000 -- 2,693(13)
Counsel and Secretary 1994 127,500 80,796 5,000 1,769(14)
Philip K. Woodlief 1996 157,000 65,000 1,500 3,039(15)
Vice President and 1995 145,000 45,000 -- 2,412(16)
Corporate Controller 1994 134,167 47,000 5,000 3,446(17)
</TABLE>
- --------------
(1) Includes employer contributions under the Company's Employee Thrift Plan
401(k) (the "Thrift Plan") ($2,250) and insurance premiums paid by the
Company ($10,509).
(2) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($8,354).
(3) Includes Thrift Plan contributions ($2,953) and insurance premiums paid by
the Company ($8,151).
(4) Mr. Miller was employed by the Company from June 16, 1994 to April 18,
1997.
(5) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($5,174).
(6) Includes Thrift Plan contributions ($2,250), insurance premiums paid by the
Company ($1,556), and living allowance ($6,250).
(7) Represents restricted stock awards totaling 20,000 shares of Common Stock
multiplied by $18.00, the estimated fair market value of a share of Common
Stock on June 16, 1994, the date the awards were made. At December 31,
1996, the aggregate value of these shares was approximately $770,000
determined by reference to the closing price reported for the Common Stock
for that day by Nasdaq National Market. As described below under
"Employment and Severance Benefits Agreements," the restrictions will lapse
with respect to all of the restricted shares on the earlier to occur of
June 16, 1997 or Mr. Miller's termination of employment.
(8) Includes temporary living expenses ($8,125) and insurance premiums paid by
the Company ($3,098).
(9) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($3,301).
- 8 -
<PAGE> 12
(10) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($1,136).
(11) Includes Thrift Plan contributions ($2,644) and insurance premiums paid by
the Company ($1,177).
(12) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($733).
(13) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($198).
(14) Includes Thrift Plan contributions ($1,477) and insurance premium paid by
the Company ($292).
(15) Includes Thrift Plan contributions ($2,250) and insurance premiums paid by
the Company ($733).
(16) Includes Thrift Plan contributions ($2,198) and insurance premiums paid by
the Company ($214).
(17) Includes Thrift Plan contributions ($3,062) and insurance premiums paid by
the Company ($384).
STOCK OPTIONS
The following table shows information regarding options to purchase
shares of the Company's Common Stock granted to executive officers named in the
summary compensation table in 1996 under the 1993 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)
GRANTED EMPLOYEES PRICE EXPIRATION --------------------------------
NAME (#) IN FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- --------------------------- --------- --------------- ---------- ------------ ------- -------- --------
- -
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. Smialek -- -- -- -- -- -- --
James D. Miller(2) 5,000 4.9% $35.00 3/20/06 $0 $99,876 $262,694
Robert F. Heffron 4,000 3.9% $35.00 3/20/06 $0 $79,901 $210,155
Kenneth H. Koch 2,500 2.4% $35.00 3/20/06 $0 $49,938 $131,347
Philip K. Woodlief 1,500 1.5% $35.00 3/20/06 $0 $29,963 $78,808
</TABLE>
- --------------
(1) The amounts under the columns labeled "5%($)" and "10%($)" are included by
the Company pursuant to certain rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, in the price of the Company's Common Stock. Such amounts are based
on the assumption that the option holders hold the options granted for
their full term. The actual value of the options will vary in accordance
with the market price of the Company's Common Stock. The column headed
"0%($)" is included to illustrate that the options were granted at fair
market value and option holders will not recognize any gain without an
increase in the stock price, which increase benefits all shareholders
commensurately.
(2) Mr. Miller terminated his employment with the Company on April 18, 1997.
None of the individuals named in the Summary Compensation Table
exercised any Company stock options or stock appreciation rights in 1996. The
following table shows information regarding the exercisability of options held
by the named executive officers at fiscal year end.
- 9 -
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (d) (e)
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
FY-End (#) FY-End ($)(1)
---------------------------------------- ----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert L. Smialek 240,000 160,000 $3,600,000 $2,400,000
James D. Miller(2) 33,333 21,667 683,333 359,167
Robert F. Heffron 30,333 6,667 632,833 36,667
Kenneth H. Koch 15,333 4,167 310,333 22,917
Philip K. Woodlief 18,333 3,167 380,833 19,417
</TABLE>
- --------------
(1) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and per share fair market value of $38.50 on
December 31, 1996.
(2) Mr. Miller terminated his employment with the Company on April 18, 1997.
RETIREMENT PLAN AND SUPPLEMENTAL ARRANGEMENTS
The Company's Retirement Plan for Salaried Employees (the "Retirement
Plan") provides retirement benefits for salaried employees, including officers.
The Company compensates employees for the loss of benefits which otherwise would
result because of the limitations the Internal Revenue Code places on pensions
that may be paid under tax-qualified retirement plans such as the Retirement
Plan. The unfunded supplemental retirement payments are accounted for as
operating expenses when earned.
The following table shows the estimated annual retirement allowances
payable after retirement at normal retirement age to persons in the following
specified remuneration and years-of-service classifications (before any
deductions for joint or survivorship payments) without regard to any statutory
limitations imposed by the Internal Revenue Code. Normal retirement allowances,
beginning at age 65, equal (i) 50% of final average compensation minus (ii) 50%
of the retiree's primary social security benefit, pro-rated if total service is
less than 25 years or, in certain cases, is less than 35 years. Five years of
service is required for vesting.
- 10 -
<PAGE> 14
<TABLE>
<CAPTION>
FINAL Years of Service
AVERAGE
EARNINGS(1) 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$125,000 $ 33,385 $ 44,514 $ 55,642 $ 55,642 $ 55,642
150,000 40,885 54,514 68,142 68,142 68,142
175,000 48,385 64,514 80,642 80,642 80,642
200,000 55,885 74,514 93,142 93,142 93,142
250,000 70,885 94,514 118,142 118,142 118,142
300,000 85,885 114,514 143,142 143,142 143,142
350,000 100,885 134,514 168,142 168,142 168,142
400,000 115,885 154,514 193,142 193,142 193,142
450,000 130,885 174,514 218,142 218,142 218,142
500,000 145,885 194,514 243,142 243,142 243,142
550,000 160,885 214,514 268,142 268,142 268,142
600,000 175,885 234,514 293,142 293,142 293,142
650,000 190,885 254,514 318,142 318,142 318,142
</TABLE>
- ---------------
(1) The higher of (i) average annual compensation for any five consecutive
calendar years during the final 10 years of employment or (ii) the average
annual compensation for the last 60 months of employment. Compensation
consists of salary (including voluntary salary deferrals) and bonus.
Supplemental payments are based on average earnings in excess of $150,000.
At December 31, 1996, Messrs. Smialek, Miller, Heffron, Koch, and Woodlief
were credited, under the Retirement Plan and various supplemental
arrangements, with approximately 2.7, 1.5, 5.8, 2.2, and 6.9 years of
service, respectively, for purposes of determining their pensions.
EMPLOYMENT AND SEVERANCE BENEFIT AGREEMENTS
The Company employs Mr. Smialek under an agreement providing that Mr.
Smialek will serve indefinitely as President and Chief Executive Officer of the
Company. Under the agreement, Mr. Smialek receives an annual base salary of
$550,000. Mr. Smialek will be eligible to receive annual bonuses and salary
increases in such amounts as may be reasonably determined by the Compensation
Committee. Mr. Smialek received an annual bonus for 1996 in the amount of
$235,000. Mr. Smialek also is entitled to participate in all incentive, savings,
retirement and welfare benefit plans and arrangements in which certain other
senior executive officers are eligible to participate, other than any restricted
stock or option plans in which his participation will be at the discretion of
the Company.
If Mr. Smialek's employment is terminated by the Company without
"Cause" or by Mr. Smialek for "Good Reason" (as the quoted terms are used in the
agreement), he will be entitled to a lump sum amount equal to his accrued
salary, annual bonus and vacation pay and any compensation previously deferred
by him (collectively, the "Accrued Obligations") as well as a
- 11 -
<PAGE> 15
severance payment equal to his annual salary plus the greater of $150,000 or his
most currently determined annual bonus, together with the continuation of
certain benefits for a one-year period.
In 1993, Mr. Smialek purchased from the Company 33,333 restricted
shares of Common Stock issued under the Plan at a cash purchase price per share
of $15, whereupon 66,667 restricted shares were awarded to him under the Plan
for a nominal price (all of such restricted shares are referred to collectively
herein as the "Restricted Shares"). Restrictions on the Restricted Shares
expired March 31, 1996, and Mr. Smialek has all the rights of a holder of common
stock with respect to such shares. Mr. Smialek has the option to settle the tax
withholding obligations of the Company resulting from expiration of the
restrictions with shares of Common Stock.
In 1994, Mr. Miller purchased from the Company 10,000 shares of Common
Stock issued under the Plan at a cash purchase price per share of $17.75,
whereupon the Company awarded Mr. Miller 20,000 shares of restricted stock under
the Plan. Except as noted below, Mr. Miller is not permitted to sell, transfer,
pledge or otherwise encumber any shares so purchased or awarded until the
restrictions thereon expire. He otherwise has all the rights of a holder of
Common Stock with respect to such shares, including the right to vote and
receive dividends and distributions, if any, but any dividends or other
distributions thereon in stock or securities or any extraordinary cash dividends
or distributions are subject to the same restrictions as the underlying
restricted stock and are held by the Company until the restrictions on the
underlying stock expire.
Restrictions on the 20,000 shares of restricted stock awarded to Mr.
Miller expired on April 18, 1997, the date Mr. Miller terminated his employment
with the Company. Under the Plan, Mr. Miller is entitled to settle the tax
withholding obligations of the Company resulting from the expiration of the
restrictions with shares of Common Stock.
In December 1996, the Company entered into a Value Appreciation
Agreement with Messrs. Heffron, Jacobs, Koch, Woodlief, and certain other
officers. The Value Appreciation Agreement provides that the executives will be
entitled to receive a commission from the Company in certain circumstances
following a transaction giving rise to the change in control. The amount of the
commission is dependent on achieving a threshold price per share in any such
transaction and is determined based on the amount realized per share in excess
of the threshold price. The Value Appreciation Agreement has a term of two
years.
In December 1996, the Company entered into Income Protection Agreements
with Messrs. Heffron, Jacobs, Koch, Woodlief, and certain other officers. The
Income Protection Agreements provide that in the event of termination of an
executive's employment by the Company without cause, or, in certain
circumstances, by the executive, the executive will be entitled to receive
certain severance benefits. The benefits payable to executive in the event of a
termination of employment covered by the Income Protection Agreement are as
follows: (i) one year's base salary; (ii) a bonus equal to the bonus paid to
executive in 1996 or the target bonus for the year in which employment is
terminated; (iii) continued participation in the Company's benefit plans for the
duration of the severance period; (iv) accelerated vesting of all stock options
and stock appreciation rights; (v) continuation of any rights to indemnification
from the Company; and (vi) certain outplacement services. The Income Protection
Agreements have three year terms and automatically renew for subsequent one year
terms, unless terminated by either party.
- 12 -
<PAGE> 16
The following Compensation Committee Report and Performance Graph will
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any of the Company's filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
information by reference, and will not otherwise be deemed filed under such
Acts.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
For fiscal years beginning with the 1994 fiscal year, the Compensation
Committee (the "Committee") has been given the authority to review and evaluate
individual executive officers and to determine the compensation for each
executive officer. In general, the Committee's philosophy is to attract,
motivate and retain qualified key executives, reward individual performance,
relate compensation to Company goals and objectives and enhance shareholder
value. The Company's compensation program includes competitive base salaries,
annual bonus opportunities, competitive benefits and long-term awards under the
1993 Long-Term Incentive Plan (the "Plan").
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Robert L. Smialek became the Company's Chief Executive Officer
effective May 1, 1993. Mr. Smialek's compensation for 1996 consisted of a base
salary of $500,000 through April 30, 1996 and $550,000 thereafter, and a bonus
of $235,000. Determination of Mr. Smialek's base salary, and the increase in
base salary as of May 1, 1996, was primarily based on Mr. Smialek's background
and experience, and compensation levels of executives in similar positions in
comparable businesses, and the fact that Mr. Smialek had not received an
increase in base salary during the three year term of his original employment
agreement that expired April 30, 1996. The cash bonus paid to Mr. Smialek for
1996 was based primarily on the Company achieving certain specified financial
performance goals and the perceptions of the Committee. At the Compensation
Committee meeting held on March 20, 1996, the employment agreement was extended
indefinitely and Mr. Smialek's annual salary was increased to $550,000. Mr.
Smialek will also be eligible to receive annual bonuses in such amounts as may
be reasonably determined from time to time by the Compensation Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's compensation program for its executive officers is based
on the following objectives:
o Total compensation of the executive officers should be linked
to the financial performance of the Company and enhancement of
shareholder value.
o The compensation paid to the executive officers of the Company
should be competitive with executive compensation levels of
similar companies so that the Company can attract, motivate
and retain qualified key executives.
o The compensation program should reward outstanding individual
performance and contributions to the Company as well as
experience.
- 13 -
<PAGE> 17
Compensation for executive officers in 1996 consisted of base salary,
bonuses and stock option awards under the Plan. Base salaries and bonuses were
paid to executive officers (excluding the Chief Executive Officer) based upon
each such executive officer's individual performance, duties, responsibilities,
experience and tenure, general economic conditions, the recent financial
performance of the Company, and other factors. Bonuses paid to the executive
officers were determined in accordance with a bonus plan that required 70% of
the bonus to be determined on the basis of the Company's achieving certain
specified financial performance goals, and 30% on the basis of the Committee's
and the Chief Executive Officer's evaluation of the performance of each
executive officer. In addition, the Chief Executive Officer has the discretion
to make performance-related individual awards. One award was made in 1996 to an
executive officer under this corporate-wide award program.
Stock options were awarded under the Plan to executive officers
(excluding the Chief Executive Officer) in March 1996. The number of options
awarded to each executive officer was determined by the Committee based on a
recommendation of the Chief Executive Officer. Determination of such awards was
based on the executive officer's length of services and the perceptions of the
Committee and the Chief Executive Officer of the individual contributions and
performance and ability to impact overall business results. The Committee
considered the levels of options awarded to executives in similar positions and
at similar salary levels as compared to four broad-based surveys published by
four separate compensation consulting firms.
IMPACT OF 1993 TAX ACT CHANGES
The Budget Reconciliation Act of 1993 (the "Act") amended the Internal
Revenue Code to add Section 162(m) that bars a deduction to any publicly held
corporation for compensation paid to a "covered employee" in excess of
$1,000,000 per year (the "Dollar Limitation"). A covered employee of the Company
is any employee who appears in the Summary Compensation Table who is also
employed by the Company on December 31. The Dollar Limitation applies to tax
years beginning after 1993.
The new legislation potentially impacts three components of the
Company's executive compensation package. These include base salaries, bonuses,
and awards under the Plan. The Company does not believe that the new legislation
as amended will have any effect on the deductibility of compensation payable in
1996 to any of its executive officers.
The Company believes that the Plan currently qualifies for the
exemption provided for performance based compensation and awards under the Plan
will not be subject to the Dollar Limitation.
COMPENSATION COMMITTEE:
James J. Gaffney
Thomas E. Petry
- 14 -
<PAGE> 18
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company
with that of the Russell 2000 Index and the Standard & Poor's Conglomerates
Index. The comparison of cumulative total return to shareholders assumes that
$100 was invested in the Common Stock of the Company on September 15, 1993 (the
effective date of the registration of the Company's Common Stock under the
Securities Exchange Act of 1934, as amended), and in the Russell 2000 Index and
the Standard & Poor's Conglomerates Index on August 31, 1993, and that all
dividends were reinvested.
COMPARISON OF 40 MONTH CUMULATIVE TOTAL RETURN*
AMONG INSILCO CORPORATION, THE S & P CONGLOMERATE INDEX
AND THE RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
Insilco Corporation Russell 2000 S & P Conglomerates
------------------- ------------ -------------------
<S> <C> <C>
100 100 100
113 105 99
207 104 94
268 129 122
323 148 139
</TABLE>
- ------------
* Assumes $100 invested on 09/15/93 in Insilco common stock or on
08/31/93 in each index. Total return assumes dividends are reinvested.
- 15 -
<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors has been comprised
of two nonemployee directors, James J. Gaffney and Thomas E. Petry. None of the
current directors on the Compensation Committee was an officer or employee of
the Company or any of its subsidiaries during 1996 or had any relationships
during 1996 that would require disclosure under SEC rules, except as follows:
In 1995, the Company loaned $210,000 to James J. Gaffney, a director of
the Company, in two separate loan transactions. Each loan bears interest at a
variable rate equal to the applicable federal rate at the date of the loan,
adjusted semi-annually in accordance with changes in the applicable federal rate
and is payable to the Company on demand. Mr. Gaffney pledged of 13,334 shares of
restricted stock of the Company to secure his repayment obligation under the
terms of the loans. The loan was repaid in full on February 19, 1997.
In 1995, the Company loaned $128,361.50 to James D. Miller, an
executive officer of the Company. The loan bears interest at a variable rate
equal to the applicable federal rate at the date of the loan, adjusted
semi-annually in accordance with changes in the applicable federal rate and is
payable to the Company on demand. Mr. Miller pledged 15,246 shares of restricted
stock of the Company to secure his repayment obligation under the terms of the
loan. Mr. Miller terminated his employment with the Company on April 18, 1997.
Terence M. O'Toole and Barry S. Volpert are partners in Goldman Sachs
and directors of the Company. The Company expects that Goldman Sachs will from
time to time provide it with financial advisory services in connection with the
possible sale of, or other significant transactions involving, various of its
businesses and that Goldman Sachs will perform such financial advisory and other
investment banking services for it on terms and conditions no less favorable to
it than it could obtain from an unaffiliated firm of comparable rank. Such
engagements are expected to provide for the payment of fees, the reimbursement
of Goldman Sachs' reasonable expenses and the indemnification of Goldman Sachs
against various liabilities, including liabilities under the federal securities
laws. Goldman Sachs may also hold or acquire from time to time equity or
creditor interests in entities with which the Company transacts business in the
ordinary course. The Company is not aware of any transaction or of any currently
proposed transaction, in which Goldman Sachs has any material direct or indirect
interest as a result of its ownership position in a party to the transaction
other than the Company, except as follows:
Goldman Sachs Credit Partners L.P. (formerly Pearl Street, L.P.), an
affiliate of Goldman Sachs, has a small participating interest in the $285
million bank credit facility entered into by the Company during 1994. The
Company paid Pearl Street L.P. $372,000 in interest and fees in 1996 on its
participation in the credit facility.
Goldman Sachs provided the Company with financial advisory services in
connection with the automotive tubing business of H. Lingemann KG, GmbH and was
paid a fee of $1,000,000 and reimbursed for expenses incurred therewith.
Goldman Sachs was also retained to assist the Company in the sale of
the Rolodex business. The business was sold March 5, 1997 and the Company will
pay Goldman Sachs a fee on account of the sale of $1,755,000 and reimburse
Goldman's reasonable expenses incurred in the sale.
- 16 -
<PAGE> 20
The Company believes that the terms of all the transactions and
existing arrangements set forth above are no less favorable to the Company than
similar transactions and arrangements which might have been entered into with
unrelated parties.
PROPOSAL TO APPROVE THE INCREASE IN THE NUMBER OF SHARES
AVAILABLE FOR ISSUANCE UNDER THE COMPANY'S 1993 LONG-TERM
INCENTIVE PLAN
The proposed amendment to the Insilco Corporation 1993 Long-Term
Incentive Plan (the "Plan") would increase the number of shares of Common Stock
subject to the Plan from 1,500,000 shares to 2,000,000 shares. Approval of this
amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock represented at the 1997 Annual Meeting. THE BOARD OF
DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE INSILCO CORPORATION 1993 LONG-TERM INCENTIVE PLAN.
1993 LONG-TERM INCENTIVE PLAN
The Company's Board of Directors believes that providing selected
persons with an opportunity to invest in the Company will give them additional
incentive to increase their efforts on behalf of the Company and will enable the
Company to attract and retain the best available employees. The Company's Board
of Directors has approved an amendment to the Plan to increase the number of
shares of Common Stock reserved for issuance under the Plan from 1,500,000 to
2,000,000 shares.
The Plan provides for the grant of stock options, stock appreciation
rights, stock awards, or cash awards (collectively, the "Awards") to employees
of the Company or any of its subsidiaries who hold positions of responsibility
and whose performance, in the judgment of the Compensation Committee of the
Board of Directors (the "Committee"), can have a significant effect on the
success of the Company (each, a "Participant"). The Plan was adopted by the
Company's Board of Directors on April 1, 1993, and approved by the Company's
stockholders at the 1993 Annual Meeting of Stockholders held on March 26, 1993.
The Plan is administered by the Committee which is composed of two
nonemployee directors who are not eligible to participate in the Plan. With
respect to all eligible persons, the Committee has the exclusive power to
determine to whom and at what time and to what extent Awards may be granted. The
Committee has exclusive power to determine the terms and conditions of all
Awards, to interpret the Plan and to grant waivers of restrictions set forth in
the Plan. The Committee may delegate to the Chief Executive Officer or to other
senior officers its duties under the Plan, with the exception of its authority
to grant Awards to, or take other action with respect to, eligible persons who
are subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Each Award under the Plan is or will be embodied in an Award Agreement
containing such terms and conditions as determined by the Committee, including
treatment of the Award upon termination of the participant's employment. No
Award under the Plan constituting a derivative security within the meaning of
Rule 16a-1(c) of the Exchange Act is assignable or otherwise transferable except
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order.
- 17 -
<PAGE> 21
Payment of Awards may be in the form of cash or the Company's Common
Stock or combination of cash and the Company's Common Stock and may include such
restrictions as the Committee has determined. In addition, payments may be
deferred, either in the form of installments or a future lump sum payment, with
the approval of the Committee. Dividends or dividend equivalent rights may be
made part of any Award which is in the form of the Company's Common Stock or
units of the Company's Common Stock as determined by the Committee. The
Committee also may allow a participant to elect to substitute an Award for
another Award or Awards of the same or different type.
The Plan may be amended or terminated at any time except that (1) no
amendment or alteration may impair the rights of any Participant under any Award
previously granted without such Participant's consent and (2) no amendment or
alteration is effective prior to approval by the Company's stockholders to the
extent that such approval is required pursuant to Rule 16b-3 of the Exchange Act
or to the extent that approval is otherwise required by applicable legal
requirements.
The price of a stock option awarded under the Plan may not be less than
the par value of the Company's Common Stock on the date of grant of the option.
Upon exercising a stock option granted under the Plan, the optionee must pay the
exercise price in cash or if permitted by the Committee, by tendering previously
owned the Company's Common Stock or surrendering another Award, including
restricted stock, valued at fair market value on the date of exercise. Stock
options awarded under the Plan may either meet the requirements of Section 422
("Incentive Stock Options") of the Internal Revenue Code of 1986, as amended
(the "Code"), or not meet such requirements ("Non-Statutory Stock Options"). The
Committee also may provide for loans from the Company to permit the exercise or
purchase of Awards and may provide for procedures to permit the exercise or
purchase of Awards by use of the proceeds to be received from the sale of the
Company's Common Stock issuable pursuant to an Award.
As of March 31, 1997, options to purchase an aggregate of 980,692
shares of the Company's Common Stock (net of options canceled) had been granted
pursuant to the Plan, options to purchase 212,877 shares had been exercised,
options to purchase 768,415 shares remained outstanding, and only 518,708 shares
remained available for future grant. As of March 31, 1997, the market value of
all shares of the Company's Common Stock subject to outstanding options under
the Plan and all of the Company's stock option plans were approximately
$28,623,458 and $34,136,459, respectively (based upon the closing sale price of
the Company's Common Stock as reported on the Nasdaq National Market on March
31, 1997 of $37.25 per share). During the 1995 and 1996 fiscal years, options
covering 12,850 shares and 102,900 shares, respectively, of the Company's Common
Stock were granted to employees of the Company under the Plan. Shares underlying
presently exercisable, but unexercised, options will constitute outstanding
shares of the Company's Common Stock for purposes of calculating the Company's
net income per share. The market value of the 2,000,000 shares of the Company's
Common Stock to be subject to the Plan was approximately $74,500,000 as of March
31, 1997. The Company has never made any grants of stock appreciation rights,
stock awards, or cash awards under the Plan.
As of March 31, 1997, the following current executive officers named in
the Company's Form 10-K for the year ended December 31, 1996 had been granted
options under the Plan as follows:
- 18 -
<PAGE> 22
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE
NAME GRANTED PRICE PER SHARE
- ------------------------------------- --------------------------- --------------------------
<S> <C> <C>
Robert L. Smialek 400,000 $23.50
James D. Miller(1) 55,000 $19.55
Robert F. Heffron 37,000 $20.41
Les G. Jacobs 25,000 $22.00
Philip K. Woodlief 21,500 $19.88
Kenneth H. Koch 19,500 $21.41
David A. Kauer 16,500 $21.36
</TABLE>
- -----------
(1) Mr. Miller terminated his employment with the Company on April 18, 1997.
Since adoption of the Plan: (i) all current executive officers, as a group, have
been granted options under the Plan covering 574,500 shares of the Company's
Common Stock which represents approximately 54% of the total number of options
granted pursuant to the Plan; and (ii) all current employees, excluding
executive officers, as a group, have been granted options under the Plan
covering 491,100 shares of the Company's Common Stock which represents
approximately 46% of the total number of options granted pursuant to the Plan.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences with respect to
Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights
("SARs"), Stock Awards, and Cash Awards granted under the Plan are as described
below. The following discussion is not intended to be a complete statement of
applicable law and is based upon the federal income tax laws as in effect on the
date hereof.
Incentive Stock Options. In general, a participant who is granted an
Incentive Stock Option does not recognize taxable income either on the date of
grant or on the date of exercise. Upon the exercise of an Incentive Stock
Option, however, the difference between the fair market value of the shares of
the Company's Common Stock received and the option price is a tax preference
item potentially subject to the alterative minimum tax. On the later sale or
other disposition of the shares of the Company's Common Stock, generally only
the difference between the fair market value of the Company's Common Stock on
the exercise date and the amount realized on the sale or disposition is
includable in alternative minimum taxable income.
Upon disposition of the shares of the Company's Common Stock acquired
from exercise of an Incentive Stock Option, long-term capital gain or loss is
generally recognized in an amount equal to the difference between the amount
realized on the sale or disposition and the exercise price. However, if the
Participant disposes of the shares of the Company's Common Stock within two
years of the date of grant or within one year from the date of the issuing of
the shares of the Company's Common Stock to the Participant (a "Disqualifying
Disposition"), then the Participant will recognize
- 19 -
<PAGE> 23
ordinary income, as opposed to capital gain, at the time of disposition. In
general, the amount of ordinary income recognized will be equal to the lesser of
(i) the amount of gain realized on the disposition, or (ii) the difference
between the fair market value of the shares of the Company's Common Stock
received on the date of exercise and the exercise price. Any remaining gain or
loss is treated as a short-term or long-term capital gain or loss, depending
upon the period of time the shares of the Company's Common Stock have been held.
The Company is not entitled to a tax deduction upon either exercise of
an Incentive Stock Option or disposition of the shares of the Company's Common
Stock acquired pursuant to such exercise, except to the extent that the
participant recognizes ordinary income in a Disqualifying Disposition.
If the holder of an Incentive Stock Option pays the exercise price, in
whole or in part, with previously acquired shares of the Company's Common Stock,
the exchange should not effect the Incentive Stock Option tax treatment of the
exercise. Upon such exchange, and except for Disqualifying Dispositions, no gain
or loss is recognized by the Participant upon the delivery of the previously
acquired shares of the Company's Common Stock to the Company for the payment of
the exercise price. The shares of the Company's Common Stock received by the
Participant, equal in number to the previously acquired shares of the Company's
Common Stock exchanged therefor, will have the same basis and holding period for
long-term capital gain purposes as the previously acquired shares of the
Company's Common Stock. The Participant, however, will not be able to utilize
the prior holding period for the purpose of satisfying the Incentive Stock
Option statutory holding period requirements. Shares of the Company's Common
Stock received by the Participant in excess of the number of previously acquired
shares of the Company's Common Stock will have a basis of zero (unless there was
gain recognized or cash paid upon the exercise) and a holding period which
commences as of the date the shares of the Company's Common Stock are issued to
the Participant upon exercise of the Incentive Stock Option. If the exercise of
an Incentive Stock Option is effected using shares of the Company's Common Stock
previously acquired through the exercise of an Incentive Stock Option, the
exchange of the previously acquired shares of the Company's Common Stock will be
considered a disposition of such shares of the Company's Common Stock for the
purposes of determining whether a Disqualifying Disposition has occurred.
Non-Statutory Stock Options. A Participant receiving a Non-Statutory
Stock Option does not recognize taxable income on the date of grant of the
Non-Statutory Stock Option, provided that the Non-Statutory Stock Option does
not have a readily ascertainable fair market value at the time it is granted. In
general, the Participant must recognize ordinary income at the time of exercise
of the Non-Statutory Stock Option in the amount equal to the difference between
the fair market value of the Company's Common Stock on the date of exercise and
the option price. The ordinary income received will constitute compensation for
which tax withholding generally will be required. The amount of ordinary income
recognized by a Participant will be deductible by the Company in the year that
the Participant recognizes the income if the Company complies with the
applicable withholding and reporting requirements.
Shares of the Company's Common Stock acquired upon exercise of a
Non-Statutory Stock Option will have a tax basis equal to their fair market
value on the exercise date or other relevant date on which ordinary income is
recognized, and the holding period for the shares of the Company's Common Stock
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the shares of the Company's Common Stock, the
Participant will recognize long-term capital gain or loss if the Participant has
held the shares of the Company's Common Stock
- 20 -
<PAGE> 24
for more than one year prior to disposition, or short-term capital gain or loss
if the Participant has held the shares of the Company's Common Stock for one
year or less.
If the holder of a Non-Statutory Stock Option pays the exercise price,
in whole or in part, with previously acquired shares of the Company's Common
Stock, the holder will recognize ordinary income in the amount by which the fair
market value of the shares of the Company's Common Stock received exceeds the
exercise price. The Participant will not recognize gain or loss upon delivery of
the previously acquired shares of the Company's Common Stock to the Company. The
shares of the Company's Common Stock received by the holder of the Non-Statutory
Stock Option equal in number to the previously acquired shares of the Company's
Common Stock exchanged therefor will have the same basis and holding period for
capital gain purposes as the previously acquired shares of the Company's Common
Stock. Shares of the Company's Common Stock received by the holder of the
Non-Statutory Stock Option in excess of the number of previously acquired shares
of the Company's Common Stock will have a basis equal to the fair market value
of such additional shares of the Company's Common Stock as of the date ordinary
income is recognized. Generally, the holding period for such additional shares
of the Company's Common Stock will commence as of the date of exercise.
Stock Appreciation Rights. The grant of an SAR generally will not
result in income for the grantee or in a deduction for the Company. Generally,
upon the receipt of shares of the Company's Common Stock or cash under an SAR,
the grantee will recognize ordinary income and the Company will be entitled to a
deduction measured by the fair market value of the shares of the Company's
Common Stock (less any amounts paid upon exercise of the SAR) plus any cash
received. Income tax withholding will be required.
Stock Awards. A Participant receiving a Stock Award which is not
subject to restrictions will recognize ordinary income equal to the fair market
value of the shares of the Company's Common Stock received. The Company will be
entitled to a corresponding deduction. Income tax withholding will be required.
A Participant receiving restricted and nontransferable stock generally
will not recognize income upon the grant of such shares, but will recognize
ordinary income when and to the extent that the restrictions on such shares
lapse, in an amount equal to the fair market value of the shares at the time
such restrictions lapse. The tax basis to the Participant will equal the amount
of ordinary income incurred at the time the restrictions lapse. Any subsequent
gain or loss upon resale of restricted stock will be long-term or short-term
capital gain or loss depending on how long the shares are held.
The above assumes a Participant does not file a Code Section 83(b)
election ("Election") at the time such restricted stock is granted. If an
Election is filed, a Participant will be taxed in an amount equal to the then
fair market value of all such shares, determined without regard to the
restrictions. This Election is made pursuant to a complex set of rules contained
in Section 83(b) of the Code and the Treasury Regulations thereunder and must be
made within 30 days of the grant. If a Participant makes the Election, then
subsequent appreciation or depreciation of the shares generally will qualify for
capital gain or loss treatment. Assuming no forfeiture, any future appreciation
or depreciation would constitute long-term or short-term capital gain or loss
depending on how long the shares are held. Generally, there would be no further
tax consequence when the restrictions expired.
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<PAGE> 25
Generally, if a Participant does not make the Election and is required
to forfeit all or a portion of the restricted stock to the Company prior to the
lapse of the restrictions, there is no tax consequence to the Participant. If a
Participant did make such Election and is required to forfeit all or a portion
of the restricted stock to the Company, such Participant generally will not be
able to recognize a loss equal to the amount such Participant previously
included in income.
In general, assuming no Election, the ordinary income recognized by a
Participant upon the expiration of restrictions would be ordinary income subject
to withholding.
Subject to reasonable compensation limitations and assuming no
Election, the Company generally will be entitled to a compensation deduction
each year equal to the amount of income, if any, recognized by Participants for
such year. The Company has reserved the right to require the Participant to
remit to the Company, or to otherwise withhold from other amounts payable to the
Participant as compensation, an amount sufficient to satisfy all federal, state,
and local withholding tax requirements.
Cash Awards. A Cash Award is taxable in the year of receipt as ordinary
income and is subject to withholding. The Company should receive a corresponding
deduction.
Dividends. Unrestricted dividends will be taxable to the Participant
upon receipt.
Tandem and Substitute Awards. Special rules may apply if an Award is
issued in combination with or in tandem with another award or is substituted for
another Award. Participants should consult their personal tax advisors to
determine the particular tax consequences of such "tandem" or substituted
Awards.
Deferral of Awards. Participants may be permitted to defer payment of
an award either in the form of installments or a future lump sum payment. Such a
deferral may impact the timing of the income to the Participant and the
deduction of the Company. Participants should consult their personal tax
advisors to determine the particular tax consequences of such a deferral.
1993 Tax Act. The Budget Reconciliation Act of 1993 (the "1993 Act")
has increased the difference between the maximum ordinary income tax rate and
the preferential tax rate on long-term capital gains. The 1993 Act has also
limited a corporation's ability to deduct certain nonqualifying compensation.
Section 162(m). Section 162 (m) of the Code no longer permits the
Company to deduct non-performance-based compensation in excess of $1,000,000 per
year paid to certain covered officers. The Company believes that compensation
paid pursuant to the Plan should qualify as performance-based compensation and
therefore, Section 162(m) should not cause the Company to be denied a deduction
for compensation paid to certain covered officers pursuant to the Plan.
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<PAGE> 26
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP served as the Company's independent accountants
and audited the Company's financial statements for the year ending December 31,
1996. It is expected that a representative of KPMG Peat Marwick LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
he desires to do so, and will be available to respond to appropriate questions.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1996, containing financial statements for such year and the signed
opinion of KPMG Peat Marwick LLP, independent certified public accountants, with
respect to such financial statements, has been simultaneously sent to
stockholders with this Proxy Statement. The Annual Report is not to be regarded
as proxy soliciting material, and management does not intend to ask, suggest or
solicit any action from the stockholders with respect to such report.
A copy of the Company's Annual Report or Form 10-K for the fiscal year
ended December 31, 1996, is available without charge to stockholders on request
to:
Insilco Corporation
Attn: Corporate Secretary
425 Metro Place North
Dublin, Ohio 43017
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and greater than 10% stockholders, to file
reports of ownership and changes in ownership of the Company's securities with
the Securities and Exchange Commission ("SEC"). Copies of the reports are
required by SEC regulation to be furnished to the Company. Based on its review
of such reports and written representations from reporting persons, the Company
believes that all reporting persons complied with all filing requirements during
fiscal 1996.
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. In addition
to the solicitation of proxies by mail, the directors, officers and employees of
the Company may solicit proxies personally or by telephone. The Company may
request persons holding shares in their names for others to forward soliciting
materials to their principals to obtain authorization for the execution of
proxies, and the Company may reimburse such persons for their expenses in doing
so.
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<PAGE> 27
STOCKHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election of
directors at the Annual Meeting of Stockholders. Other proposals may be
submitted by the Board of Directors or the stockholders for inclusion in the
Proxy Statement for action at the Annual Meeting of Stockholders. Any proposal
submitted by a stockholder for inclusion in the Proxy Statement for the 1998
Annual Meeting of Stockholders must be received by the Company (addressed to the
attention of the Corporate Secretary) on or before December 31, 1997. To be
submitted at the meeting, any such proposal must be a proper subject for
stockholder action under the laws of the state of Delaware.
OTHER MATTERS
The only business which management intends to present at the meeting
consists of the matters set forth in this statement. Management knows of no
other matters to be brought before the meeting by any other person or group. If
any other matter should properly come before the meeting, the proxy holders will
vote thereon in their discretion. All proxies received duly executed will be
voted. You are requested to sign and date the enclosed proxy and mail it
promptly in the enclosed envelope. If you later desire to vote in person, you
may revoke your proxy, either by written notice to the Company or in person at
the meeting, without affecting any vote previously taken.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT L. SMIALEK
CHAIRMAN OF THE BOARD AND PRESIDENT
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<PAGE> 28
COMMON STOCK
PROXY - INSILCO CORPORATION
The undersigned stockholder of Insilco Corporation (the "Company")
hereby appoints Robert L. Smialek and Kenneth H. Koch, or either one of them,
as attorneys and proxies with full power of substitution to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the Hyatt on
Capitol Square, 75 East State Street, Columbus, Ohio, on Thursday, May 22,
1997, at 9:00 a.m., local time, and at any adjournment or adjournments thereof
as follows:
1. THE ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
James J. Gaffney * Terence M. O'Toole * Thomas E. Petry
Robert L. Smialek * Barry S. Volpert
2. AMENDMENT TO THE INSILCO CORPORATION 1993 LONG-TERM INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN FROM
1,500,000 TO 2,000,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
(Continued and to be signed on other side.)
(Continued from other side.)
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, AND 3.
The undersigned hereby acknowledges receipt of the Notice of the
Annual Meeting of Stockholders, dated April 23, 1997 and the Proxy Statement
furnished therewith. Any proxy heretofore given to vote said shares hereby is
revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED
ENVELOPE.
Dated:_______________________, 1997
___________________________________
(Signature)
____________________________________
(Signature)
Signature(s) must agree with the
name(s) printed on this Proxy. If
shares are registered in two names,
both stockholders should sign this
Proxy. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
