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PROSPECTUS Filed Pursuant to Regulation 424(b)(2)
Registration No. 333-71947
INSILCO CORPORATION
425 Metro Place North, Fifth Floor
Dublin, Ohio 43017
(614) 792-0468
12% Series B Senior Subordinated Notes due 2007
We are Insilco Corporation, a Delaware corporation, and a diversified
manufacturer of vehicle, electronic and telecommunications components. Our
business units service the automotive, 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.
THE ORIGINAL OFFERING:
o We issued the notes in a private offering on November 9, 1998.
o We used the proceeds from the notes to repurchase a portion of our existing
debt. DLJ Merchant Banking Partners II, L.P. and related funds and entities
acquired a controlling stake in our company in August, and a portion of our
existing debt required us to offer to repurchase such debt in the event of
such a change of control.
THE NOTES:
o Maturity: August 15, 2007
o Interest Payment: semi-annually on February 15 and August 15, commencing on
February 15, 1999.
o Optional Redemption: The notes will be redeemable on or after August 15,
2002 at the prices state herein.
o Mandatory Redemption: We also have the right to redeem, and you have the
right to require us to purchase, the notes upon the occurrence of certain
change of control events, at the prices set forth herein.
o Ranking of Notes: The notes are general unsecured obligations, subordinated
to all of our senior obligations, including any borrowings under our bank
credit facility. The notes rank senior to all subordinated indebtedness.
The notes will effectively rank junior to all liabilities of our
subsidiaries that are not guarantors.
o Subsidiary Guarantees: All of our wholly owned domestic subsidiaries have
fully and unconditionally guaranteed the notes. The guarantees are general
unsecured obligations of the guarantors, subordinated to all senior
obligations and senior to all subordinated obligations.
o On December 31, 1999, Insilco and the guarantors had outstanding
approximately $199.3 million of senior indebtedness, and our subsidiaries
that are not guarantors had approximately $17.5 million of outstanding
liabilities, including trade payables.
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10.
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 will be used by Donaldson, Lufkin & Jenrette Securities
Corporation in connection offers and sales in market-making transactions at
negotiated prices related to prevailing market 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 May 18, 2000.
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TABLE OF CONTENTS
Page
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Additional Information............................................ 3
Incorporation of Certain Documents by Reference................... 3
Note Regarding Forward Looking Statements......................... 4
Summary .......................................................... 5
Risk Factors...................................................... 10
Use of Proceeds................................................... 16
Capitalization.................................................... 17
Management........................................................ 18
Description of Certain Indebtedness............................... 18
Description of Notes.............................................. 21
Plan of Distribution.............................................. 52
Legal Matters..................................................... 53
Experts ......................................................... 53
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
information that is different. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
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ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-1 under the Act with respect to our offering of
the New Notes. This prospectus 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 New 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, as amended (the "Exchange
Act"), we are still required under the indenture to furnish the holders of the
New 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.
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Certain of the titles and logos of our products referenced herein are
trademarks of Insilco. Each trade name, trademark or servicemark of any other
company appearing in this Prospectus is the property of its holder.
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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 of Insilco Holding Co. 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.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our actual results could differ materially from those projected in
forward-looking statements. 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.
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SUMMARY
This section summarizes the more detailed information in this prospectus
and you should read all of such information carefully and in its entirety.
Because various entities discussed in this prospectus have similar sounding
names, we refer to Insilco Holdings Co., our parent company, as "Holdings" and
we refer to ourselves as "Insilco" the "Company," "we," "us" or "our company."
All of the information that we present about Holdings and Insilco, except for
historical financial information, reflects our recent merger, as described below
and the various financings that we obtained in connection with the merger.
THE COMPANY
We are Insilco Corporation, a Delaware corporation originally incorporated
in New Jersey in 1898 and we are a diversified manufacturer of vehicle,
electronic and telecommunications components. Our business units service the
automotive, 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,
Dublin, Ohio 43017 and our telephone number is (614) 792-0468.
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SUMMARY DESCRIPTION OF THE NOTES
The terms of the New Notes and the Old Notes are identical in all
material respects, except that the New Notes have been registered under the
Securities Act, and certain transfer restrictions and registration rights
relating to Old Notes do not apply to the New Notes.
Maturity Date ..........................August 15, 2007
Interest Payment Dates..................Every February 15 and August 15,
beginning February 15, 1999.
Optional Redemption ....................We may redeem any of the notes at our
option on or after August 15, 2002 at
the redemption prices set forth on page
20, 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 rank junior to all of our
senior indebtedness and secured
indebtedness, including the new credit
facility. The notes will rank equally
with any of our future unsecured senior
subordinated indebtedness. The notes
will effectively rank junior to all
liabilities of subsidiaries that have
not guaranteed the notes. On December
31, 1999 Insilco and the guarantors had
outstanding $199.3 million of senior
indebtedness.
Note Guarantees ........................The notes are unconditionally guaranteed
on a senior subordinated basis by all of
our wholly-owned domestic subsidiaries
(the "guarantors"). The note guarantees
are unsecured obligations of the
guarantors and rank junior to all
existing and future senior indebtedness
of the guarantors, including
indebtedness under our bank credit
facility. See "Description of
Notes--Note Guarantees."
Certain Covenants ......................The indenture governing the notes
contains certain covenants limiting or
prohibiting 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 or to repurchase
subordinated indebtedness;
o engage in transactions with
affiliates;
o engage in sale and leaseback
transactions;
o create liens securing indebtedness;
assets; and
o consolidate with or merge into, or
sell substantially all of our assets
to, another person.
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See "Description of Notes--Certain Covenants."
Use of Proceeds ........................We will not receive any proceeds from
the exchange of New Notes for Old Notes.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA 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 "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Consolidated Financial Data"
and the consolidated financial statements and the notes thereto included
elsewhere in this prospectus (the "Consolidated Financial Statements").
The unaudited pro forma condensed consolidated financial data of
Insilco and our subsidiaries for the years ended December 31, 1999 are based
upon historical information that has been adjusted to give effect to the
transactions described in footnote 1.
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL AND OPERATING DATA
<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 $430.0 $434.3 $476.4 $535.4
Operating Income (2) 33.1 44.8 44.0 13.7 22.1 25.3
Other income (expenses):
Interest expense (19.0) (17.8) (20.0) (28.6) (36.5) (44.1)
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 (7.3) (0.9) (5.1)
Income tax (expense) benefit (15.1) (12.3) (11.1) 1.6 5.1 5.2
----------- ----------- ---------- ---------- ---------- --------------
Income (loss) from continuing
operations before extraordinary
items 14.9 23.5 19.5 (5.7) 4.2 0.1
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 (4.2) 9.8 0.1
Extraordinary items, net of tax
--- --- (0.7) (5.9) --- ---
----------- ----------- ---------- ---------- ---------- --------------
Net income (loss) 2.5 39.0 81.7 (10.1) 9.1 0.1
Other Data:
EBITDA(5) $59.7 $57.4 $59.4 $30.5 $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 $6.5
Working capital 54.7 60.9 46.3 82.2 83.0
Total assets 264.1 273.1 231.0 287.6 316.0
Total debt 186.5 161.0 257.7 312.4 319.1
Stockholders' equity (deficit) (17.9) 34.7 (101.1) (136.9) (125.0)
</TABLE>
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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 amortization of our
reorganization value over the fair value of its tangible and identified
intangible assets at March 31, 1993 ("Reorganization Goodwill") of $16.2
million, due
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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 million from the sales of our
stainless steel 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.
Rolodex Business, 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 Product 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 TP 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.
(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 $2.9 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; (ii) $1.8 million and $0.9
million of legal expenses relating to significant legal cases the years ended
December 31, 1998 and 1999 respectively; (iii) $1.3 million in rationalization
expenses related to 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 $20.9 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 of costs related to the closing of
our Duncan, South Carolina heat exchanger tubing manufacturer.
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RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following risk factors.
CONSEQUENCES OF FAILURE TO EXCHANGE YOUR NOTES
If you do not exchange your Old Notes in the Exchange Offer, your Old Notes
will continue to be subject to the restrictions on transfer described in the
legend on the certificate for the Old Notes. In general, you may offer or sell
the Old Notes only if they are registered under, offered or sold pursuant to an
exemption from, or offered or sold in a transaction not subject to, the
Securities Act and applicable state securities laws.
We believe that New Notes issued in exchange for Old Notes pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by you
without registering the New Notes under the Securities Act or delivering a
prospectus so long as you (1) are not one of our "affiliates", which is defined
in Rule 405 of the Securities Act, and (2) acquire the New Notes in the ordinary
course of your business and, unless you are a broker dealer, you do not have any
arrangement with any person to participate in the distribution of such New
Notes. Our belief is based on interpretations by the SEC's staff in no-action
letters issued to third parties. Please note that the SEC has not considered our
Exchange Offer in the context of a no-action letter and we cannot assure you
that the SEC's staff would make a similar determination with respect to our
Exchange Offer.
Unless you are a broker-dealer, you must acknowledge that you are not
engaged in, and do not intend to engage in, a distribution of the New Notes and
that you have no arrangement or understanding to participate in a distribution
of the New Notes. If you are an affiliate of Insilco, or you are engaged in,
intend to engage in or have any arrangement or understanding with respect to,
the distribution of New Notes acquired in the Exchange Offer, you (1) should not
rely on our interpretations of the position of the SEC's staff and (2) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
If you are a broker-dealer and receive New Notes for your own account
pursuant to the Exchange Offer, you must acknowledge that you will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, you
will not be deemed to admit that you are an "underwriter" within the meaning of
the Securities Act. If you are a broker-dealer, you may use this prospectus, as
it may be amended or supplemented from time to time, in connection with the
resale of New Notes received in exchange for Old Notes acquired by you as a
result of market-making or other trading activities. For a period of 90 days
after the expiration of the Exchange Offer, we will make this prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
In addition, you may offer or sell the New Notes in certain jurisdictions
only if they have been registered or qualified for sale there, or an exemption
from registration or qualification is available and is complied with. Subject to
the limitations specified in the registration rights agreement, we will register
or qualify the New Notes for offer or sale under the securities laws of any
jurisdictions that you reasonably request in writing. Unless you request that
the sale of the New Notes be registered or qualified in a jurisdiction, we
currently do not intend to register or qualify the sale of the New Notes in any
jurisdiction.
SUBSTANTIAL LEVERAGE; LIQUIDITY
LEVERAGE
In connection with the Merger and Merger Financing, we incurred significant
indebtedness. As of December 31, 1999, we had: (i) total consolidated
indebtedness of approximately $319.1 million; and (ii) $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 indenture, we may incur significant additional indebtedness,
which may be secured, from time to time.
The level of our indebtedness could have important consequences, including:
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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 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. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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
o merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of 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. 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
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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."
SUBORDINATION
The notes rank junior to all of our existing and future senior
indebtedness, including all indebtedness under our credit facility. In addition,
the note guarantee of each guarantor will rank junior to all of senior
indebtedness of such guarantor (including the guarantees of our bank credit
facility) to the same extent that the notes rank junior to senior indebtedness
of Insilco. As of December 31, 1999 Insilco and the guarantors had $199.3
million of senior indebtedness, substantially all of which would have been
secured borrowings.
As a result of such subordination, if:
(i) Insilco and the guarantors are insolvent or enter into a bankruptcy or
similar proceeding;
(ii) Insilco fails to make a payment when due on senior indebtedness; or
(iii) any senior indebtedness is accelerated
then the holders of such senior indebtedness and any other creditors of
subsidiaries, if any, must be paid in full before the holders of the notes may
be paid. If we or the guarantors incur any additional debt that ranks equally
with the notes, the holders of such debt will be entitled to share ratably with
you in any proceeds distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other winding-up of Insilco or the guarantors.
This may have the effect of reducing the amount of such proceeds paid to you.
In addition, we cannot make any cash payments to you if we have failed to
make payments to holders of senior indebtedness. Under certain circumstances, we
cannot make any payments to you for a period of up to 179 days if we have
defaulted (other than failures to make payments) on our senior indebtedness
covenants.
Certain of our subsidiaries have not guaranteed the notes. As a result, the
notes are not debt of such subsidiaries, and holders of indebtedness and other
liabilities will effectively be senior to your claims against such subsidiaries.
As of December 31, 1999, these subsidiaries had $17.5 million of outstanding
liabilities, including trade payables. See "Description of
Notes--Subordination."
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 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
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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 periods 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
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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
an acquisition 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.
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. See
"Business--Environmental Regulation and Proceedings."
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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 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 new 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.
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,
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(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.
Our obligations under the notes are guaranteed by certain of our
subsidiaries, and the guarantees also may be subject to review under various
laws for the protection of creditors, including federal and state fraudulent
conveyance and fraudulent transfer laws. In such a case, the analysis set forth
above would generally apply.
In addition, creditors could also claim that, since the guarantees were
incurred for the benefit of Insilco (and only indirectly for the benefit of the
guarantors), the obligations of the guarantors thereunder were incurred for less
than reasonably equivalent value or fair consideration. Courts could take
actions similar to those outlined above. Please note that, in an attempt to
limit the applicability of fraudulent transfer laws, the indenture limits the
amount of each guarantee to the amount that will result in it not constituting a
fraudulent conveyance or improper corporate distribution, and we cannot assure
you as to what standard a court would apply in making a determination as to what
would be the maximum liability of each guarantor.
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 intends to make 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.
DLJSC may be deemed to be our "affiliate" (as defined the Securities Act)
and, as such, may be required to deliver a prospectus in connection with its
market-making activities in the notes. Pursuant to the registration rights
agreement that we signed with DLJSC in connection with the initial sale of the
notes, we have agreed to use our best efforts to file and maintain a
registration statement that would allow DLJSC to engage in market-making
transactions in the notes for up to 90 days from the date on which we consummate
the offer to exchange the notes for the Old Notes. We have agreed to bear
substantially all the costs and expenses related to registration.
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by
DLJSC in market-making transactions. We will not receive any of the proceeds
from such transactions.
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CAPITALIZATION
The following table sets forth the unaudited 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 Insilco Corporation 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
Miscellaneous .2
-----------
Total long-term debt (including current portion) $ 319.1
-----------
Stockholders' deficit (125.0)
-----------
Total capitalization $ 194.1
===========
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MANAGEMENT
The following table sets forth the name, age and position of each person
who is a director or executive officer of Insilco.
NAME AND BUSINESS EXPERIENCE AGE
---------------------------- ---
MICHAEL R. ELIA, SENIOR VP, CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY 41
Mr. Elia has been the Senior Vice President, Chief Financial Officer,
Treasurer, and Secretary (since June 1999) and Vice President and Controller
(August 1998 to June 1999). He served as Chief Financial Officer of Jordan
Telecommunication Products from February 1997 to August 1998, and as Director of
Strategic Planning Fieldcrest Cannon, Inc. from 1994 to 1997. From 1983 through
1993, he held senior financial positions with Insilco's Technologies Group.
Prior to joining Insilco, he was with Ernst & Young LLP.
DAVID A. KAUER, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR 44
Mr. Kauer has been President and Chief Executive Officer of the Company since
June 1999. Prior to that, he served as Vice President and Chief Financial
Officer of the Company from May 1998 to June 1999, as Vice President and
Treasurer of the Company from April 1997 to May 1998, and as Treasurer from
September 1993 to April 1997. From October 1989 to September 1993, he served as
Controller and Treasurer of Johnson Yokogawa Corporation (a joint venture of
Yokogawa Electric Corporation and Johnson Controls, Inc.)
WILLIAM F. DAWSON, JR., DIRECTOR 35
Mr. Dawson has been a Managing Director of DLJMB Inc. since January 2000. Prior
to that and since August 1997, he was a Principal of DLJMB Inc. From December
1995 to August 1997, he was a Senior Vice President in DLJ's High Yield Capital
Markets Group. Prior thereto, Mr. Dawson was a Vice President in the Leveraged
Finance Group within DLJ's Investment Banking Group. Mr. Dawson serves as a
director of Von Hoffman Press, Inc., Haights Cross Communication, Inc, Merrill
Corporation, WRC Media, Inc. and Thermadyne Holdings Corporation, a publicly
traded company.
THOMPSON DEAN, DIRECTOR 41
Mr. Dean has been the Managing Partner of DLJMB Inc. since November 1996. Prior
thereto, Mr. Dean was a Managing Director of DLJMB Inc. (and its predecessor).
Mr. Dean serves as a director of Commvault Inc., Von Hoffman Press, Inc.,
Manufacturers' Services Limited, Phase Metrics, Inc., a publicly traded company,
and Arcade Holding Corporation.
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
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(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, will be
subject to possible reductions based on the ratio of consolidated Debt to EBITDA
(each as defined in the new 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:
Percentage
Year Reduction
---- ---------
1 ........................... 1.0%
2 ........................... 1.0%
3 ........................... 1.0%
4 ........................... 1.0%
5 ........................... 1.0%
6 ........................... 1.0%
7 ........................... 94.0%
---------
100.0%
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.
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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:
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:
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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.
DESCRIPTION OF NOTES
GENERAL
We issued the notes under an Indenture between Insilco and Star Bank, N.A.,
as trustee (the "Trustee"). The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). Because this is a summary it
does not contain all the information
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that may be important to you. You should read the entire indenture, including
the definitions therein of certain terms used below. We have filed a copy of the
indenture as an exhibit to the registration statement which includes this
prospectus. For definitions of certain terms used in this description see
"--Certain Definitions." As used in this "Description of Notes", the word
"Insilco" refers only to Insilco Corporation and not to any of its subsidiaries.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, if the
registration statement relating to this exchange offer is not declared effective
by the Commission by April 8, 1999, Holders that have complied with their
obligations under the Registration Rights Agreement will be entitled, subject to
certain exceptions, to liquidated damaged in an amount equal to $0.05 per week
per $1,000 principal amount of notes held by such Holder until July 2, 1999 and
increasing every 90 days thereafter up to a maximum amount equal to $0.25 per
week per $1,000 principal amount of notes until the registration statement is
declared effective.
The notes
o will be general unsecured obligations of Insilco
o will be subordinated in right of payment to all existing and future
Senior Indebtedness of Insilco (including borrowings under the Credit
Facility)
o will rank senior in right of payment to all future Subordinated
Indebtedness of Insilco
o will be effectively subordinated to all liabilities of Insilco's
subsidiaries, except that with respect to subsidiaries which are
guarantors, the notes will be subordinated only to Senior Indebtedness
of such subsidiaries.
On December 31, 1999, we and the guarantors had outstanding approximately
$199.3 million of Senior Indebtedness. The indenture permits Insilco and its
Subsidiaries to incur additional Debt, including Senior Indebtedness, in the
future. See "Risk Factors--Subordination of the Notes; Dependence on
Subsidiaries" and "--Certain Covenants--Limitation on Consolidated Debt."
As of the date of the indenture, all of Insilco's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, we will be
permitted to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries are not be subject to the restrictive
covenants set forth in the indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited to $150 million aggregate principal amount (including
any Additional Notes, as defined below) and will mature on August 15, 2007. The
notes will bear interest at the rate per annum shown on the front cover of this
prospectus from the date of original issuance or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semi-annually on February 15 and August 15 of each year, commencing February 15,
1999, to the Person in whose name the note (or any predecessor note) is
registered (a "Holder") at the close of business on the preceding February 1 or
August 1, as the case may be. The notes will bear interest on overdue principal
and premium (if any) and, to the extent permitted by law, overdue interest at
the rate per annum shown on the front cover of this prospectus plus 2%. Interest
on the notes will be computed on the basis of a 360-day year of twelve 30-day
months.
The principal of (and premium, if any) and interest and Liquidated Damages
(as defined herein), if any, on the notes will be payable, and the transfer of
notes will be registrable, at the office or agency of Insilco maintained for
that purpose in the Borough of Manhattan, The City of New York. In addition,
payment of interest and Liquidated Damages, if any, may, at the option of
Insilco, be made by check mailed to the address of the Person entitled thereto
as it appears in the Security Register; provided, however, that all payments of
the principal (and premium, if any) and interest on notes the Holders of which
have given wire transfer instructions to Insilco or its agent at least 10
Business Days prior to the applicable payment date will be required to be made
by wire transfer of immediately available funds to the accounts specified by
such Holders in such instructions.
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Subject to the covenants described below, we may issue additional notes of
up to an aggregate principal amount of $30 million (the "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
(1) scheduled and paid prior to the date of issuance of such Additional
Notes or
(2) payable on the first interest payment date following such date of
issuance). The notes offered hereby and any such Additional Notes would
be treated as a single class for all purposes under the indenture.
OPTIONAL REDEMPTION
The notes will be subject to redemption, at our option, in whole or in
part, at any time on or after August 15, 2002 and prior to maturity, upon not
less than 30 nor more than 60 days' notice mailed to each Holder of notes to be
redeemed at such Holder's address appearing in the Security Register, in amounts
of $1,000 or an integral multiple of $1,000, at the following Redemption Prices
(expressed as percentages of the principal amount redeemed), plus accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date), if redeemed
during the twelve-month period beginning on August 15 of each of the years
indicated below:
Year Redemption Price
---- ----------------
2002............................. 106.000%
2003............................. 104.000%
2004............................. 102.000%
2005 and thereafter.............. 100.000%
If less than all the notes are to be redeemed, the particular notes to be
redeemed will be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the outstanding notes not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of notes of a denomination larger than
$1,000.
MANDATORY REDEMPTION
Except as described above under "Special Redemption" and below under
"Repurchase at the Option of Holders--Asset Dispositions" and "--Change of
Control," the notes will not have the benefit of any mandatory redemption or
sinking fund obligations of Insilco.
REPURCHASE AT THE OPTION OF HOLDERS
ASSET DISPOSITIONS
Insilco may not make, and may not permit any Restricted Subsidiary to make,
any Asset Disposition (other than an Asset Disposition permitted under the
indenture as described in "Covenants--Mergers, Consolidations and Certain Sales
of Assets" below) in one transaction (or series of related transactions) unless:
(1) Insilco (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such disposition at least equal to the fair market
value of the shares or other assets disposed of (as determined in good faith by
the Board of Directors and evidenced by their resolution) for any transaction
(or series of related transactions) involving in excess of $2 million;
(2) at least 80% of the consideration received by Insilco (or such
Restricted Subsidiary) consists of:
(u) cash, readily marketable cash equivalents, readily marketable
fixed-income securities or equity securities traded on a national securities
exchange or NASDAQ (valued, in the case of securities, at the market value
thereof when received by Insilco or such Restricted Subsidiary),
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(v) the assumption of Debt or other liabilities reflected on the
consolidated balance sheet of Insilco and its Restricted Subsidiaries in
accordance with generally accepted accounting principles (excluding Debt or any
other liabilities subordinate in right of payment to the notes) and release from
all liability on such Debt or other liabilities assumed,
(w) assets used by, or stock or other ownership interests in, a Person
that upon the consummation of such Asset Disposition becomes a Restricted
Subsidiary and will be principally engaged in the business of Insilco or any of
its Wholly Owned Restricted Subsidiaries substantially as such business was
conducted prior to such Asset Disposition (as determined by the Board of
Directors in good faith) or
(x) any combination thereof and
(3) 100% of the Net Available Proceeds from such Asset Disposition
(including from the sale of any marketable cash equivalents, fixed-income or
equity securities received therein), less any amounts ("Reinvested Amounts")
invested, within one year from the later of the date of such Asset Disposition
or the receipt of such Net Available Proceeds, in assets that will be used in
the same or a substantially similar or related business of Insilco or any of its
Wholly Owned Restricted Subsidiaries as conducted prior to such Asset
Disposition (as determined by the Board of Directors in good faith), are applied
by Insilco or a Restricted Subsidiary
(a) first, within one year from the later of the date of such Asset
Disposition or the receipt of such Net Available Proceeds, to repayment of
Senior Indebtedness of Insilco or Debt of its Restricted Subsidiaries then
outstanding under any agreements or instruments which would require such
application or which would prohibit payments pursuant to the following clause
(b);
(b) second, to the extent Net Available Proceeds are not required to be
applied to Senior Indebtedness of Insilco or Debt of Restricted Subsidiaries as
specified in clause (a), to purchases of outstanding notes pursuant to an Offer
to Purchase at a purchase price equal to 100% of their principal amount, plus
accrued interest to the date of purchase (subject to the rights of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the purchase date), and, to the
extent required by the terms thereof, to purchases (on a pro rata basis with the
notes) of any other Debt of Insilco or its Restricted Subsidiaries that is pari
passu with the notes at a price no greater than 100% of the principal amount
thereof, plus accrued interest to the date of purchase, in each case to the
extent such purchases are not prohibited by the terms of any Senior Indebtedness
of Insilco or of any Debt of Restricted Subsidiaries then outstanding;
(c) third, to the extent of any remaining Net Available Proceeds
following purchases pursuant to the foregoing clause (b), to the repayment of
other Debt of Insilco or Debt of a Restricted Subsidiary, to the extent
permitted under the terms thereof and
(d) fourth, to the extent of any remaining Net Available Proceeds, to
any other use as determined by Insilco which is not otherwise prohibited by the
indenture.
The foregoing obligations will not continue after a discharge of Insilco or
defeasance from its obligations with respect to the notes. See "Defeasance"
below.
Notwithstanding the foregoing, Insilco will not be required to comply with
the requirements described in clause (2) or clause (3) of the preceding
paragraph for any Asset Disposition that is an Excepted Disposition, and Insilco
will not be required to comply with the requirements described in clause (3) of
the preceding paragraph except at any time and from time to time that the
aggregate amount of Net Available Proceeds, less Reinvested Amounts, required to
be applied pursuant to clause (3) (and not theretofore so applied) exceeds $10
million; provided, however, with respect to such clause (3), that if any
Restricted Subsidiary in which a Reinvested Amount is invested becomes an
Unrestricted Subsidiary thereafter, such change in status, except under certain
circumstances, will be deemed an Asset Disposition with Net Available Proceeds
of cash in an amount equal to such Reinvested Amount (less any portion of such
Reinvested Amount theretofore distributed to Insilco or any Restricted
Subsidiary), and such amount of cash will be applied pursuant to clause (3)
above (subject to this proviso).
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Any Offer to Purchase required by the provisions described above will be
effected by the sending of the written terms and conditions thereof (the "Offer
Document"), by first class mail, to Holders of the notes within 30 days after
the date which is one year after the later of the date of such Asset Disposition
or the receipt of the related Net Available Proceeds. The form of the Offer to
Purchase and the requirements that a Holder must satisfy to tender any New Note
pursuant to such Offer to Purchase are substantially the same as those described
below under "--Change of Control."
CHANGE OF CONTROL
Within 30 days following the consummation of a transaction that results in
a Change of Control (as defined below), Insilco will commence an Offer to
Purchase all outstanding notes, at a purchase price equal to 101% of their
aggregate principal amount, plus accrued interest to the date of purchase
(subject to the rights of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
date of purchase). Such obligation will not continue after a discharge of
Insilco or defeasance from its obligations with respect to the notes. See
"Defeasance."
Insilco 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 resulting from a Change of Control.
Under the terms of the Credit Facility, a Change of Control could
constitute an event of default thereunder and prohibit the redemption of the
notes. If an event of default under the Credit Facility has occurred and is
continuing, payments owing on the notes could be blocked pursuant to the
subordination provisions of the notes. See "--Subordination" below. To repay the
notes, it may be necessary for Insilco first to recapitalize or refinance the
Credit Facility and some or all of its outstanding indebtedness (if any). There
can be no assurance that such recapitalization or refinancing, if required,
would be accomplished on favorable terms, in a timely manner or at all.
Prior to the mailing of an Offer Document, Insilco will in good faith seek
to obtain any required consents of holders of Senior Indebtedness or repay the
outstanding obligations thereunder. The right of holders to require Insilco to
purchase notes pursuant to an Offer to Purchase will be subject to obtaining the
requisite consents or making such repayment.
Within 30 days following a Change of Control, an Offer Document will be
sent, by first class mail, to Holders of the notes, accompanied by such
information regarding Insilco and its Subsidiaries as Insilco in good faith
believes will enable the holders to make an informed decision with respect to
the Offer to Purchase, which at a minimum will include
(1) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the Trustee
pursuant to the provisions described under "Covenants--Provision of Financial
Information" below (which requirements may be satisfied by delivery of such
documents together with the Offer to Purchase),
(2) a description of material developments in Insilco's business subsequent
to the date of the latest of such financial statements referred to in clause (1)
(including a description of the events requiring Insilco to make the Offer to
Purchase),
(3) if applicable, appropriate pro forma financial information concerning
the Offer to Purchase and the events requiring Insilco to make the Offer to
Purchase and
(4) any other information required by applicable law to be included
therein. The Offer Document will contain all instructions and materials
necessary to enable holders of the notes to tender notes pursuant to the Offer
to Purchase.
The Offer Document will also state
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(1) that a Change of Control has occurred (or, if the Offer to Purchase is
delivered in connection with an Asset Disposition, that an Asset Disposition has
occurred) and that Insilco will offer to purchase the holder's notes,
(2) the Expiration Date of the Offer to Purchase, which will be, subject to
any contrary requirements of applicable law, not less than 30 days or more than
60 days after the date of such Offer Document,
(3) the Purchase Date for the purchase of notes which will be within five
Business Days after the Expiration Date,
(4) the aggregate principal amount of notes to be purchased (including, if
less than 100%, the manner by which such purchase has been determined pursuant
to the indenture) and the purchase price and
(5) a description of the procedure which a holder must follow to tender all
or any portion of the notes.
To tender any note, a holder must surrender such note at the place or
places specified in the Offer Document prior to the close of business on the
Expiration Date (such note being duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to Insilco and the Trustee duly
executed by, the holder thereof or its attorney duly authorized in writing). A
holder will be entitled to withdraw all or any portion of notes tendered if
Insilco (or its Paying Agent) receives, not later than the close of business on
the Expiration Date, a telegram, facsimile transmission or letter setting forth
the name of the holder, the principal amount of the note the holder tendered,
the certificate number of the note the holder tendered and a statement that such
holder is withdrawing all or a portion of his tender. Any portion of a note
tendered must be tendered in an integral multiple of $1,000 principal amount.
SUBORDINATION
The payment of the principal of (and premium, if any) and interest on the
notes and all other Obligations in respect of the notes or on account of any
Claim (collectively, the "Subordinated Obligations") will, in certain
circumstances as set forth in the indenture, be subordinated in right of payment
to the prior payment in full of all Senior Indebtedness of Insilco. Upon any
payment or distribution of assets of Insilco to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or
similar proceedings ("Insolvency Proceedings") of Insilco, the holders of Senior
Indebtedness of Insilco will be entitled to receive payment in full of the
principal of (and premium, if any), interest on and all other Obligations in
respect of such Senior Indebtedness, including all amounts due or to become due
on all such Senior Indebtedness, or provision will be made for payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of such
Senior Indebtedness, before the Holders of notes are entitled to receive any
Securities Payment. "Securities Payment" means any payment or distribution of
any kind, whether in cash, property or securities (including any payment or
distribution deliverable by reason of the payment of any other Debt subordinated
to the notes) on account of the Subordinated Obligations or on account of the
purchase, redemption or other acquisition of notes by Insilco or any Subsidiary
of Insilco. If notwithstanding the foregoing the Trustee or the Holder of any
note receives during the pendency of any Insolvency Proceeding any Securities
Payment before all Senior Indebtedness of Insilco is paid in full or payment
thereof is provided for in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, then in such event such
Securities Payment will be required to be paid over or delivered forthwith to
the holders of Senior Indebtedness for application to the payment of all Senior
Indebtedness of Insilco remaining unpaid, to the extent necessary to pay such
Senior Indebtedness in full. Notwithstanding the foregoing, Holders of the notes
may receive Subordinated Securities.
Insilco may not make any Securities Payment (other than pursuant to the
Special Redemption and except for Subordinated Securities) if there has occurred
and is continuing a default in the payment of the principal of (or premium, if
any) or interest on or any other payment Obligation owing in respect of any
Designated Senior Indebtedness or if there has occurred and is continuing any
event of default with respect to any Designated Senior Indebtedness that has
resulted in such Designated Senior Indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable (a "Senior Payment Default"). In addition, if any default (other than a
Senior Payment Default) with respect to any Designated Senior Indebtedness
permitting after notice or lapse of time (or both) the holders thereof (or a
trustee on behalf thereof) to accelerate the
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maturity thereof (a "Senior Nonmonetary Default") has occurred and is continuing
and Insilco and the Trustee have received written notice thereof from the
administrative agent under the Credit Facility or the trustee or other
authorized representative of the holders of any Designated Senior Indebtedness
(in any case, a "Senior Representative"), then Insilco may not make any
Securities Payment (other than pursuant to the Special Redemption and except for
Subordinated Securities) for a period (a "Blockage Period") commencing on the
date Insilco and the Trustee receive such written notice and ending on the
earliest of
(1) 179 days after such date;
(2) the date, if any, on which the Designated Senior Indebtedness to which
such default relates is paid in full or such default is waived or otherwise
cured; and
(3) the date on which Insilco and the Trustee receive written notice from
such Senior Representative terminating the Blockage Period.
If notwithstanding the foregoing the Trustee or the Holder of any note
receives during the pendency of any Blockage Period any Securities Payment
before such Designated Senior Indebtedness is paid in full or payment thereof is
provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of such Designated Senior Indebtedness, then in such event such
Securities Payment will be required to be paid over or delivered forthwith to
the holders of such Designated Senior Indebtedness for application to the
payment thereof, to the extent necessary to pay such Designated Senior
Indebtedness in full. Notwithstanding the foregoing, Holders of the notes may
receive Subordinated Securities.
During any 360-day period, the aggregate of all Blockage Periods shall not
exceed 179 days and there shall be a period of at least 181 consecutive days in
each consecutive 360-day period when no Blockage Period is in effect. When no
Blockage Period is in effect, Insilco may make all required payments (including
any such payments not made during any Blockage Period) in respect of the notes
not prohibited by the terms of these subordination provisions. No Senior
Nonmonetary Default that existed or was continuing on the date of commencement
of any Blockage Period will be, or can be, made the basis for the commencement
of a subsequent Blockage Period, unless such default has been cured or waived
for a period of not less than 90 consecutive days.
By reason of the subordination of the notes described above, in the event
of insolvency, creditors of Insilco that are not holders of Senior Indebtedness
of Insilco or of the notes may recover less, ratably, than holders of such
Senior Indebtedness and may recover more, ratably, than the Holders of the
notes, and Insilco may be unable to fully satisfy its obligations in connection
with the notes.
The subordination provisions described above will cease to be applicable to
the notes upon any defeasance or covenant defeasance of the notes as described
below under "Defeasance."
NOTE GUARANTEES
Insilco's wholly-owned Domestic Restricted Subsidiaries jointly and
severally guarantee the notes. The indenture provides that if any future
wholly-owned Domestic Restricted Subsidiary guarantees any Indebtedness under
the Credit Facility, then such Domestic Restricted Subsidiary shall become a
guarantor under the indenture and execute a Supplemental Indenture and deliver
an Opinion of Counsel, in accordance with the terms of the indenture. The
guarantee of each guarantor is subordinated to the prior payment in full in cash
or cash equivalents of all existing and future Senior Indebtedness of such
guarantor (including such guarantor's guarantee of the Credit Facility) to the
same extent that the notes are subordinated to Senior Indebtedness of Insilco.
The obligations of each guarantor under its guarantee are limited so as not to
constitute a fraudulent conveyance under applicable law.
The indenture provides that, in the event of a sale or other disposition of
all or substantially all of the assets of any guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all or
substantially all of the capital stock of any guarantor held by Insilco or any
Restricted Subsidiary, such guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all or
substantially all of the capital stock of such guarantor) or the Person
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such guarantor) will be released and relieved
of any obligations under its guarantee.
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CERTAIN COVENANTS
LIMITATION ON CONSOLIDATED DEBT
Insilco may not, and may not permit any Restricted Subsidiary to, Incur any
Debt unless, immediately after giving pro forma effect to the Incurrence of such
Debt and the receipt and application of the proceeds thereof, the Consolidated
EBITDA Coverage Ratio of Insilco and its Restricted Subsidiaries for the four
full fiscal quarters next preceding the Incurrence of such Debt for which
financial information is available, calculated on a pro forma basis as if such
Debt had been Incurred and the proceeds thereof had been received and so applied
at the beginning of the four fiscal quarters, would be greater than (x) 1.9 to 1
for Debt Incurred on or prior to November 9, 1999 and (y) 2.0 to 1 for Debt
Incurred thereafter.
Notwithstanding the foregoing limitation, the following Debt may be
Incurred:
(1) Debt Incurred by Insilco or any Restricted Subsidiary under the Credit
Facility in an aggregate principal amount at any time outstanding not to exceed
$200 million, less (A) $20 million at each of the third, fourth and fifth
anniversaries of the Credit Facility's effective date, plus (B) increased
revolving credit commitments thereunder in an aggregate amount not exceeding in
the aggregate the amount of Debt that is permitted to be Incurred, but has not
been Incurred, under clauses (4) and (8) of this paragraph, and plus (C) the
amount of Debt Incurred under the Credit Facility on a term loan basis that is
Incurred pursuant to the immediately preceding paragraph, and, with respect to
all of the foregoing, any renewal, extension, refinancing or refunding (a
"refinancing") of such Debt in an amount that does not exceed the sum of the
amount of the revolving credit commitments and the amount of the outstanding
term Debt under the Credit Facility immediately prior to such renewal,
extension, refinancing or refunding; provided that no Debt Incurred on a term
loan basis may be refinanced on a revolving credit basis;
(2) the original issuance by Insilco of the Debt evidenced by the notes and
the issuance by Insilco's subsidiaries of the guarantees;
(3) Debt (other than Debt described in another clause of this paragraph) of
Insilco outstanding on the date of the indenture after giving effect to the
application of the proceeds of the notes;
(4) Debt in respect of Capital Lease Obligations, mortgage financings or
other purchase money obligations, in an aggregate principal amount at any time
outstanding not to exceed $15 million (including Debt refinanced pursuant to
clause (7) of this paragraph and without duplication at such time of any portion
of any revolving credit commitment then in effect that represents an increase
made under the immediately preceding clause (1)(B) in reliance on this clause
(4)), Incurred by Insilco or any Restricted Subsidiary for the purpose of
financing all or any part of the acquisition or improvement of any property used
in the business of Insilco or such Restricted Subsidiary;
(5) Debt owed by Insilco to any Wholly Owned Restricted subsidiary or Debt
owed by any Restricted Subsidiary to Insilco or a Wholly Owned Restricted
Subsidiary; provided, however, that
(a) any such Debt (not pledged as security for any Senior Indebtedness)
owing by Insilco to a Wholly Owned Restricted Subsidiary shall be Subordinated
Indebtedness evidenced by an intercompany promissory note and
(b) upon either
(1) the transfer or other disposition (excluding any pledge
thereof as security for any Senior Indebtedness) by such Wholly Owned Restricted
Subsidiary or Insilco of any Debt so permitted to a Person other than Insilco or
another Wholly Owned Restricted Subsidiary or
(2) the issuance (other than directors' qualifying shares), sale,
lease, transfer or other disposition (including by consolidation or merger) of
shares of Capital Stock (other than any pledge thereof as security for any
Senior Indebtedness) of such Wholly Owned Restricted Subsidiary to a Person
other than Insilco or another such
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Wholly Owned Restricted Subsidiary, the provisions of this clause (5) shall no
longer be applicable to such Debt and such Debt shall be deemed to have been
Incurred at the time of such issuance, sale, lease, transfer or other
disposition, as the case may be;
(6) Debt Incurred by Insilco or any Restricted Subsidiary consisting of
Permitted Interest Rate, Currency or Commodity Price Agreements;
(7) Debt which is exchanged for or the proceeds of which are used to
refinance or refund, or any extension or renewal of, outstanding Debt Incurred
pursuant to the preceding paragraph or clauses (2), (3) or (4) of this paragraph
(each of the foregoing, a "refinancing") in an aggregate principal amount not to
exceed the principal amount of the Debt so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of the Debt so refinanced or the amount of any premium reasonably
determined by Insilco as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase and plus the expenses of Insilco
or the Restricted Subsidiary, as the case may be, Incurred in connection with
such refinancing; provided, however, that
(a) Debt the proceeds of which are used to refinance the notes or Debt
that is pari passu with or subordinate in right of payment to the notes shall
only be permitted if
(1) in the case of any refinancing of the notes or Debt that is
pari passu with the notes, the refinancing Debt is Incurred by Insilco and made
pari passu with the notes or subordinated in right of payment to the notes, and
(2) in the case of any refinancing of Debt that is subordinate in
right of payment to the notes, the refinancing Debt is Incurred by Insilco and
constitutes Subordinated Indebtedness;
(b) the refinancing Debt by its terms, or by the terms of any agreement
or instrument pursuant to which such Debt is issued,
(1) does not provide for payments of principal of such Debt at the
stated maturity thereof or by way of a sinking fund applicable thereto or by way
of any mandatory redemption, defeasance, retirement or repurchase thereof
(including any redemption, defeasance, retirement or repurchase which is
contingent upon events or circumstances, but excluding any retirement required
by virtue of acceleration of such Debt upon any event of default thereunder), in
each case prior to the final stated maturity of the Debt being refinanced and
(2) except as provided for by the terms of the Debt being
refinanced, does not permit redemption or other retirement (including pursuant
to an offer to purchase) of such Debt at the option of the holder thereof prior
to the final stated maturity of the Debt being refinanced other than a
redemption or other retirement at the option of the holder of such Debt
(including pursuant to an offer to purchase) which is conditioned upon
provisions substantially similar to those described above under "Repurchase at
the Option of Holders--Asset Dispositions" and "--Change of Control";
(c) in the case of any refinancing of Debt Incurred by Insilco, the
refinancing Debt may be Incurred only by Insilco and, in the case of any
refinancing of Debt Incurred by a Restricted Subsidiary, the refinancing Debt
may be Incurred only by Insilco or such Restricted Subsidiary; provided,
further, that Debt Incurred pursuant to this clause (7) may not be Incurred more
than 90 days prior to the application of the proceeds to repay the Debt to be
refinanced; and
(8) Debt not otherwise permitted to be Incurred by Insilco or any
Restricted Subsidiary pursuant to clauses (1) through (7) above, which, together
with any other outstanding Debt Incurred pursuant to this clause (8), has an
aggregate principal amount at any time outstanding not in excess of $15 million
(without duplication at such time of any portion of any revolving credit
commitment then in effect that represents an increase made under the immediately
preceding clause (1)(B) in reliance on this clause (8)).
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LIMITATION ON DEBT AND PREFERRED STOCK OF SUBSIDIARIES
Insilco may not cause, and may not permit, any Restricted Subsidiary to
Incur any Debt or issue any Preferred Stock except:
(1) Debt Incurred by any Restricted Subsidiary that is expressly permitted
in the preceding paragraph;
(2) Debt or Preferred Stock outstanding on the date of the indenture after
giving effect to the application of the proceeds of the notes;
(3) Debt or Preferred Stock issued to and held by Insilco or a Wholly Owned
Restricted Subsidiary (provided that such Debt or Preferred Stock is at all
times held by Insilco or a Wholly Owned Restricted Subsidiary);
(4) Debt or Preferred Stock Incurred or issued by a Person prior to the
time
(A) such Person became a Restricted Subsidiary,
(B) such Person merges into or consolidates with a Restricted
Subsidiary or
(C) another Restricted Subsidiary merges into or consolidates with such
Person (in a transaction in which such Person becomes a Restricted Subsidiary),
which Debt or Preferred Stock was not Incurred or issued in anticipation of such
transaction and was outstanding prior to such transaction; or
(5) any guarantee incurred by any guarantor; provided, in the case of this
clause (5), that if the obligation guaranteed is
(x) subordinated to the notes, then such guarantee shall be
subordinated to the guarantee under the indenture to substantially the same
extent or
(y) pari passu with the notes, then such guarantee shall be pari passu
with the guarantee under the indenture to substantially the same extent.
LIMITATION ON LAYERED DEBT
Insilco may not Incur any Debt which by its terms is both
(1) subordinated in right of payment to any Senior Indebtedness and
(2) senior in right of payment to the notes.
LIMITATION ON ISSUANCE OF GUARANTEES OF SUBORDINATED INDEBTEDNESS
Insilco may not permit any Restricted Subsidiary, directly or indirectly,
to assume, guarantee or in any other manner become liable with respect to any
Debt of Insilco that by its terms is pari passu with or junior in right of
payment to the notes unless such Restricted Subsidiary has issued a guarantee
under the indenture.
LIMITATION ON RESTRICTED PAYMENTS
Insilco may not, and may not permit any Restricted Subsidiary to, directly
or indirectly,
(1) declare or pay any dividend, or make any distribution, of any kind or
character (whether in cash, property or securities) in respect of the Capital
Stock of Insilco or any Restricted Subsidiary or to the holders thereof in their
capacity as such (excluding
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(u) dividends or distributions to the extent payable in shares of the
Capital Stock of Insilco (other than Redeemable Interests) or in options,
warrants or other rights to acquire the Capital Stock of Insilco (other than
Redeemable Interests),
(v) dividends or distributions by a Restricted Subsidiary to Insilco or
another Restricted Subsidiary and
(w) the payment of pro rata dividends by a Restricted Subsidiary to
holders of both minority and majority interests in such Restricted Subsidiary),
(2) other than pursuant to the Special Redemption, purchase, redeem or
otherwise acquire or retire for value
(a) any Capital Stock of Insilco or any Capital Stock of or other
ownership interests in any Subsidiary or any Affiliate or Related Person of
Insilco or
(b) any options, warrants or rights to purchase or acquire shares of
Capital Stock of Insilco or any Capital Stock of or other ownership interests in
any Subsidiary or any Affiliate or Related Person of Insilco (excluding, in each
case of (a) and (b), the purchase, redemption, acquisition or retirement by any
Restricted Subsidiary of any of its Capital Stock, other ownership interests or
options, warrants or rights to purchase such Capital Stock or other ownership
interests
(x) owned by Insilco or any Restricted Subsidiary,
(y) owned by any other Person if effected on a pro rata basis with
respect to holders of both minority and majority interests in such Restricted
Subsidiary or
(z) owned by any officer, director or employee of Insilco, but
solely for the purpose of enabling such Person (or Insilco on his or her behalf)
to satisfy tax obligations in respect of his or her exercise of options,
warrants or rights to purchase Capital Stock of Insilco),
(3) make any Investment that is not a Permitted Investment or
(4) redeem, defease, repurchase, retire or otherwise acquire or retire for
value, prior to any scheduled maturity, repayment or sinking fund payment, Debt
of Insilco that is subordinate in right of payment to the notes (each of the
transactions described in clauses (1) through (4) being a "Restricted Payment"),
if:
(1) an Event of Default, or an event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing;
(2) Insilco would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the most recently ended four full fiscal quarter period for
which annual or quarterly financial statements are publicly available
immediately preceding the date of such Restricted Payment, not have been
permitted to Incur at least $1.00 of additional Debt pursuant to the
Consolidated EBITDA Coverage Ratio test described in the first paragraph under
"--Limitation on Consolidated Debt" above; or
(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments (excluding Restricted Payments permitted by clauses (2), (3)
and (4) of the next succeeding paragraph) from the date of the indenture (the
amount so expended, if other than in cash, determined in good faith by the Board
of Directors) exceeds the sum, without duplication, of:
(a) 50% of the aggregate Consolidated Net Income (or, in case
Consolidated Net Income shall be negative, less 100% of such deficit) for the
period (taken as one accounting period) from June 30, 1997 through the end of
Insilco's most recently ended fiscal quarter for which annual or quarterly
financial statements are publicly available at the time of such Restricted
Payment;
(b) 100% of the aggregate net cash proceeds from the issuance and
sale (other than to a Restricted Subsidiary) of Capital Stock (other than
Redeemable Interests) of Insilco and options, warrants or other rights to
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acquire Capital Stock (other than Redeemable Interests and Debt convertible into
Capital Stock) of Insilco and the principal amount of Debt and Redeemable
Interests of Insilco that has been converted into or exchanged for Capital Stock
(other than Redeemable Interests) of Insilco after June 30, 1997, provided that
any such net proceeds received by Insilco from an employee stock ownership plan
financed by loans from Insilco or a Subsidiary of Insilco shall be included only
to the extent such loans have been repaid with
(c) the amount by which the total consideration paid by Insilco in
the Tender Offer was less than $110 million; and
(d) $5 million.
The foregoing covenant will not be violated by reason of:
(1) the payment of any dividend within 60 days after declaration thereof if
at the declaration date such payment would have complied with the foregoing
covenant;
(2) any payment made by Insilco in connection with the consummation of the
Transactions;
(3) any refinancing or refunding of Debt permitted pursuant to clause (1)
or (7) of the second paragraph under "Limitation on Consolidated Debt" above;
and
(4) the purchase, redemption or other acquisition or retirement for value
of any Capital Stock of Insilco or any options, warrants or rights to purchase
or acquire shares of Capital Stock of Insilco in exchange for, or out of the net
cash proceeds of, the substantially concurrent issuance or sale (other than to a
Restricted Subsidiary) of Capital Stock (other than Redeemable Interests) of
Insilco; provided that the amount of any such net cash proceeds that are
utilized for any such purchase, redemption or other acquisition or retirement
for value shall be excluded from clause (3)(b) in the foregoing paragraph.
Upon the designation of any Restricted Subsidiary as an Unrestricted
Subsidiary, an amount equal to the greater of the book value and the fair market
value of all assets of such Restricted Subsidiary at the end of Insilco's most
recently ended fiscal quarter for which annual or quarterly financial statements
are publicly available prior to such designation will be deemed to be a
Restricted Payment at the time of such designation for purposes of calculating
the aggregate amount of Restricted Payments (including the Restricted Payment
resulting from such designation) permitted under provisions described in the
second preceding paragraph.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Insilco may not, and may not permit any Restricted Subsidiary 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
(1) to pay dividends (in cash or otherwise) or make any other distributions
in respect of its Capital Stock or other ownership interests or pay any Debt or
other obligation owed to Insilco or any other Restricted Subsidiary;
(2) to make loans or advances to Insilco or any other Restricted
Subsidiary; or
(3) to sell, lease or transfer any of its property or assets to Insilco or
any Restricted Subsidiary. Notwithstanding the foregoing, Insilco may, and may
permit any Restricted Subsidiary to, suffer to exist any such encumbrance or
restriction:
(a) pursuant to any agreement in effect on the date of the indenture
(including the Credit Facility, the indenture and the notes);
(b) pursuant to an agreement relating to any Debt Incurred by such
Restricted Subsidiary prior to the date on which such Restricted Subsidiary was
acquired by Insilco and outstanding on such date and not Incurred in
anticipation of becoming a Restricted Subsidiary;
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(c) pursuant to mortgages and other purchase money obligations in
connection with property acquired or improved in the ordinary course of business
or liens in connection therewith permitted to be Incurred under the indenture as
described in "-- Limitation on Liens" below that impose restrictions of the
nature described in clause (3) above on the property so acquired or improved;
(d) pursuant to an agreement effecting a renewal, refunding,
refinancing or extension of Debt Incurred pursuant to an agreement referred to
in clause (a), (b) or (c) above, provided, however, that the provisions
contained in such renewal, refunding, refinancing or extension agreement
relating to such encumbrance or restriction are no more restrictive in any
material respect than the provisions contained in the agreement the subject
thereof (as determined in good faith by the Board of Directors);
(e) pursuant to customary non-assignment provisions entered into in the
ordinary course of business consistent with past practices in leases, licenses
or contracts to the extent such provisions restrict the transfer, subletting or
other disposition of any such lease, license or contract;
(f) pursuant to an agreement which has been entered into for the sale
or other disposition of all or substantially all of the Capital Stock or assets
of such Restricted Subsidiary, provided that consummation of such transaction
would not result in an Event of Default or an event that, with the passing of
time or the giving of notice or both, would constitute an Event of Default, that
such restriction terminates if such transaction is closed or abandoned and that
the closing or abandonment of such transaction occurs within one year of the
date such agreement was entered into; or
(g) arising under any applicable law, rule, regulation or order.
LIMITATION ON LIENS
Insilco may not, and may not permit any Restricted Subsidiary to, Incur or
suffer to exist any Lien on or with respect to any property or assets now owned
or hereafter acquired to secure any Debt of Insilco that is expressly by its
terms subordinate or junior in right of payment to any other Debt of Insilco
(other than related to any secured deposit of funds for the repayment of the
10(1)/(4)% notes; provided that the excess of such secured deposit over the
principal amount of the 10(1)/(4)% notes to be repaid shall be deemed to be a
Restricted Payment) without making, or causing such Restricted Subsidiary to
make, effective provision for securing the notes.
(1) equally and ratably with such Debt as to such property or assets for so
long as such Debt will be so secured or
(2) in the event such Debt is subordinate in right of payment to the notes,
prior to such Debt as to such property or assets for so long as such Debt will
be secured.
LIMITATION ON OWNERSHIP OF CAPITAL STOCK OF SUBSIDIARIES
Insilco may not, and may not permit any Restricted Subsidiary to, issue,
transfer, convey, lease or otherwise dispose of any shares of Capital Stock
(other than directors' qualifying shares and shares pledged as security for any
Senior Indebtedness) of a Restricted Subsidiary or securities convertible or
exchangeable into, or options, warrants, rights or any other interest with
respect to, Capital Stock of a Restricted Subsidiary to any Person other than
Insilco or a Wholly Owned Restricted Subsidiary except in a transaction
consisting of a sale (including a public offering) of all or part of the Capital
Stock of such Restricted Subsidiary owned by Insilco and any Restricted
Subsidiary and that complies with the provisions described under "Repurchase at
the Option of Holders--Asset Dispositions" above to the extent such provisions
apply; provided that after any sale of less than all of the Capital Stock of any
Restricted Subsidiary, Insilco directly or indirectly maintains voting power to
elect a majority of the board of directors of such Restricted Subsidiary.
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TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
Insilco may not, and may not permit any Restricted Subsidiary to, after the
date of the indenture, enter into any transaction (or series of related
transactions) with an Affiliate or Related Person of Insilco (other than Insilco
or any Restricted Subsidiary), including any Investment, either directly or
indirectly, that involves total consideration or asset transfers in excess of
$1,000,000
(1) unless such transaction is on terms no less favorable to Insilco or
such Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person and is in the best interests of Insilco or such Restricted Subsidiary and
(2) except for the Transactions. For any transaction that involves in
excess of $1,000,000 but less than or equal to $5,000,000, the Chief Executive
Officer of Insilco shall determine that the transaction satisfies the above
criteria and shall evidence such a determination by a certificate filed with the
Trustee. For any transaction that involves in excess of $5,000,000, a majority
of the disinterested members of the Board of Directors shall determine that the
transaction satisfies the above criteria and shall evidence such a determination
by a Board Resolution filed with the Trustee. For any transaction that involves
in excess of $10,000,000, Insilco shall also obtain an opinion from a nationally
recognized expert with experience in appraising the terms and conditions of the
type of transaction (or series of related transactions) for which the opinion is
required stating that such transaction (or series of related transactions) is on
terms no less favorable to Insilco or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with an entity that
is not an Affiliate or Related Person of Insilco, which opinion shall be filed
with the Trustee; provided, however, that the foregoing restrictions will not
apply to:
(a) reasonable employment, compensation, bonus or benefit arrangements
entered into in the ordinary course of business (including the granting of stock
acquisition rights and other incentives other than Redeemable Interests); the
payment of reasonable fees, expense reimbursements and customary
indemnification, advances and other similar arrangements with respect to
officers and directors; and reasonable loans and advances to employees in the
ordinary course of business;
(b) required payments with respect to any Debt permitted by the
indenture as described in "Covenants--Limitation on Consolidated Debt" above;
(c) transactions permitted by the indenture as described in
"Covenants--Limitation on Restricted Payments" above;
(d) any payments or other transactions pursuant to any tax sharing
agreement with any Person with which Insilco or such Restricted Subsidiary is
required or permitted to file a consolidated tax return or with which Insilco or
such Restricted Subsidiary is or could be part of a consolidated group for tax
purposes; and
(e) any transaction with the Principals, their Related Parties or any
of their Affiliates to the extent that such transaction is or was approved by a
majority of the disinterested members of the Board of Directors in good faith.
PROVISION OF FINANCIAL INFORMATION
Whether or not Insilco is required to be subject to Section 13(a) or15(d)
of the Exchange Act, or any successor provision thereto, Insilco shall file with
the Commission the annual reports, quarterly reports and other documents that
Insilco would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if Insilco were so
required, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which Insilco would have been
required so to file such documents if Insilco were so required. Insilco shall
also in any event within 15 days after each Required Filing Date
(1) transmit by mail to all Holders, as their names and addresses appear in
the Security Register, without cost to such Holders, and
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(2) file with the Trustee,
copies of the annual reports, quarterly reports and other documents that Insilco
files with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto or would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if Insilco were so required. If filing such documents by Insilco with
the Commission is not permitted under the Exchange Act, Insilco will upon
written request promptly provide copies of such documents to any prospective
holder of the notes.
UNRESTRICTED SUBSIDIARIES
Insilco at any time may designate any Person that is a Subsidiary, or after
the date of the indenture becomes a Subsidiary, of Insilco as an "Unrestricted
Subsidiary," whereupon (and until such Person ceases to be an Unrestricted
Subsidiary) such Person and each other Person that is then or thereafter becomes
a Subsidiary of such Person will be deemed to be an Unrestricted Subsidiary. In
addition, Insilco may at any time terminate the status of any Unrestricted
Subsidiary as an Unrestricted Subsidiary, whereupon such Subsidiary and each
other Subsidiary of Insilco (if any) of which such Subsidiary is a Subsidiary
will be a Restricted Subsidiary.
Notwithstanding the foregoing, no change in the status of a Subsidiary of
Insilco from a Restricted Subsidiary to an Unrestricted Subsidiary or from an
Unrestricted Subsidiary to a Restricted Subsidiary will be effective, and no
Person may otherwise become a Restricted Subsidiary, if:
(1) the Consolidated EBITDA Coverage Ratio of Insilco and its Restricted
Subsidiaries for the four full fiscal quarters of Insilco next preceding the
effective date of such purported change or other event, calculated on a pro
forma basis as if such change or other event had been effective at the beginning
of such period, would not exceed
(a) on or prior to November 9, 1999, 1.9 to 1.0 and
(b) thereafter, 2.0 to 1.0;
(2) in the case of any change in status of a Restricted Subsidiary to an
Unrestricted Subsidiary, the Restricted Payment resulting from such change would
violate the provisions of the indenture described under clause (3) of the first
paragraph under "Covenants--Limitation on Restricted Payments" above; or
(3) such change or other event would otherwise result (after the giving of
notice or the lapse of time, or both) in an Event of Default.
In addition and notwithstanding the foregoing, no Restricted Subsidiary may
become an Unrestricted Subsidiary, and the status of any Unrestricted Subsidiary
as an Unrestricted Subsidiary will be deemed to have been immediately terminated
(whereupon such Subsidiary and each other Subsidiary of Insilco (if any) of
which such Subsidiary is a Subsidiary will be a Restricted Subsidiary) at any
time when:
(1) such Subsidiary
(A) has outstanding Debt that is Unpermitted Debt or
(B) owns or holds any Capital Stock of or other ownership interests in,
or a Lien on any property or other assets of, Insilco or any of its Restricted
Subsidiaries; or
(2) Insilco or any other Restricted Subsidiary
(A) provides credit support for, or a guarantee of, any Debt of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Debt) or
(B) is directly or indirectly liable for any Debt of such Subsidiary.
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Any termination of the status of an Unrestricted Subsidiary as an
Unrestricted Subsidiary pursuant to the preceding sentence will be deemed to
result in a breach of this covenant in any circumstance in which Insilco would
not be permitted to change the status of such Unrestricted Subsidiary to the
status of a Restricted Subsidiary pursuant to the provision of the indenture
described under the preceding paragraph; provided, however, that
(a) so long as the aggregate principal amount outstanding of Unpermitted
Debt does not exceed $5 million, no such breach will be deemed to have occurred
with respect to any Unpermitted Debt until 15 days after Insilco has become
aware of such Unpermitted Debt and such Unpermitted Debt remains outstanding or
Unpermitted Debt, and
(b) any change of status of an Unrestricted Subsidiary to a Restricted
Subsidiary as aforesaid followed within one year by a change of status of such
Restricted Subsidiary to an Unrestricted Subsidiary will not be deemed an Asset
Disposition or cause any Reinvested Amount invested therein to be deemed Net
Available Proceeds or the book value or fair market value of the assets thereof
to be deemed a Restricted Payment. "Unpermitted Debt" means any Debt of a
Subsidiary of Insilco if
(x) a default thereunder (or under any instrument or agreement pursuant
to or by which such Debt is issued, secured or evidenced), or any right that the
holders thereof may have to take enforcement action against such Subsidiary or
its property or other assets, would permit (whether or not after the giving of
notice or the lapse time or both) the holders of any Debt of Insilco or any
other Restricted Subsidiary to declare the same due and payable prior to the
date on which it otherwise would have become due and payable or otherwise to
take any enforcement action against Insilco or such other Restricted Subsidiary
or
(y) such Debt is secured by a Lien on any property or other assets of
Insilco and any of its other Restricted Subsidiaries.
Each Person that is or becomes a Subsidiary of Insilco will be deemed to be
a Restricted Subsidiary at all times when it is a Subsidiary of Insilco that is
not an Unrestricted Subsidiary. Each Person that is or becomes a Wholly Owned
Subsidiary of Insilco shall be deemed to be a Wholly Owned Restricted Subsidiary
at all times when it is a Wholly Owned Subsidiary of Insilco that is not an
Unrestricted Subsidiary.
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
Insilco
(1) may not, and may not permit any Restricted Subsidiary to, consolidate
with or merge into any Person, provided that this clause (1) will not prohibit
any such consolidation or merger by a Restricted Subsidiary if
(x) such Restricted Subsidiary ceases to be a Restricted Subsidiary in
such consolidation or merger or
(y) such consolidation or merger is with or into Insilco or another
Restricted Subsidiary;
(2) may not permit any Person other than a Restricted Subsidiary to
consolidate with or merge into Insilco or any Restricted Subsidiary, provided
that this clause (2) will not prohibit any such consolidation or merger with or
into a Restricted Subsidiary if such Restricted Subsidiary ceases to be a
Restricted Subsidiary in such consolidation or merger; and
(3) may not, directly or indirectly (in one transaction or a series of
related transactions), transfer, convey, sell, lease or otherwise dispose of all
or substantially all of the properties and assets of Insilco and its
Subsidiaries on a consolidated basis unless, in each case (1), (2) and (3)
above:
(1) immediately before and after giving effect to such transaction (or
series of related transactions) and treating any Debt Incurred by Insilco or a
Subsidiary of Insilco as a result thereof as having been Incurred by Insilco or
such Subsidiary at the time of such transaction (or series of related
transactions), no Event of Default, or event that with the passing of time or
the giving of notice, or both, will constitute an Event of Default, shall have
occurred and be continuing;
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(2) in a transaction (or series of related transactions) in which
Insilco does not survive or in which Insilco transfers, conveys, sells, leases
or otherwise disposes of all or substantially all of its properties and assets,
the successor entity is a corporation, partnership, limited liability company or
trust and is organized and validly existing under the laws of the United States
of America, any state thereof or the District of Columbia and expressly assumes,
by a Supplemental Indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all Insilco's obligations under the indenture;
(3) Insilco or its successor entity would, at the time of such
transaction (or series of related transactions) and after giving pro forma
effect thereto as if such transaction (or series of related transactions) had
occurred at the beginning of the most recently ended four full fiscal quarter
period for which annual or quarterly financial statements are publicly available
immediately preceding the date of such transaction (or series of related
transactions), have been permitted to Incur at least $1.00 of additional Debt
pursuant to the Consolidated EBITDA Coverage Ratio test described in the first
paragraph under "Covenants--Limitation on Consolidated Debt" above;
(4) if, as a result of any such transaction, property or assets of
Insilco would become subject to a Lien prohibited by the covenant described
above under "Covenants--Limitation on Liens," Insilco or its successor entity
will have secured the notes as required by such covenant; and
(5) Insilco has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel as specified in the indenture.
EVENTS OF DEFAULT
The following constitute Events of Default under the indenture:
(1) failure to pay any interest on any note when due, continuing for 30
days;
(2) failure to pay principal of (or premium, if any, on) any note when due;
(3) failure to perform or comply with the provisions described under
"Covenants--Mergers, Consolidations and Certain Sales of Assets" or the
provisions described under "Repurchase at the Option of Holders--Asset
Dispositions" and "--Change of Control";
(4) failure to perform any other covenant or warranty of Insilco in the
indenture or the notes, continuing for 60 days after written notice to Insilco
and the Trustee from Holders of at least 25% in principal amount of the
outstanding notes as provided in the indenture;
(5) a default or defaults under any bonds, debentures, notes or other
evidences of, or obligations constituting, Debt by Insilco or any Restricted
Subsidiary or under any mortgages, indentures, instruments or agreements under
which there may be issued or existing or by which there may be secured or
evidenced any Debt of Insilco or any Restricted Subsidiary, in each case with a
principal or similar amount then outstanding, individually or in the aggregate,
in excess of $15 million, whether such Debt now exists or is hereafter created,
which default or defaults constitute a failure to pay any portion of the
principal or similar amount of such Debt when due and payable after the
expiration of any applicable grace period with respect thereto or will have
resulted in such Debt becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable;
(6) the rendering of a final judgment or judgments (not subject to appeal)
against Insilco or any of its Restricted Subsidiaries in an aggregate amount in
excess of $15 million (in excess of applicable insurance coverage) which remains
unstayed, undischarged or unbonded for a period of 60 days thereafter; and
(7) certain events of bankruptcy, insolvency or reorganization affecting
Insilco or any Restricted Subsidiary of Insilco.
Subject to the provisions of the indenture relating to the duties of the
Trustee in case an Event of Default occurs and is continuing, the Trustee is
under no obligation to exercise any of its rights or powers under the indenture
at the
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request or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee and certain other conditions provided in the
indenture, the Holders of a majority in aggregate principal amount of the
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
If an Event of Default (other than an Event of Default of the type
described in clause (7) above) occurs and is continuing, either the Trustee or
the Holders of at least 25% in aggregate principal amount of the outstanding
notes may accelerate the maturity of all notes. If an Event of Default of the
type described in clause (7) above occurs, the principal amount of and any
accrued interest on the notes then outstanding will become immediately due and
payable; provided, however, that after such acceleration, but before a judgment
or decree based on acceleration, the Holders of a majority in aggregate
principal amount of outstanding notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal amount have been cured or waived as provided in the
indenture. For information as to waiver of defaults, see "Modification and
Waiver" below.
No Holder of any note has any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the Holders of at least 25% in aggregate principal amount of
the outstanding notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the outstanding notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
note for enforcement of payment of the principal of and premium, if any, or
interest on such note on or after the respective due dates expressed in such
note.
In the case any Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of Insilco with the intention of
avoiding payment of the premium that Insilco would have had to pay if Insilco
then had elected to redeem the notes pursuant to the provisions described above
under "Repurchase at the Option of Holders," an equivalent premium will become
and be immediately due and payable upon the acceleration of the notes.
Insilco is required to furnish to the Trustee annually a statement as to
the performance by Insilco of certain of its obligations under the indenture and
as to any default in such performance. Insilco will be required to deliver to
the Trustee, as soon as possible and in any event within 30 days after Insilco
becomes aware of the occurrence of an Event of Default or an event which, with
notice or the lapse of time or both, would constitute an Event of Default, an
Officers' Certificate setting forth the details of such Event of Default or
default, and the action which Insilco proposes to take with respect thereto.
DEFEASANCE
The indenture provides that, at the option of Insilco, (a) if applicable,
Insilco and the guarantors will be discharged from any and all obligations in
respect of the outstanding notes and guarantees or (b) if applicable, Insilco
may omit to comply with certain restrictive covenants, and that such omission
shall not be deemed to be an Event of Default under the indenture and the notes,
in either case (a) or (b) upon irrevocable deposit with the Trustee, in trust,
of money and/or U.S. Government Obligations that will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the outstanding notes. With respect to
clause (b), the obligations under the indenture other than with respect to such
covenants and the Events of Default other than the Events of Default relating to
such covenants above shall remain in full force and effect.
Such trust may only be established if, among other things
(1) with respect to clause (a), Insilco has received from, or there has
been published by, the Internal Revenue Service a ruling or there has been a
change in law, which in the Opinion of Counsel provides that Holders of the
notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and
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discharge and will be subject to Federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (b),
Insilco has delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount, in the same manner and at the same times
as would have been the case if such deposit and defeasance had not occurred;
(2) no Event of Default or event that with the passing of time of the
giving of notice, or both, shall constitute an Event of Default shall have
occurred or be continuing;
(3) Insilco has delivered to the Trustee an Opinion of Counsel to the
effect that such deposit shall not cause the Trustee or the trust so created to
be subject to the Investment Company Act of 1940; and
(4) certain other customary conditions precedent are satisfied.
In the event Insilco omits to comply with its remaining obligations under
the indenture and the notes after a defeasance of the indenture with respect to
the notes as described under clause (b) above and the notes are declared due and
payable because of the occurrence of any Event of Default, the amount of money
and U.S. Government Obligations on deposit with the Trustee may be insufficient
to pay amounts due on the notes at the time of the acceleration resulting from
such Event of Default. However, Insilco will remain liable in respect of such
payments.
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by Insilco and
the Trustee with the consent of the Holders of two-thirds in aggregate principal
amount of the outstanding notes; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding note
affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any note,
(2) reduce the principal amount of, (or the premium) or interest on, any
note,
(3) change the place or currency of payment of principal of (or premium),
or interest on, any note,
(4) impair the right to institute suit for the enforcement of any payment
on or with respect to any note,
(5) reduce the above-stated percentage of outstanding notes necessary to
modify or amend the indenture,
(6) reduce the percentage of aggregate principal amount of outstanding
notes necessary for waiver of compliance with certain provisions of the
indenture or for waiver of certain defaults,
(7) modify any provisions of the indenture relating to the modification and
amendment of the indenture or the waiver of past defaults or covenants, except
as otherwise specified,
(8) modify any of the provisions of the indenture relating to the
subordination of the notes in a manner adverse to the Holders or
(9) modify the provisions described under "Repurchase at the Option of
Holders--Asset Dispositions" and under "--Change of Control" in a manner adverse
to the Holders in any material respect.
The Holders of two-thirds in aggregate principal amount of the outstanding
notes, on behalf of all Holders of notes, may waive compliance by Insilco with
certain restrictive provisions of the indenture. The Holders of two-thirds in
aggregate principal amount of the outstanding notes, on behalf of all Holders of
notes, may waive any past default under the indenture, except a default in the
payment of principal, premium or interest.
No amendment, waiver or modification of any subordination provision adverse
to the holders of Senior Indebtedness will be effective against any holder of
Senior Indebtedness unless expressly consented to in writing by
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or on behalf of such holder (or by any specified percentage of holders of a
class of Senior Indebtedness required to consent thereto) pursuant to the terms
of the agreement or instrument creating, evidencing or governing such Senior
Indebtedness.
NOTICES
Notices to Holders will be given by mail to the addresses of such Holders
as they may appear in the Security Register.
GOVERNING LAW
The indenture, the notes and the guarantees are governed by, and construed
in accordance with, the laws of the State of New York, without regard to its
conflict of law principles.
THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
The indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee, should it become a creditor of
Insilco, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
The Trustee is permitted to engage in other transactions with Insilco or any
Affiliate, provided, however, that if it acquires any conflicting interest (as
defined in the indenture or in the TIA), it must eliminate such conflict or
resign. Star Bank, N.A., the Trustee under the indenture, is the trustee under
the Holdings Indenture, may become a lender under the Credit Facility and may
engage in other transactions with Insilco or its subsidiaries in connection with
which Star Bank, N.A. may be or become a creditor of Insilco.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons. Except as described below, the New 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 (the "Global Registered Note").
The Global Registered Note. Insilco expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Registered Note, DTC or its
custodian will credit on its internal system interests in the Global Registered
Notes to the accounts of persons who have accounts with DTC ("Participants") and
(b) ownership of the Global Registered 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 Registered 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 New
Notes, DTC or such nominee will be considered the sole owner or holder of the
New Notes represented by the Global Registered Note for all purposes under the
indenture. No beneficial owner of an interest in the Global Registered 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 New
Notes.
Payments of the principal of or premium and interest on the Global
Registered Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of Insilco, 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
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made on account of beneficial ownership interests in the Global Registered Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of the
principal of or premium and interest on the Global Registered Note, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Registered Note as shown on the records of DTC or its nominee. We also expect
that payments by Participants to owners of beneficial interests in the Global
Registered 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 exchange note for any reason,
including to sell New Notes to persons in states which require physical delivery
of the New Notes or to pledge such securities, such holder must transfer its
interest in the Global Registered Note in accordance with the normal procedures
of DTC and with the procedures set forth in the indenture.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of New Notes (including the presentation of New Notes for exchange as
described below) only at the direction of one or more Participants to whose
account at DTC interests in the Global Registered Note are credited and only in
respect of such portion of the aggregate principal amount of New 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 Registered Note for Certificated New Notes, which it will distribute
to its Participants.
DTC has advised us 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 Registered 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 Registered Notes will be
exchangeable or transferable, as the case may be, for certificate notes if
(1) DTC notifies us that it is unwilling or unable to continue as
depositary for such Global Registered 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
(2) an Event of Default has occurred and is continuing with respect to such
New Notes. Upon the occurrence of any of the events described in the preceding
sentence, Insilco will cause the appropriate certificated notes to be delivered.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
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"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the 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 Disposition" means, with respect to Insilco or any Restricted
Subsidiary, any transfer, conveyance, sale, lease or other disposition by
Insilco or such Restricted Subsidiary (including a consolidation or merger or
other sale of such Restricted Subsidiary with, into or to another Person in a
transaction in which such Restricted Subsidiary ceases to be a Restricted
Subsidiary) of
(1) shares of Capital Stock (other than directors' qualifying shares) or
other ownership interests of any Restricted Subsidiary,
(2) substantially all of the assets of Insilco or such Restricted
Subsidiary representing a division or line of business or
(3) other assets or rights of Insilco or any Restricted Subsidiary outside
of the ordinary course of business, but excluding, in each case of clauses (1),
(2) and (3),
(a) any disposition in the ordinary course of business of obsolete
equipment or other property used in the business of Insilco or any Restricted
Subsidiary that is no longer used or useful in such business,
(b) any disposition by Insilco or any Restricted Subsidiary to Insilco
or any Wholly Owned Restricted Subsidiary,
(c) required payments with respect to any Debt permitted by the
indenture as described in "Covenants--Limitation on Consolidated Debt" above,
(d) any disposition that is permitted under the indenture as described
in "Covenants--Limitation on Restricted Payments" above, and
(e) the disposition of all or substantially all of the assets of
Insilco permitted under the indenture as described in "Covenants--Mergers,
Consolidations and Certain Sales of Assets" above.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person that is required to
be classified and accounted for as a capital lease or a liability on the face of
balance sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty. The principal amount of such obligation shall be the capitalized amount
thereof that would appear on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Change of Control" will be deemed to have occurred in the event that,
after the date of the indenture, the following occurs:
(1) 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 Insilco 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;
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(2) the adoption of a plan for the liquidation or dissolution of Insilco;
(3) 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 Insilco; or
(4) the first day on which a majority of the members of the Board of
Directors of Insilco 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 Insilco 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 Insilco to repurchase
such notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Insilco and its Subsidiaries taken
as a whole to another Person or group may be uncertain.
"Claim" means any and all rights to payment under or in respect of any of
the notes or the indenture, all rights, remedies, demands, causes of action and
claims of every type and description at any time held or asserted by, or arising
in favor of, any holder of a note against Insilco or any of its Subsidiaries or
Affiliates or any of their assets, in each case on account of any breach of any
promise, obligation, agreement, indemnity, representation, warranty or covenant
in a note or the indenture or the performance or nonperformance or payment or
nonpayment thereof.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated EBITDA" of any Person means for any period, on a consolidated
basis for such Person and its Consolidated Subsidiaries, the sum of the amounts
for such period of
(1) Consolidated Net Income,
(2) Consolidated Interest Expense (but excluding any interest capitalized
in accordance with generally accepted accounting principles),
(3) Consolidated Income Tax Expense,
(4) depreciation and amortization expense,
(5) other non-cash charges and
(6) other non-operating expenses that have been deducted in the
determination of Consolidated Net Income; provided, however, that for each such
Consolidated Subsidiary the items (1) through (6) shall be included in such sum
only
(x) to the extent and in the same proportion that the Consolidated Net
Income of such Consolidated Subsidiary was included in calculating the
Consolidated Net Income of such Person and
(y) only to the extent that the amount specified in clause (x) is not
restricted from the payment of dividends or the making of distributions to such
Person during such period.
"Consolidated EBITDA Coverage Ratio" of any Person means for any period
the ratio of
(1) Consolidated EBITDA of such Person for such period to
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(2) the sum of
(A) Consolidated Interest Expense of such Person for such period, plus
(B) the annual interest expense (including the amortization of debt
discount but excluding the fees and expenses incurred in connection with the
amortization of the Old Credit Facility) with respect to any Debt Incurred or
proposed to be Incurred by such Person or its Consolidated Subsidiaries since
the beginning of such period to the extent not included within clause (2)(A),
minus
(C) Consolidated Interest Expense of such Person with respect to any
Debt that is no longer outstanding or that will no longer be outstanding as a
result of the transaction with respect to which the Consolidated EBITDA Coverage
Ratio is being calculated, to the extent included within clause (2)(A);
provided, however, that in making such computation, the Consolidated Interest
Expense of such Person attributable to interest on any Debt bearing a floating
interest rate shall be computed on a pro forma basis as if the rate in effect on
the date of computation had been the applicable rate for the entire period; and
provided, further, that, in the event such Person or any of its Consolidated
Subsidiaries has made acquisitions or dispositions of assets not in the ordinary
course of business (including by merger, consolidation or purchase of Capital
Stock) during or after such period, the computation of the Consolidation EBITDA
Coverage Ratio (and for the purpose of such computation, the calculation of
Consolidated Net Income, Consolidated Interest Expense, Consolidated Income Tax
Expense and Consolidated EBITDA) shall be made on a pro forma basis as if the
acquisitions or dispositions had taken place on the first day of such period.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles.
"Consolidated Interest Expense" of any Person means for any period, on a
consolidated basis for such Person and its Consolidated Subsidiaries, all of the
following determined in accordance with generally accepted accounting
principles:
(1) the consolidated interest expense included in a consolidated income
statement (net of interest income),
(2) the portion of any rental obligation in respect of any Capital Lease
Obligation allocable to interest expense in accordance with generally accepted
accounting principles;
(3) the amortization of Debt discounts (but excluding the amortization of
fees and expenses incurred in connection with the amortization of the Old Credit
Facility and the amount of financing costs and expenses that are capitalized and
amortized);
(4) to the extent not included in total interest expense, any net payments
made or received during such period under interest rate or currency swaps,
hedges or exchanges or similar derivative agreements, including any amortized
portion of such payments and
(5) any interest capitalized in accordance with generally accepted
accounting principles.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom
(1) the net income (or loss) of any Person acquired by such Person or a
Subsidiary of such Person in a pooling-of-interests transaction for any period
prior to the date of such transaction (subject to the final proviso of the
definition of Consolidated EBITDA Coverage Ratio when Consolidated Net Income is
being computed for purposes of calculating the Consolidated EBITDA Coverage
Ratio),
(2) the net income (but not net loss) of any Consolidated Subsidiary of
such Person to the extent restricted from the payment of dividends or the making
of distributions to such Person during such period,
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(3) the net income (or loss) of any Person that is not a Consolidated
Subsidiary of such Person except to the extent of the amount of dividends or
other distributions actually paid to such Person by such other Person during
such period,
(4) extraordinary gains and losses (and any unusual gains and losses
arising outside the ordinary course of business not included in extraordinary
gains and losses),
(5) net gains and losses in respect of dispositions of assets other than in
the ordinary course of business and
(6) the tax effect of any of the items described in clauses (1) through (5)
above.
"Consolidated Net Worth" of any Person at any date means the consolidated
stockholders' equity of such Person and its Consolidated Subsidiaries at such
date, as determined on a consolidated basis in accordance with generally
accepted accounting principles, less amounts attributable to Redeemable
Interests of such Person; provided, however, that, with respect to Insilco and
its Restricted Subsidiaries, adjustments following the date of the indenture to
the accounting books and records of Insilco and its Restricted Subsidiaries in
accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or
successor opinions thereto) or otherwise resulting from the acquisition of
control of Insilco by another Person shall not be given effect to.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles;
provided, however, that, for any particular period during which any Subsidiary
of Insilco was an Unrestricted Subsidiary, "Consolidated Subsidiaries" will
exclude such Subsidiary for such period (or portion thereof) during which it was
an Unrestricted Subsidiary.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Insilco who (a) was a member of such Board of
Directors on the date of the indenture 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.
"Credit Facility" means, collectively, the Credit Agreement dated as of
July 3, 1997 among Insilco, certain of its Subsidiaries, the financial
institutions from time to time party thereto as Lenders and Issuing Banks, The
First National Bank of Chicago and Goldman Sachs Credit Partners L.P., as
syndication agents, 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; and any other agreement pursuant to which any of
the Debt, commitments, Obligations, costs, expenses, fees, reimbursements and
other indemnities payable or owing under the 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.
"CVC" means 399 Venture Partners, Inc. and its Affiliates.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person,
(1) every obligation of such Person for money borrowed,
(2) every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments, including payment obligations Incurred in
connection with the acquisition of property, assets or businesses,
(3) every reimbursement obligation of such Person with respect to letters
of credit, bankers' acceptances or similar facilities issued for the account of
such Person,
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(4) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business),
(5) every Capital Lease Obligation of such Person,
(6) the maximum fixed redemption or repurchase price of Redeemable
Interests of such Person at the time of determination,
(7) the market value of any indebtedness, obligation or other liability of
such Person in respect of any interest rate or currency swap, hedge or exchange
or similar derivative agreement with any counterparty thereto, net of
indebtedness, obligations or other liabilities owed to such Person by such
counterparty and
(8) every obligation of the type referred to in clauses (1) through (7) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or for which such Person is responsible
or liable, directly or indirectly, jointly or severally, as obligor, guarantor
or otherwise, but excluding from Debt
(a) any indebtedness, obligations or other liabilities subject to the
Plan of Reorganization and
(b) any indebtedness or other liabilities incurred in connection with
obligations incurred to pay premiums for corporate owned life insurance policies
purchased by Insilco in an aggregate amount not to exceed the aggregate cash
value of such policies.
"Designated Senior Indebtedness" means
(1) all Obligations in respect of the Credit Facility and
(2) all Obligations in respect of any other Senior Indebtedness of Insilco
in each case in an outstanding principal amount not less than $10 million.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary that is
organized under the laws of the United States or any state, district or
territory thereof.
"Excepted Disposition" means a transfer, conveyance, sale, lease or other
disposition by Insilco or any Restricted Subsidiary of
(1) the Capital Stock or any or all of the assets of Taylor Publishing
Company,
(2) certain assets of a Restricted Subsidiary that may be required to be
divested, in an amount not to exceed $8 million, in connection with an action by
the Federal Trade Commission relating to the acquisition by Insilco of certain
assets of Helima-Helvetion International, Inc. or
(3) any other asset of Insilco or any Restricted Subsidiary for which
Insilco or any Restricted Subsidiary receives a mortgage or a purchase money
security interest the principal amount of which at any time outstanding does not
exceed $8 million or, taken together with all other mortgages and purchase money
security interests in respect of any other such assets, the aggregate principal
amount of which at any time outstanding does not exceed $15 million.
"guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt, or dividends or distributions on any equity
security, of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person,
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt,
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(2) to purchase property, securities or services for the purpose of
assuring the holder of such Debt of the payment of such Debt, or
(3) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt (and "guaranteed," "guaranteeing" and
"guarantor" shall have meanings correlative to the foregoing); provided,
however, that the guarantee by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of
business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted counting principles
or otherwise, of any such Debt or other obligation on the balance sheet of such
Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that a change in
generally accepted accounting principles that results in an obligation of such
Person that exists at such time becoming Debt shall not be deemed an Incurrence
of such Debt.
"Interest Rate, Currency or Commodity Price Agreement" of any Person means
any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates, currency exchange rates or commodity prices or indices
(excluding contracts for the purchase or sale of goods in the ordinary course of
business).
"Investment" by any Person in any other Person means
(1) any direct or indirect loan, advance or other extension of credit or
capital contribution to or for the account of such other Person (by means of any
transfer of cash or other property to any Person or any payment for property or
services for the account or use of any Person, or otherwise),
(2) any direct or indirect purchase or other acquisition of any Capital
Stock, bond, note, debenture or other debt or equity security or evidence of
Debt, or any other ownership interest, issued by such other Person, whether or
not such acquisition is from such or any other Person,
(3) any direct or indirect payment by such Person on a guarantee of any
obligation of or for the account of such other Person or
(4) any other investment of cash or other property by such Person in or for
the account of such other Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" means cash, readily marketable cash equivalents,
readily marketable fixed-income securities and equity securities traded on a
national securities exchange or NASDAQ (valued, in the case of securities, at
the market value thereof when received by Insilco or such Restricted Subsidiary)
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of an assumption by any transferee of Debt or other obligations
relating to the properties or assets transferred, or otherwise received in any
non-cash form) from an Asset Disposition by Insilco or any Restricted
Subsidiary, net of
(1) all legal, title and recording tax expenses, commissions and other fees
and expenses Incurred and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability as a consequence of such Asset
Disposition,
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(2) all payments made by Insilco or any Restricted Subsidiary on any Debt
which is secured by assets disposed of in such Asset Disposition in accordance
with the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition,
(3) amounts provided as a reserve by Insilco or any Restricted Subsidiary,
in accordance with generally accepted accounting principles, against liabilities
under any indemnification obligations to the buyer in such Asset Disposition
(except to the extent and at the time any such amounts are released from any
such reserve, such amounts shall constitute Net Available Proceeds) and
(4) all distributions and other payments made to minority interest holders
in Restricted Subsidiaries or joint ventures as a result of such Asset
Disposition.
"Obligations" mean any principal, interest, penalties, expenses, fees,
indemnities, reimbursements, damages and other liabilities payable under the
documentation governing any Debt.
"Old Credit Facility" means the revolving credit and term loan facility to
which Insilco and certain of its Subsidiaries were parties that was replaced by,
and repaid in full by advances under, the Credit Facility.
"Payment in full," together with any correlative term such as "paid in
full" and "pay in full," means with respect to any Obligation payment in full
thereof in cash.
"Permitted Interest Rate, Currency or Commodity Price Agreement" of any
Person means any Interest Rate, Currency or Commodity Price Agreement entered
into with one or more financial institutions that is designed to protect such
Person against fluctuations in interest rates or currency exchange rates with
respect to Debt Incurred or, in the case of currency or commodity protection
agreements, against currency exchange rate or commodity price fluctuations
relating to then existing financial obligations or then existing or sold
production and, in any case, not for purposes of speculation.
"Permitted Investment" means
(1) Investments in Insilco or any Person that is, or as a consequence of
such Investment becomes, a Restricted Subsidiary,
(2) securities either issued directly or fully guaranteed or insured by the
government of the United States of America or any agency or instrumentality
thereof having maturities of not more than one year,
(3) time deposits and certificates of deposit, demand deposits and banker's
acceptances having maturities of not more than one year from the date of
deposit, of any domestic commercial bank having capital and surplus in excess of
$500 million and having a peer group rating of B or better (or the equivalent
thereof) by Thompson BankWatch, Inc. or outstanding long-term debt rated BBB or
better (or the equivalent thereof) by Standard & Poor's Ratings Group or Baa2 or
better (or the equivalent thereof) by Moody's Investors Service, Inc.,
(4) demand deposits made in the ordinary course of business and consistent
with Insilco's customary cash management policy in any domestic office of any
commercial bank organized under the laws of the United States of America or any
state thereof,
(5) insured deposits issued by commercial banks of the type described in
clause (4) above,
(6) mutual funds whose investment guidelines restrict such funds'
investments primarily to those satisfying the provisions of any of clauses (2),
(3), (7) and (8) of this definition,
(7) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any bank meeting the qualifications specified in clause (3)
above,
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(8) commercial paper (other than commercial paper issued by an Affiliate or
Related Person) rated A-1 or the equivalent thereof by Standard & Poor's Ratings
Group or P-1 or the equivalent thereof by Moody's Investors Service, Inc., and
in each case maturing within 360 days,
(9) receivables owing to Insilco or a Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms,
(10) any Investment consisting of loans and advances to employees of
Insilco or any Restricted Subsidiary for travel, entertainment, relocation,
employee incentive plans or other expenses in the ordinary course of business,
(11) any Investment consisting of a Permitted Interest Rate, Currency or
Commodity Price Agreement,
(12) any Investment acquired by Insilco or any of its Restricted
Subsidiaries
(A) in exchange for any other Investment or accounts receivable held by
Insilco 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 Insilco 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,
(13) any Investment that constitutes part of the consideration from an
Asset Disposition made pursuant to, and in compliance with, the covenant
described above under "Repurchase at the Option of Holders--Asset Dispositions,"
(14) Investments the payment for which consists exclusively of Capital
Stock (exclusive of Redeemable Interests) of Insilco and
(15) Investments existing as of the date of the indenture of Insilco or any
Subsidiary of Insilco.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any Insolvency Proceeding (and interest that would accrue but
for the commencement of any Insolvency Proceeding) in accordance with and at the
contract rate (including, without limitation, any rate applicable upon default)
specified in the agreement or instrument creating, evidencing or governing any
Senior Indebtedness, whether or not, pursuant to applicable law or otherwise,
the claim for such interest is allowed as a claim in such Insolvency Proceeding.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Principals" means DLJMB and/or CVC.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"Redeemable Interest" of any Person means any equity security of or other
ownership interest in such Person that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) or
otherwise (including upon the occurrence of an event) matures or is required to
be redeemed (pursuant to any sinking fund obligation or otherwise) or is
convertible into or exchangeable for Debt or is redeemable at the option of the
holder thereof, in whole or in part, at any time prior to the final Stated
Maturity of the Notes.
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"Related Party" means, with respect to any Principal,
(1) any controlling stockholder or partner of such Principal on the date of
the indenture, or
(2) 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 (1) or (2).
"Related Person" of any Person means any other Person directly or
indirectly owning
(1) 5% or more of the outstanding Common Stock of such Person (or, in the
case of a Person that is not a corporation, 5% or more of the equity interest in
such Person) or
(2) 5% or more of the combined voting power of the Voting Stock of such
Person.
(1) at any date, a Subsidiary of Insilco that is not an
Unrestricted Subsidiary as of such date and
(2) for any period, a Subsidiary of Insilco that for any portion
of such period is not an Unrestricted Subsidiary, provided that such term shall
mean such Subsidiary only for such portion of such period.
"Senior Indebtedness" means with respect to any Person
(1) all Debt and other Obligations owing in respect of the Credit Facility
(including, without limitation, all loans, letters of credit and other
extensions of credit thereunder and all expenses, fees, reimbursements,
indemnities and other amounts owing pursuant thereto),
(2) all Debt referred to in clauses (1), (2), (3), (5), (7) or (8) of the
definition of Debt, whether Incurred on or prior to the date of the indenture or
thereafter Incurred, and
(3) amendments, modifications, renewals, extensions, refinancings and
refundings of any such Debt; provided, however, the following shall not
constitute Senior Indebtedness:
(a) any Debt owed to a Person when such Person is a Subsidiary of
Insilco,
(b) any Debt which by the terms of the instrument creating or
evidencing the same is pari passu with or subordinate in right of payment to the
notes,
(c) any Debt Incurred in violation of the indenture or
(d) any Debt which is subordinate in right of payment in any respect to
any other Debt of such Person. For purposes of this definition, "Debt" includes
any obligation to pay principal, premium (if any), interest, penalties,
reimbursement or indemnity amounts, fees and expenses (including Post-Petition
Interest). To the extent any payment of Senior Indebtedness (whether by or on
behalf of Insilco, as proceeds of security or enforcement or any right of setoff
or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to a trustee, receiver or other similar party under any
bankruptcy, insolvency, receivership or similar law, then if such payment is
recovered by, or paid over to, such trustee, receiver or other similar party,
the Senior Indebtedness or part thereof originally intended to be satisfied
shall be deemed to be reinstated and outstanding as if such payment had not
occurred. All Senior Indebtedness shall be and remain Senior Indebtedness for
all purposes of the indenture, whether or not subordinated in any Insolvency
Proceeding.
"Subordinated Indebtedness" means Debt of Insilco as to which the payment
of principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of the
notes to at least the following extent:
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(1) no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be permitted for so long as any
default in the payment of principal (or premium, if any) or interest on the
notes exists;
(2) in the event that any other default exists with respect to the notes
that with the passing of time or the giving of notice, or both, would constitute
an event of default, upon notice by Holders of 25% or more in principal amount
of the notes to the Trustee, the Trustee shall have the right to give notice to
Insilco and the holders of such Debt (or trustees or agents therefor) of a
payment blockage, and thereafter no payments of principal of (or premium, if
any) or interest on or otherwise due in respect of such Debt may be made for a
period of 179 days from the date of such notice; and
(3) such Debt may not
(x) provide for payments of principal of such Debt at the stated
maturity thereof or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by Insilco
(including any redemption, retirement or repurchase which is contingent upon
events or circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the notes or
(y) permit redemption or other retirement (including pursuant to an
offer to purchase made by Insilco) of such other Debt at the option of the
holder thereof prior to the final Stated Maturity of the notes, other than a
redemption or other retirement at the option of the holder of such Debt
(including pursuant to an offer to purchase made by Insilco) which is
conditioned upon a change of control of Insilco pursuant to provisions
substantially similar to those described under "Change of Control" (and which
shall provide that such Debt will not be repurchased pursuant to such provisions
prior to Insilco's repurchase of the notes required to be repurchased by Insilco
pursuant to the provisions described under "Change of Control").
"Subordinated Securities" mean securities distributed to the holders of the
notes
(1) in an Insolvency Proceeding, pursuant to a plan of reorganization
consented to by each class of Senior Indebtedness or
(2) outside an Insolvency Proceeding, but only if, in each case, all of the
terms and conditions of such securities (including, without limitation, term,
tenor, interest, amortization, subordination, covenants and defaults) are in all
material respects at least as favorable (and provide the same relative benefits)
to the holders of Senior Indebtedness and, in the case of an Insolvency
Proceeding, to the holders of any security distributed in such Insolvency
Proceeding on account of Senior Indebtedness as the terms and conditions of the
notes and the indenture are and provide to the holders of Senior Indebtedness.
"Subsidiary" of any Person means
(1) a corporation more than 50% of the combined voting power of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or
(2) any other Person (other than a corporation) in which such Person or one
or more other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Tender Offer" means Insilco's offer to purchase, commenced July 11, 1997
up to 2,857,142 Shares at a price of $38.50 per share.
"Transactions" means
(1) the Tender Offer,
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(2) the repurchase by Insilco of Shares from Robert L. Smialek at $38.50
per Share pursuant to a negotiated share purchase agreement entered into in July
1997,
(3) the repurchase by Insilco of Shares from Water Street at $38.50 per
Share pursuant to a negotiated share purchase agreement entered into in July
1997,
(4) the entering into by Insilco of the Credit Facility and
(5) the offering of the 10(1)/(4)% notes.
"Unrestricted Subsidiary" means
(1) at any date, a Subsidiary of Insilco that is an Unrestricted Subsidiary
in accordance with the provisions of the indenture described under the caption
"Certain Covenants--Unrestricted Subsidiaries" and
(2) for any period, a Subsidiary of Insilco that for any portion of such
period is an Unrestricted Subsidiary in accordance with the provisions of the
indenture as described under the caption "Certain Covenants--Unrestricted
Subsidiaries," provided that such term shall mean such Subsidiary only for such
portion of such period.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all of
the outstanding Capital Stock or other ownership interests of which (other than
directors' qualifying shares) shall at the time be owned by Insilco or by one or
more Wholly Owned Restricted Subsidiaries or by Insilco and one or more Wholly
Owned Restricted Subsidiaries.
PLAN OF DISTRIBUTION
This prospectus is to be used by DLJSC in connection with offers and sales
of the New 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.
DLJMB, an affiliate of DLJSC, and certain of its affiliates beneficially
own approximately 69.0% 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 initial sale of the Old Notes and received
an underwriting discount of approximately $3.6 million in connection therewith.
In addition, DLJSC received a merger advisory fee of $3.5 million in cash from
Holdings after the consummation of the Merger.
DLJSC has informed Insilco that it does not intend to confirm sales of the
New Notes to any accounts over which it exercises discretionary authority
without the prior specific written approval of such transactions by the
customer.
Insilco has been advised by DLJSC that, subject to applicable laws and
regulations, DLJSC currently intends to make a market in the New Notes following
completion of the Exchange Offer. However, DLJSC is not obligated to do so and
any such market-making may be interrupted or discontinued at any time without
notice. In
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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 will be passed upon for Insilco by
Davis Polk & Wardwell, New York, New York and the validity of the guarantees
will be passed upon for the guarantors by David A. Kauer, President and Chief
Executive Officer of Insilco.
EXPERTS
The financial statements of Insilco 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.
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