UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December
31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
_________ to ____________
Commission file number 0-16211
DENTSPLY International Inc.
(Exact name of registrant as specified in its charter)
Delaware 39-1434669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
570 West College Avenue, York, Pennsylvania 17405-0872
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (717) 845-
7511
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
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pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 1, 1996, the aggregate market value of voting common stock held
by non-affiliates of the registrant, based upon the last reported sale price for
the registrant's Common Stock on the Nasdaq National Market on such date, as
reported in The Wall Street Journal, was $1,003,713,275 (calculated by excluding
shares owned beneficially by directors and executive officers as a group from
total outstanding shares solely for the purpose of this response).
The number of shares of the registrant's common stock outstanding as of the
close of business on March 1, 1996 was 26,953,269.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of DENTSPLY
International Inc. to be used in connection with the 1996 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part III
of this Annual Report on Form 10-K to the extent provided herein. Except as
specifically incorporated by reference herein, the Proxy Statement is not to be
deemed filed as part of this Annual Report on Form 10-K.
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PART I
Item 1. Business
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General
DENTSPLY International Inc. ("DENTSPLY" or the "Company"), a Delaware
corporation, designs, develops, manufactures and markets products in two
principal categories: dental consumable and laboratory products, and dental
equipment. Dental consumable and laboratory products include artificial teeth,
endodontic instruments and materials, impression materials, restorative
materials, crown and bridge materials, prophylaxis paste, dental sealants and
dental implants. Dental equipment includes dental x-ray systems, handpieces,
cutting instruments, and ultrasonic scalers and polishers.
The Company is the surviving corporation of the merger (the "Merger") of a
company formerly known as "Dentsply International Inc." ("Old Dentsply") with
and into the Company effective June 11, 1993. In connection with the Merger, the
Company changed its name to "DENTSPLY International Inc." Prior to the Merger,
the Company's name was GENDEX Corporation ("Gendex").
On October 13, 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business. The divestiture was
part of the Company's strategy to focus its resources on the expansion of its
core dental business. The medical operations include the Eureka X-Ray Tube
("Eureka"), GENDEX Medical and CMW business units which manufacture medical
x-ray tubes, medical x-ray systems and orthopedic bone cement, respectively. The
net assets of CMW were sold on November 22, 1994, and substantially all of the
net assets of Eureka were sold in two transactions on November 23 and December
16, 1994. Substantially all of the net assets of GENDEX Medical were sold on
March 6, 1996.
On January 10, 1996, the Company completed the acquisition of the dental
manufacturing and distribution operations of Tulsa Dental Products LLC
("Tulsa"). Tulsa manufactures and distributes endodontic instruments and
materials. The operations of Tulsa are included in the discussion of the
Company, its business, properties and employees.
Market Overview
Professional Dental Products
General. The worldwide professional dental industry
encompasses the diagnosis, treatment and prevention of disease
and ailments of the teeth, gums and supporting bone. DENTSPLY
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believes that demand in a given geographic market for dental procedures and
products varies according to the stage of social, economic and technical
development that the market has attained. Geographic markets for DENTSPLY's
dental products can be categorized into the three stages of development
described below.
The United States, Canada, Western Europe, the United Kingdom and Japan are
highly developed markets that demand the most advanced dental procedures and
products and have the highest level of expenditure on dental care. In these
markets, the focus of dental care is increasingly upon preventive care and
specialized dentistry. In addition to basic procedures such as the excavation
and filling of cavities and tooth extraction and denture replacement, dental
professionals perform an increasing volume of preventive and cosmetic
procedures, including periodontia (the treatment of the structure supporting the
teeth), endodontia (the revitalization of teeth that would otherwise require
extraction), orthodontia (the movement and realignment of teeth for improved
function and aesthetics), gnathology (the treatment of temporomandibular joint
(TMJ) dysfunction and occlusive modification), implantology (the insertion of
prosthetic devices to provide support for partial or full dentures) and cosmetic
dentistry. These markets require varied and complex dental products, such as
advanced cleaning and scaling equipment and related solutions, light-cured
bonding and restorative compounds, precision-molded and customized crowns,
bridges, implants and other prosthodontic devices, materials and instruments
used in endodontic procedures, and aesthetically accurate stains and tints.
These markets also utilize sophisticated diagnostic and imaging equipment, and
demand high levels of attention to protection against infection and patient
cross-contamination.
In certain countries in Central America, South America and the Pacific Rim,
dental care is often limited to the excavation and filling of cavities and other
restorative techniques, reflecting more modest per capita expenditures for
dental care. These markets demand diverse products such as high and low speed
handpieces, restorative compounds, finishing devices and custom restorative
devices.
In the People's Republic of China, India, Eastern Europe, the Commonwealth
of Independent States, and other developing countries, dental ailments are
treated primarily through tooth extraction and denture replacement. These
procedures require basic surgical instruments, artificial teeth for dentures and
bridgework, and anchoring devices such as posts.
The Company offers products and equipment for use in markets at each of
these stages of development. The Company believes that as each of these markets
develops, demand for more technically advanced products will increase. The
Company also believes that
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its recognized brand names, high quality and innovative products, technical
support services and strong international distribution capabilities position it
well to take advantage of continued growth in all of the markets that it serves.
United States. The market for professional dental products in the United
States has experienced significant growth in recent years. Statistics published
by the U.S. Department of Health and Human Services indicate that annual United
States spending on dental products and services increased from $25.3 billion to
$40.0 billion from 1987 to 1994, or 6.8% per annum.
The Company believes that the United States market will continue to be
influenced by favorable demographic trends, increasing coverage of dental care
by private insurance and government programs, and an intensifying focus on
preventive dental care. The percentage of the United States population over age
65 is expected to nearly double by the year 2030, to 22%, and this segment of
the population commands a relatively high level of discretionary income. The
Company believes that as the number of older, more affluent Americans increases,
the demand for restorative and cosmetic dental procedures will increase as these
individuals seek to retain their natural teeth and improve their appearance.
The Company also believes that the United States market will increasingly
demand products which reduce the risks of infection and patient
cross-contamination. This growing demand reflects increasing government
regulation, professional practice guidelines and public attention focused on
preventing the transmission in the dental office of infectious diseases such as
hepatitis-B and the virus that causes acquired immune deficiency syndrome. The
Company offers products to address the growing market for infection control
products, such as sterilizable dental handpieces and cutting instruments,
single-use prophylaxis pastes, disposable prophy angles and infection control
barriers, and intends to continue to develop and acquire products to address
this market.
DENTSPLY expects insurance coverage of dental care to play an important
role in the United States market. According to the National Center for Health
Statistics, approximately 45% of the United States population is covered by some
form of dental insurance, up from 35% in 1980. While insurance coverage has been
increasing, the Health Care Finance Review indicates that, in 1993,
approximately 50% of dental expenditures were paid for directly by the consumer.
Products
DENTSPLY's two principal dental product lines are consumable
and laboratory products, and equipment. These products are
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produced by the Company in the United States and internationally and are
distributed throughout the world under some of the most well-established brand
names and tradenames in the industry, including ASH(Registered Trademark),
CAULK(Registered Trademark), CAVITRON(Registered Trademark),
CERAMCO(Registered Trademark), DENTSPLY(Registered Trademark),
DETREY(Trademark), GENDEX(Registered Trademark), MIDWEST(Registered Trademark),
R&R(Registered Trademark), RINN(Registered Trademark),
TRUBYTE(Registered Trademark), MAILLEFER(Trademark),
PROFILE(Registered Trademark) and THERMAFIL(Registered Trademark).
Sales of the Company's professional dental products from continuing operations
accounted for approximately 95%, 96% and 97% of DENTSPLY's consolidated sales
for 1995, 1994 and 1993, respectively.
Consumable and Laboratory Products. Consumable and laboratory products
consist of dental sundries used in dental offices in the treatment of patients
and in dental laboratories in the preparation of dental appliances, such as
crowns and bridges. The Company manufactures approximately 1,200 different
consumable and laboratory products marketed under more than 70 brand names.
Consumable and laboratory products include:
Resin-Based and Porcelain Artificial Teeth: Artificial teeth replace
natural teeth lost through deterioration, disease or injury. The Company's
artificial teeth are marketed under the TRUBYTE(Registered Trademark) and
PORTRAIT(Trademark) IPN(Registered Trademark) trade names, among others,
and are produced by the Company in York, Pennsylvania, Brazil and Germany
in some 15,000 combinations of shapes, sizes and shades.
Impression Materials: Impression materials are used to make molds of
teeth for fitting crowns, bridges and dentures. DENTSPLY's
JELTRATE(Registered Trademark), BLUEPRINT(Trademark),
REPROSIL(Registered Trademark) and AQUASIL(Trademark) impression materials
are designed to increase the rate of successful impressions without retakes
and to set quickly to minimize patient discomfort.
Restorative Materials: Restorative materials are used in sealing,
lining and filling excavated tooth cavities and repairing broken or damaged
teeth, and include amalgams, bonding agents, light-cured composites and
glass ionomer filling materials for more aesthetic restorations. The
Company's DYRACT(Trademark) product is a revolutionary, patented, single
component restorative material featuring simplicity in delivery combined
with excellence in restorative results. The Company's PRISMA(Trademark)
AP.H(Registered Trademark), PRISMA(Trademark) TP.H(Trademark) and
TP.H(Trademark) SPECTRUM(Trademark) universal composite materials
permit restorations to be performed on either the anterior or posterior
teeth using the same material, and are rapidly replacing older,
single-purpose composite materials. The Company's recently introduced
ADVANCE(Trademark) Hybrid Ionomer Cement is a resin modified,
fluoride-releasing glass ionomer cement with superior adhesion to metal for
crown and bridge work while helping to prevent secondary caries and
extending the life of a restoration. PRIME & BOND(Trademark) 2.0 is a
unique, one-bottle dental adhesive system which combines the functions of a
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primer and an adhesive in a simple-to-use single component formula. PRIME &
BOND(Trademark) 2.0's proprietary resin formulation has significantly
improved the mechanical properties of the cured primer/adhesive, thus
greatly enhancing the long-term marginal integrity of stress-bearing
restorations at both dentin and enamel margins. DENTSPLY also markets the
DISPERSALLOY(Registered Trademark), UNISON(Registered Trademark) and
MEGALLOY(Trademark) lines of restorative amalgams;
DELTON(Registered Trademark) and DENTON(Registered Trademark) PLUS
(with fluoride release) brand dental sealants; and
ADAPTIC(Registered Trademark) self-cured composite.
Crown and Bridge Porcelains and Ceramics: These porcelain and ceramic
products are used by dental laboratories in making crowns, bridges, inlays
and onlays for restorative dental procedures, where aesthetics are
particularly important, and to provide functional biting and chewing
surfaces that appear and feel natural. The Company produces specialty crown
and bridge porcelain materials and fully automatic programmable porcelain
furnaces, as well as castable ceramic materials, used by dental
laboratories. Product offerings include the CERAMCO(Registered Trademark)
line, and in Europe, the DETREY(Trademark) CARAT(Trademark) line of
specialty crown and bridge porcelain products for use as fixed prosthetics.
Endodontic Instruments and Materials: These products are used in root
canal treatment of severely damaged or decayed teeth. With the recent
acquisition of Maillefer Instruments S.A. ("Maillefer") and Tulsa, the
Company has an extensive endodontic product offering including broaches,
files, and other endodontic materials and instruments. The
SUREFLEX(Trademark) NICKEL TITANIUM FILE features superior flexibility
and shape memory which allows the instrument to follow the path of the root
canal. The Company's PROFILE(Registered Trademark)
SERIES 29(Registered Trademark) line of endodontic files offer a standard
29 percent increase between the tip diameters of each size instrument for a
smooth, progressive enlargement from one file to the next.
PROFILE(Registered Trademark) .04 TAPERS(Registered Trademark) feature
non-standard tapers constructed from super-flexible nickel titanium for use
in a controlled, slow-speed, high-torque rotary dental handpiece. The
THERMAFIL(Registered Trademark) product line offers a method of root
canal obturation (filling) that provides a three-dimensional seal allowing
ease of placement and precise apical control.
Dental Implant Systems: Under the CORE-VENT(Trademark) brand name,
DENTSPLY offers a line of endosseous root form dental implants and
abutments which are designed to accommodate each of the four anatomical
zones found in human jaws. These products include
Screw-Vent(Registered Trademark) (threaded screw),
Core-Vent(Registered Trademark) (hollow basket),
Bio-Vent(Registered Trademark) (press-fit cylinders) and
Micro-Vent(Registered Trademark) (press-fit threaded), that are retained in
the bone of the oral cavity and provide fixation points for dental
restorations. Under an agreement with Core-Vent(Registered Trademark)
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Corporation, DENTSPLY holds exclusive worldwide marketing and distribution
rights to these dental implants for up to 10 years.
Protective Supplies: These products are designed to ameliorate
possible sources of patient cross-contamination of infectious disease, and
include RITE-ANGLE(Registered Trademark) and NUPRO(Registered Trademark)
Disposable Prophy Angles (disposable mechanical devices used by dentists
and hygienists to clean and polish teeth), hand cleansers, disposable
barriers, enzymatic cleansers and needle stick prevention devices.
Other Consumable and Laboratory Products: Other products produced by
the Company for use in dental offices and laboratories include
NUPRO(Registered Trademark) prophylaxis paste that is used in cleaning and
polishing teeth and the VERTEX(Registered Trademark) disposable articulator
used in dental laboratories to simulate the dynamic movement of teeth
against one another.
Dental Equipment. DENTSPLY's dental equipment product lines include high
and low speed handpieces, intraoral lighting systems, dental cutting
instruments, ultrasonic scalers and polishers, and x-ray systems and
related support equipment and accessories.
Handpieces: Under the MIDWEST(Trademark) brand name, DENTSPLY
manufactures and distributes a line of high-speed and low-speed air-driven
handpieces and intraoral lighting systems and distributes carbide and
specialty burs. High-speed handpieces are the primary instruments utilized
by dentists for restorative, prosthodontic and aesthetic procedures.
Low-speed handpieces may also be used in these procedures and in procedures
which require more control and higher torque, such as removal of soft
decay, tooth cleaning and polishing, and chairside adjustment of dentures.
Handpiece intraoral lighting systems supply light to the fiber optic
bundles in the handpieces through tubes that also provide air and water to
the handpiece.
Dental Cutting Instruments: The Company distributes MIDWEST(Trademark)
carbide and specialty burs. Regular carbide burs are the most commonly used
dental cutting instruments in the North American market. Carbide burs
mounted in handpieces are used as milling tools. While these burs are
primarily used for cavity excavation, the variety of available shapes
allows for alternative uses such as limited trimming and finishing
techniques. Specialty burs are designed to cut and remove metal alloy
dental restorations, to produce smooth surfaces on composite materials,
amalgams, gold, enamel and dentin, and for gross reduction of tooth anatomy
in preparation for fitting crowns and normal cavity excavations.
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Ultrasonic Scalers and Polishers: DENTSPLY manufactures and
distributes the CAVITRON(Registered Trademark) ultrasonic scaler (which
uses ultrasonic waves to remove hardened tooth calculus which results from
the interaction of plaque, saliva and food particles), the
PROPHY-JET(Registered Trademark) 30 Air Polishing Prophylaxis Unit (which
cleans, polishes and buffs the tooth surface after scaling is completed)
and the CAVITRON(Trademark) JET (which combines both ultrasonic scaling and
air polishing prophylaxis in one multi-function unit). The Company also
produces the CAVITRON(Trademark) MED (which delivers medicaments directly
to pockets below the gum surface in periodontic treatments). DENTSPLY
manufactures a variety of inserts for use with its ultrasonic prophylaxis
units. The FOCUSED SPRAY(Trademark) INSERT brings water directly to the
instrument tip and focuses water where it is most needed. The
SLIMLINE(Trademark) Ultrasonic Insert is 40 percent thinner than standard
ultrasonic inserts and allows subgingival ultrasonic instrumentation at
depths up to 7 mm.
Dental X-Ray Systems: The Company offers a full line of dental x-ray
equipment for intraoral, panoramic and cephalometric procedures, all
marketed under the GENDEX(Registered Trademark) brand name. Intraoral films
provide a view of a particular area of tooth and jaw structure. Panoramic
x-rays utilize a moving x-ray tube and provide an image of the entire oral
cavity, an image that is particularly valuable to oral surgeons and
orthodontists. Cephalometric systems permit precise, repeatable
positioning of the patient's skull so that images taken at different times
can be compared.
The Company markets VISUALIX(Trademark), a real time, digital video
x-ray system. Through its solid state, intraoral x-ray sensor and
associated computer, the VISUALIX(Trademark) system allows the dentist to
produce radiographic images without using film. X-rays generated by a
standard system strike the sensor. The image is then displayed on a
computer screen, where it can be enlarged, enhanced and manipulated. The
image may also be stored for future retrieval. The extremely sensitive
sensor provides excellent image quality with a significantly lower x-ray
dosage compared to film.
X-Ray Support Equipment: Under the RINN(Trademark) brand name,
DENTSPLY manufactures and distributes x-ray film mounts, film holders and
related equipment and accessories. X-ray film mounts are used as
organizing, storage and retrieval holders for dental x-ray films. Film
holders are film positioning devices used in taking dental x-ray films
which ensure the alignment of the x-ray beam to the intraoral film.
Equipment and accessories include film viewers, film duplicators,
chair-side darkrooms, patient aprons, developing chemicals and x-ray
collimating devices.
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The GXP(Trademark) Processor, which develops intraoral, panoramic, and
cephalometric x-ray film, features a closed chemical recirculation system
so that potentially environmentally hazardous solutions may be disposed of
properly. Film enters and exits in the front of the processor, thereby
allowing placement of the unit flush against a wall to conserve space.
DENTSPLY also supplies specialty chemical binders, refractory particles,
investment mold materials and related products to the precision investment
casting industry, which produces metal parts of complex geometry and "near net"
shapes requiring little or no subsequent machining or finishing.
Marketing, Sales and Distribution
The market for DENTSPLY's dental products is primarily comprised of
dentists, dental hygienists, dental assistants, dental laboratories and dental
schools. DENTSPLY focuses its marketing efforts on both the dental professionals
who are the end users of its products and the dealers who distribute certain of
those products. DENTSPLY employs highly trained, product- specific sales and
technical staffs to provide comprehensive marketing and service tailored to the
particular sales and technical support requirements of its customers. DENTSPLY's
marketing efforts seek to capitalize on the strength of the Company's brand
names and international infrastructure to expand sales of new and existing
products throughout the world, including emerging dental markets in the Pacific
Rim, Central and South America and Eastern Europe.
DENTSPLY's product-specific sales force is divided into domestic and
foreign field selling organizations, each of which is responsible for
maintaining contact with both dealers and dental professionals. The dental sales
force includes approximately 300 domestic representatives, approximately 325
international representatives and approximately 30 telemarketers who support the
domestic representatives. This sales force is further divided into product-based
teams. Each specialized sales force tailors its sales strategy to the particular
sales and technical support requirements of its customers. Sales personnel
attend over 100 dental trade shows each year where the Company's products are
exhibited to dental professionals and dealers. Sales personnel also routinely
participate with dealers to disseminate product information and conduct product
demonstrations, seminars, study groups and lectures for dental professionals. In
addition, DENTSPLY invests significant amounts in advertising in national and
international dental publications.
DENTSPLY distributes its dental products primarily through approximately
350 domestic and over 800 foreign dealers and importers. While the overwhelming
majority of DENTSPLY's
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products are distributed through dental dealers, certain highly technical
products such as the Company's CERAMCO(Registered Trademark) line of crown and
bridge procelain products and dental implants are sold directly to the dental
laboratory or dentist.
DENTSPLY also maintains seven educational facilities. The Company's
facilities in York, Pennsylvania; Burlington, New Jersey; Dreieich, Germany; and
Weybridge, England are used for training, product demonstrations and seminars
and to promote interest in and understanding of the use of DENTSPLY's dental
laboratory products. The DENTSPLY Educational Center in York provides
personalized training in both fixed and removable prosthodontic specialties.
Additional teaching facilities are maintained in Milford, Delaware; Konstanz,
Germany; and Hong Kong for training dental professionals in the use of
consumable dental products. The Company also offers many seminars throughout the
world in such areas as endodontics, crown and bridge porcelain and ceramics,
restoratives and dental implant systems.
Product Development
During 1995, 1994 and 1993, approximately $12.3 million, $10.9 million and
$10.3 million, respectively, was invested by the Company in connection with the
development of new products and in the improvement of existing products.
DENTSPLY employs approximately 175 scientists, engineers and technicians
dedicated to product development. The Company believes that its product
development programs are critical in meeting market demands and achieving future
growth. The Company also sponsors independent clinical research projects aimed
at developing, adapting and testing new technologies for use in DENTSPLY
products. From time to time, the Company contracts with independent consultants
and engineers to augment efforts to develop new products.
Manufacturing and Technical Expertise
DENTSPLY believes that its manufacturing capabilities are critical to its
success. The Company continues to automate its global manufacturing operations
in order to remain a low cost producer.
The manufacture of the Company's products requires substantial and varied
technical expertise. Complex materials technology and processes are necessary to
manufacture the Company's products.
The manufacture of artificial teeth and dental composites involves
expertise in polymer chemistry. A polymer is a compound of high molecular weight
derived through the combination of many smaller molecules or by the condensation
of many smaller molecules through the elimination of water or alcohol. DENTSPLY
manufactures certain lines of artificial teeth by a process that
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disperses the polymeric molecules found within cross-linked polymers, thereby
improving the tooth's resistance to blushing, whitening, crazing and
disintegration. Another line of artificial teeth utilizes an ultra-high
viscosity polypropylene that significantly increases wear resistance.
Visible light-cured composites utilize a single paste that immediately
polymerizes when exposed to a light source. DENTSPLY's PRISMA(Trademark)
TP.H(Trademark)light-cured composites contain non- radiopaque fillers of
approximately .02-.08 microns in size. The small size of this filler increases
the bonding power of the composite. It also permits the material to be polished
in order to more accurately replicate the color of a natural tooth. Basic,
self-cured (self-hardened) composites are formed by combining two pastes that
trigger polymerization when reacted.
The Company manufactures extremely high quality endodontic instruments
using production equipment designed and manufactured in-house. In general, the
equipment used is not available on the external market.
Dental handpiece manufacturing technology requires precision machining of
component parts to extremely tight tolerances in order to accommodate the
operating speed of the air-driven turbine, which exceeds 350,000 r.p.m. in high
speed handpieces, and the wide range of applications for which the unit is used.
These tolerances require dimensional machining to as little as 15 millionths of
an inch to produce the delicate balance necessary for a quiet, smooth-running
turbine with minimal vibration. The Company utilizes "computer numerically
controlled" (CNC) machines and computer-assisted design software in its
handpiece manufacturing processes.
Production of the Company's x-ray products involves a variety of
manufacturing disciplines. For example, the manufacture of x-ray tubes requires
expertise in high-temperature metallurgy, sophisticated glass blowing
techniques, and the ability to evacuate molecular impurities from the x-ray tube
through degasification. The Company also designs and fabricates printed circuit
boards, assembles electrical harnesses, fabricates sheet metal, and engages in
precision machining, painting and high-tension coil winding in connection with
the manufacturing of its x-ray products.
Foreign Operations
The Company conducts its business in over 100 foreign countries,
principally through its foreign subsidiaries which operate 35 foreign facilities
(including thirteen manufacturing operations). DENTSPLY has a long-established
presence in Canada and in the European market, particularly in Germany,
Switzerland and England. The Company also has a significant market presence
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in Central and South America, Australia, Hong Kong, Thailand, India, Philippines
and Japan. DENTSPLY has established joint ventures and marketing activities in
the People's Republic of China and the Commonwealth of Independent States. In
1996, a 100 percent-owned subsidiary, including a manufacturing facility, will
be established in the People's Republic of China. Manufacturing operations in
India will also commence in 1996.
For 1995, 1994 and 1993, the Company's sales outside the United States,
including export sales, accounted for approximately 48%, 45% and 42%,
respectively, of consolidated net sales from continuing operations. As a result
of the Company's significant international presence, DENTSPLY is subject to
fluctuations in exchange rates of various foreign currencies and other risks
associated with foreign trade. The Company actively manages its currency risk
exposures. Fluctuations in exchange rates have not had a material adverse impact
upon the Company's financial position.
Competition
The Company conducts its operations, both domestic and foreign, under
highly competitive market conditions. Competition in the dental materials and
equipment industries is based primarily upon product performance, quality,
safety and ease of use, as well as price, customer service, innovation and
acceptance by professionals and technicians. DENTSPLY believes that its
principal strengths include its well-established brand names, its reputation for
high-quality and innovative products, its leadership in product development and
manufacturing, and its commitment to customer service and technical support.
The size and number of the Company's competitors vary by product line and
from region to region. There are many companies which produce some, but not all,
of the same types of products as those produced by the Company. Certain of
DENTSPLY's competitors may have greater resources than does the Company in
certain of its product offerings.
Regulation
The Company's products are subject to regulation by, among other
governmental entities, the United States Food and Drug Administration (the
"FDA"). In general, if a dental "device" is subject to FDA regulation,
compliance with the FDA's requirements constitutes compliance with corresponding
state requirements. In order to ensure that dental products distributed for
human use in the United States are safe and effective, the FDA regulates the
introduction, manufacture, advertising, labeling, packaging, marketing and
distribution of, and record-keeping for, such products.
Dental devices of the types sold by the Company are
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generally classified by the FDA into a category that renders them subject only
to general controls that apply to all medical devices, including regulations
regarding alteration, misbranding, notification, record-keeping and good
manufacturing practices. The Company believes that it is in compliance with FDA
regulations applicable to its products and manufacturing operations.
All dental amalgam filling materials, including those manufactured and sold
by the Company, contain mercury. Various groups have alleged that dental amalgam
containing mercury is harmful to human health and have actively lobbied state
and federal lawmakers and regulators to pass laws or adopt regulatory changes
restricting the use, or requiring a warning against alleged potential risks, of
dental amalgams. The FDA's Dental Devices Classification Panel, the National
Institutes of Health and the United States Public Health Service have each
indicated that no direct hazard to humans from exposure to dental amalgams has
been demonstrated to them. If the FDA were to reclassify dental mercury and
amalgam filling materials as classes of products requiring FDA premarket
approval, there can be no assurance that the required approval would be obtained
or that the FDA would permit the continued sale of amalgam filling materials
pending its determination.
The introduction and sale of dental products of the types produced by the
Company are also subject to government regulation in the various foreign
countries in which they are produced or sold. Some of these regulatory
requirements are more stringent than those applicable in the United States.
DENTSPLY believes that it is in substantial compliance with the foreign
regulatory requirements that are applicable to its products and manufacturing
operations.
Sources and Supply of Raw Materials
All of the raw materials used by the Company in the manufacture of its
products are purchased from various suppliers and are available from numerous
sources. No single supplier accounts for a significant percentage of DENTSPLY's
raw material requirements.
Trademarks and Patents
The Company's trademark properties are important and contribute to the
Company's marketing position. To safeguard these properties, the Company
maintains trademark registrations in the United States and in significant
international markets for its products, and carefully monitors trademark use
worldwide. DENTSPLY also owns and maintains several hundred foreign and domestic
patents. Although the protection afforded to the Company by these patents is
advantageous to its business, the
14
<PAGE>
Company does not consider that its business is materially dependent on its
patents.
Employees
As of March 15, 1996, the Company and its subsidiaries had approximately
5,070 employees, of whom approximately 3,070 were engaged in manufacturing
operations, approximately 1,335 were engaged in sales and distribution,
approximately 490 were engaged in finance and administration, and approximately
175 were engaged in research and product development activities. Hourly workers
at the Company's Ransom & Randolph facility in Maumee, Ohio are represented by
Local No. 12 of the International Union, United Automobile, Aerospace and
Agriculture Implement Workers of America under a collective bargaining agreement
that expires on January 31, 2000; hourly workers at the Company's Cavitron
Products facility in Long Island City, New York are represented by Local No. 431
of the International Union of Electronic, Electrical, Technical, Salaried and
Machine Workers, AFL-CIO, under a collective bargaining agreement that expires
on November 3, 1998; and hourly workers at the Company's Midwest Dental Products
facility in Des Plaines, Illinois are represented by Tool & Die Makers Local 113
of the International Association of Machinists and Aerospace Workers under a
collective bargaining agreement that expires on May 31, 1997. The Company
believes that its relationship with its employees is good.
15
<PAGE>
Item 2. Properties
- -------------------
As of March 15, 1996, DENTSPLY maintains manufacturing facilities at the
following locations:
Leased
Location Function or Owned
- -------- -------- --------
York, Pennsylvania Manufacture and distribution of Owned
artificial teeth and other dental
laboratory products; export of
dental products; marketing and
sales of dental equipment;
manufacture and distribution of
preventive dental products;
corporate headquarters
Des Plaines, Illinois Manufacture and assembly of dental Leased
handpieces and components and
dental x-ray equipment
Milford, Delaware Manufacture and distribution of Owned
consumable dental products
Long Island City, Manufacture and distribution of Leased
New York dental equipment
Las Piedras, Manufacture of crown and bridge Owned
Puerto Rico materials
Chicago, Illinois Manufacture of dental x-ray Owned
equipment
Elgin, Illinois Manufacture of dental x-ray film Owned
holders, film mounts and
accessories
Maumee, Ohio Manufacture and distribution of Owned
investment casting products
Commerce, California Manufacture and distribution of Leased
investment casting products
Johnson City, Manufacture and distribution of Leased
Tennessee endodontic instruments and
materials
Petropolis, Brazil Manufacture and distribution of Owned
artificial teeth and consumable
dental products
Paraiba Do Sol, Manufacture and distribution of Leased
Brazil gutta percha
16
<PAGE>
Dreieich, Germany Manufacture and distribution of Owned
artificial teeth and other dental
laboratory products
Konstanz, Germany Manufacture and distribution of Owned
consumable dental products;
distribution of dental equipment
Milan, Italy Manufacture and distribution of Leased
dental x-ray equipment
Mexico City, Mexico Manufacture and distribution of Owned
dental products
Weybridge, England Manufacture and distribution of Owned
dental products
Plymouth, England Manufacture and distribution of Leased
dental hand instruments
Ballaigues, Manufacture and distribution of Owned
Switzerland endodontic instruments
Ballaigues, Manufacture and distribution of Owned
Switzerland plastic components and packaging
material
Le Creux, Manufacture and distribution of Owned
Switzerland endodontic instruments
Moscow, Russia Manufacture and distributon of Leased
consumable dental products
New Dehli, India Manufacture and distribution of Leased
dental products
In addition, the Company maintains sales and distribution offices at
certain of its foreign and domestic manufacturing facilities, as well as at
three other United States locations and at 13 international locations in nine
foreign countries. Of the 16 United States and international sites used
exclusively for sales and distribution, one is owned by the Company and the
remaining 15 are leased. The Company also maintains sales offices in various
countries throughout the world.
DENTSPLY believes that its properties and facilities are well maintained
and are generally suitable and adequate for the purposes for which they are
used.
17
<PAGE>
Item 3. Legal Proceedings
- --------------------------
DENTSPLY and its subsidiaries are from time to time parties to lawsuits
arising out of their respective operations. The Company believes that pending
litigation to which DENTSPLY is a party will not have a material adverse effect
upon its consolidated financial position or results of operations.
In May 1994, Core-Vent Corporation and Dr. Gerald Niznick filed an equity
action against DENTSPLY in Common Pleas Court in York County, Pennsylvania,
arising out of the terms of an April 1991 Exclusive Distribution Agreement
("Agreement"). The action sought to enjoin DENTSPLY from publishing certain
marketing materials for dental implant products. DENTSPLY countersued alleging
that the Agreement, or in the alternative an amendment to the Agreement, should
be terminated because of the misconduct of Dr. Niznick. The case has been
referred to arbitration pursuant to the terms of the Agreement and both parties
have amended their pleadings to allege monetary damages. Core-Vent and Dr.
Niznick are alleging damages of up to $25,478,000 for loss of market share.
DENTSPLY is vigorously contesting these claims in the arbitration hearing and
believes these claims to be without merit.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
18
<PAGE>
Executive Officers of the Registrant
The following table sets forth certain information regarding the executive
officers of the Company as of March 15, 1996.
Name Age Position
---- --- --------
Burton C. Borgelt 63 Chairman of the Board
John C. Miles, II 54 President and Chief Executive
Officer
W. William Weston 48 Senior Vice President, European Group
Michael R. Crane 55 Senior Vice President, North
American Group
Edward D. Yates 52 Senior Vice President and Chief
Financial Officer
Thomas L. Whiting 53 Senior Vice President, Pacific Rim,
Latin America, Gendex, and Tulsa Dental
J. Patrick Clark 54 Vice President, Secretary and
General Counsel
Burton C. Borgelt assumed the position of Chairman of the Board effective
January 1, 1996. Prior to that Mr. Borgelt was named Chairman of the Board and
Chief Executive Officer of the Company upon the resignation of John J. McDonough
as Chief Executive Officer on February 8, 1995. Prior to Mr. McDonough's
resignation, Mr. Borgelt served as Chairman of the Board and a director of the
Company following the Merger. Prior thereto, Mr. Borgelt served as Chairman of
the Board and Chief Executive Officer of Old Dentsply commencing in March 1989
and as the Chief Executive Officer and a director of Old Dentsply commencing in
February 1981.
John C. Miles was named President and Chief Executive Officer effective
Janury 1, 1996. Prior to that he was President and Chief Operating Officer and a
director of the Company since the Merger. Prior to that time he served as
President and Chief Operating Officer and a Director of Old Dentsply commencing
in January 1990. From January 1988 until December 1989, Mr. Miles served as
Senior Vice President/International Operations of Old Dentsply. He was Director
of European Operations of Old Dentsply from May 1986 to December 1987, and from
June 1985 to April 1986 he was General Manager of Old Dentsply's York Laboratory
Products Division (presently known as the Trubyte Division). From 1978 to June
1985, Mr. Miles was employed in various capacities with Rhone-Poulenc, most
recently as Senior Vice President--General Manager of its Systems Division.
Michael R. Crane was named Senior Vice President, North
American Group effective January 1, 1996. Prior to that he
19
<PAGE>
was Senior Vice President, Europe, Mideast, Africa and Commonwealth of
Independent States of the Company effective in early 1995 and prior thereto he
served as Senior Vice President, International Operations of the Company since
the Merger, and in a similar capacity with Old Dentsply commencing in November
1989. Prior to that time, he served as Vice President Sales/Marketing for
Whaledent International, a division of IPCO Corporation.
W. William Weston was named Senior Vice President, European Group of the
Company effective January 1, 1996. Prior to that Mr. Weston served as the Vice
President and General Manager of DENTSPLY's DeDent Operations in Europe from
October 1, 1990 to January 1, 1996. Prior to that time he was Pharmaceutical
Director for Pfizer in Germany.
Edward D. Yates has been Senior Vice President and Chief Financial Officer
of the Company since the Merger and prior thereto served in a similar capacity
with Old Dentsply commencing in March 1991. From January 1990 until March 1991,
he served as Old Dentsply's Controller. Prior to that time, he was the Treasurer
of Old Dentsply. Mr. Yates is a Certified Public Accountant.
Thomas L. Whiting was named Senior Vice President, Pacific Rim, Latin
America, Gendex, and Tulsa Dental of the Company in July 1994, to be effective
in early 1995. Prior to this appointment, Mr. Whiting was Vice President and
General Manager of the Company's L.D. Caulk Division since the Merger, and prior
thereto served in the same capacity with Old Dentsply since joining Old Dentsply
in 1987. Prior to that time, Mr. Whiting held management positions with Deseret
Medical and the Parker-Davis Company.
J. Patrick Clark has been Vice President, Secretary and General Counsel of
the Company since the Merger and prior thereto served as General Counsel and
Secretary of Old Dentsply since 1986.
20
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
- ----------------------------------------------------------
Stockholder Matters
- -------------------
The information set forth under the caption "Supplemental Stock
Information" in Part IV of this Annual Report on Form 10-K is incorporated
herein by reference in response to this Item 5.
Item 6. Selected Financial Data
- --------------------------------
The information set forth under the caption "Selected Financial Data" in
Part IV of this Annual Report on Form 10-K is incorporated herein by reference
in response to this Item 6.
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
- -----------------------------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part IV of this
Annual Report on Form 10-K is incorporated herein by reference in response to
this Item 7.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The information set forth under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of
Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to
Consolidated Financial Statements," "Management's Financial Responsibility" and
"Independent Auditors' Report" of KPMG Peat Marwick LLP in Part IV of this
Annual Report on Form 10-K is incorporated herein by reference in response to
this Item 8.
Item 9. Changes in and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
- -----------------------------------
Not applicable.
21
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K and the information set
forth under the captions "Election of Directors" and "Other Matters" in the
Proxy Statement is incorporated herein by reference in response to this Item 10.
Item 11. Executive Compensation
- --------------------------------
The information set forth under the caption "Executive Compensation" in the
Proxy Statement is incorporated herein by reference in response to this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------------------------------------------------------------
Management
- ----------
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information set forth under the subcaption "Executive
Compensation--Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement is incorporated herein by
reference to this Item 13.
22
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ----------------------------------------------------------------
Form 8-K
- --------
Sequential
(a) Documents filed as part of this Report Page No.
-------------------------------------- ----------
1. Supplemental Stock Information 33
2. Selected Financial Data 34
3. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 36
4. Financial Statements and Supplementary
Data
--------------------------------------
The following consolidated financial statements of the Company are
filed as part of this Annual Report on Form 10-K:
Management's Financial Responsibility 40
Independent Auditors' Report of
KPMG Peat Marwick LLP 41
Consolidated Statements of Income
for the years ended December 31,
1995, 1994 and 1993 42
Consolidated Balance Sheets as of
December 31, 1995 and 1994 44
Consolidated Statements of
Stockholders' Equity for the years
ended December 31, 1995, 1994 and
1993 45
Consolidated Statements of Cash
Flows for the years ended
December 31, 1995, 1994 and 1993 47
Notes to Consolidated Financial
Statements 51
23
<PAGE>
Sequential
5. Financial Statement Schedules Page No.
----------------------------- ----------
The following financial statement schedule is filed as part of
this Annual Report on Form 10-K:
Schedule II - Valuation and qualifying 74
accounts
Financial statement schedules not listed above have been
omitted because they are inapplicable, are not required under
applicable provisions of Regulation S-X, or the information that
would otherwise be included in such schedules is contained in the
registrant's consolidated financial statements or accompanying
notes.
24
<PAGE>
3. Exhibits. The Exhibits listed below are filed or
incorporated by reference as part of this Annual
Report on Form 10-K.
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation (1)
3.2 By-Laws, as amended (1)
4.1 Stock Purchase Agreement dated
March 27, 1991 by and among the
Company, John J. McDonough and
Robert Fleming Nominees (2)*
4.2 Form of Stock Purchase Agreement dated as of
September 30, 1991 and effective as of March 27,
1991 by and between the Company and [Strong Stock
Funds] (3)
4.3 Stock Purchase Agreement dated as
of September 30, 1991 and effective
as of March 27, 1991 by and between
the Company and Harbor Investments
Ltd. (3)
4.4 (a) Competitive Advance, Revolving
Credit and Guaranty Agreement,
dated as of November 15, 1993,
among the Company, the guarantors
named therein, the banks named
therein, and Chemical Bank, as
agent (Note: All attachments have
been omitted. Copies of such
attachments will be furnished
supplementally to the Securities
and Exchange Commission upon
request.) (11)
(b) First Amendment, dated as of
December 23, 1994, to Competitive
Advance, Revolving Credit and
Guaranty Agreement (12)
10.1 (a) 1987 Employee Stock Option Plan
(4)*
(b) Amendment No. 1 to the Company's
1987 Employee Stock Option Plan
(5)*
10.2 (a) Investment Agreement, dated as of
August 8, 1987, by and among the
Company, John J. McDonough, the
John J. McDonough Children's Trust
and M&I Ventures Corporation (4)*
(b) Amendment to Investment Agreement, dated as of
October 26, 1989, by and among the Company, John
25
<PAGE>
J. McDonough, the John J. McDonough
Children's trust and M&I Ventures
Corporation (4)*
10.3 Amended and Restated to Split Dollar Insurance
Agreement between The McDonough Insurance Trust
and the Company dated as of October 25, 1995.
10.4 Guaranty Agreement dated May 3,
1989 among Edwin J. McDonough,
Allison McDonough, John J.
McDonough, Jr., Joseph F.
McDonough, and Dana L. McDonough
and the Company (6)*
10.5 Guarantee and Collateral Pledge
Agreement dated May 3, 1989 by and
among Edwin J. McDonough, Allison
McDonough, John J. McDonough, Jr.,
Joseph F. McDonough and Dana L.
McDonough and the Company (6)*
10.6 (a) Letter Agreement dated June 29, 1990 by and
between Cravey, Green & Wahlen Incorporated and
the Company (3)*
(b) Stock Purchase Warrant dated August 28, 1990
issued to Cravey, Green & Wahlen Incorporated by
the Company (2)*
(c) Stock Purchase Warrant Plan adopted
February 25, 1993 (7)
10.7 1992 Stock Option Plan adopted May
26, 1992 (8)*
10.8 Employee Stock Ownership Plan as
amended effective as of December 1,
1982, restated as of January 1,
1991 (12)*
10.9 (a) Retainer Agreement dated December
29, 1992 between the Company and
State Street Bank and Trust Company
("State Street") (9)
(b) Trust Agreement between the Company
and State Street Bank and Trust
Company dated as of August 11, 1993
(11)
(c) Amendment to Trust Agreement
between the Company and State
Street Bank and Trust Company
effective August 11, 1993 (11)
10.10 DENTSPLY Stock Option Conversion
Plan approved June 23, 1993 (9)*
10.11 Employment Agreement dated January
1, 1996 between the Company and
26
<PAGE>
Burton C. Borgelt *
10.12 (a) Employment Agreement dated as of
December 31, 1987 between the
Company and John C. Miles, II (9)*
(b) Amendment to Employment Agreement
between the Company and John C.
Miles, II dated February 16, 1996,
effective January 1, 1996 *
10.13 Employment Agreement dated as of
December 31, 1987, as amended as of
February 8, 1990, between the
Company and Leslie A. Jones (9)*
10.14 Employment Agreement dated as of
December 10, 1992 between the
Company and Michael R. Crane (9)*
10.15 Employment Agreement dated as of
December 10, 1992 between the
Company and Edward D. Yates (9)*
10.16 Employment Agreement dated as of
December 10, 1992 between the
Company and J. Patrick Clark (9)*
10.17 Employment Agreement dated January
1, 1996 between the Company and W.
William Weston *
10.18 Employment Agreement dated January
1, 1996 between the Company and
Thomas L. Whiting *
10.19 (a) Merger Agreement and Schedules
thereto (the "Kestrel Merger
Agreement") dated August 9, 1990 by
and among the Company, Kestrel
Merging Corp. ("Merging Corp."),
Kestrel Dental Corporation
("Kestrel"), Midwest, Rinn
Corporation ("Rinn") and the
holders (the "Kestrel
Shareholders") of all of the issued
and outstanding capital stock of
Kestrel (10)
(b) Amendment to the Kestrel Merger
Agreement and Settlement Agreement
dated March 6, 1991 by and among
the Company, Merging Corp.,
Kestrel, Midwest, Rinn and the
Kestrel Shareholders (2)
10.20 (a) Amended and Restated Real Estate
Sale and Leaseback Agreement dated
August 1, 1991, between Midwest and
McDonough Partners I, relating to
the sale and leaseback of 901 West
Oakton Street, Des Plaines,
Illinois (3)*
27
<PAGE>
(b) Lease dated September 4, 1991 by
and between the Company and
McDonough Partners I (3)*
10.21 Environmental Indemnity Agreement dated September
4, 1991 by and among the Company, McDonough
Partners I and The Penn Insurance Annuity Company
(3)*
10.22 Subordination, Non Disturbance and
Attornment Agreement, dated September 4, 1991 by
and among the Company, McDonough Partners I and
The Penn Insurance and Annuity
Company (3)*
10.23 Purchase of Assets Agreement dated
as of April 27, 1992, as amended
through September 28, 1992, between
the Company and Johnson & Johnson.
(Note: All attachments except the
Toll Manufacturing Agreements have
been omitted. Copies of such
attachments will be furnished to
the Securities and Exchange
Commission supplementally upon
request.) (9)
10.24 (a) Exclusive Distribution Agreement
dated April 19, 1991, between
Core-Vent Corporation ("Core-
Vent"), Dr. Gerald Niznick and the
Company (9)
(b) First Amendment to Exclusive
Distribution Agreement dated April
30, 1991 (9)
(c) Second Amendment to Exclusive
Distribution Agreement dated April
21, 1993 (Note: Exhibits 2.3.1B
(Notice of New Products), 2.3.1A
(Price List) and 16 (Mutual
Release) have been omitted. Copies
of such exhibits will be furnished
to the Securities and Exchange
Commission supplementally upon
request.) (9)
10.25 1993 Stock Option Plan (1)*
10.26 Revolving Credit Agreement among
DENTSPLY International Inc., each of the
guarantors named therein, and ABN AMRO Bank N.V.,
dated as of September 9, 1994 (12)
10.27 DENTSPLY International Inc. 401(k)
Savings Plan Summary Plan
Description, as amended effective
28
<PAGE>
January 1, 1994 (12)*
10.28 Midwest Dental Products Corporation
Pension Plan. as amended and re-
stated effective January 1, 1989
(12)*
10.29 Revised Ransom & Randolph Pension Plan, as amended
effective as of September 1, 1985, restated as of
January 1, 1989 (12)*
10.30 DENTSPLY International Inc.
Directors' Deferred Compensation
Plan (12)*
10.31 (a) Letter Agreement, dated February 8,
1995, between the Company and John
J. McDonough (12)*
(b) Amendment to Letter Agreement
between the Company and John J.
McDonough dated July 6, 1995
10.32 Letter Agreement, dated October 13,
1994, between Dentsply Limited and
DePuy International Limited (12)
10.33 Sales-Purchase Agreement, dated May
30, 1995, between certain stock-
holders of Maillefer Instruments,
S.A., Dentsply Ltd., and DENTSPLY
International Inc. as guarantor
(13)
10.34 Asset Purchase and Sale Agreement,
dated January 10, 1996, between
Tulsa Dental Products, L.L.C. and
DENTSPLY International Inc. (14)
10.35 Multi-Currency Term Loan Agreement
among Dentsply Ltd., the banks
named therein, and ABN AMRO Bank
N.V., dated as of May 12, 1995
(Note: All attachments have been
omitted. Copies of such attach-
ments will be furnished supplement-
ally to the Securities and Exchange
Commission upon request.)
11 Computation of earnings per share
21.1 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
- -------------------
* Management contract or compensatory plan.
29
<PAGE>
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(2) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1991, File No. 0-16211.
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-2 filed on
October 7, 1991 (No. 33-43079).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-18 (No. 33-
15355C).
(5) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1992, File No. 0-16211.
(6) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1989, File No. 0-16211.
(7) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-61780).
(8) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
(9) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated August 28, 1990,
File No. 0-16211.
(11) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-16211.
(12) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
December 31, 1994, File No. 0-16211.
(13) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated June 30, 1995,
File No. 0-16211.
30
<PAGE>
(14) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
Loan Documents
The Company and certain of its subsidiaries have entered into various loan
and credit agreements and issued various promissory notes and guaranties of such
notes, listed below, the aggregate principal amount of which is less than 10% of
its assets on a consolidated basis. The Company has not filed copies of such
documents but undertakes to provide copies thereof to the Securities and
Exchange Commission supplementally upon request.
(1) Master Note dated September 18, 1990 executed in favor of Chemical Bank in
connection with a line of credit up to $2,000,000 between the Company and
Chemical Bank.
(2) Agreement dated December 27, 1991 between National Westminster Bank PLC and
Dentsply Limited for (pound)2,500,000.
(3) Promissory Note dated May 1, 1992 in the principal amount of $3,000,000 of
the Company in favor of Philadelphia National Bank.
(4) Credit Agreement dated September 14, 1990 between Dentsply
Canada Limited ("DCL") and Mellon Bank Canada.
(5) Promissory Note dated April 17, 1995 in connection with a line of credit up
to $15,000,000 between the Company and Mellon Bank.
(6) Loan Agreement between Chemical Bank AG and Dentsply GmbH dated March 14,
1983.
(7) Guaranty of the Company dated March 14, 1983.
(8) Form of "comfort letters" to various foreign commercial lending
institutions having a lending relationship with one or more of the
Company's international subsidiaries.
(9) Unsecured Note dated July 8, 1993 between the Company and Harris Trust and
Savings Bank in the principal amount of $1,750,000.
31
<PAGE>
(b) Reports on Form 8-K
-------------------
The Company did not file any Reports on Form 8-K during the
quarter ended December 31, 1995.
* * * * * *
32
<PAGE>
DENTSPLY International Inc. and Subsidiaries
SUPPLEMENTAL STOCK INFORMATION
The Common Stock of the Company is traded on the NASDAQ National Market
under the symbol "XRAY". The following table sets forth low and high sale prices
of the Company's common stock for the periods indicated as reported on the
NASDAQ National Market:
Market Range of Common Stock Cash
---------------------------- Dividend
1995 High Low Declared
- ---- -------- -------- --------
First Quarter $36-1/4 $31 $.075
Second Quarter 36-7/8 34-1/4 .075
Third Quarter 40-1/4 32-3/4 .075
Fourth Quarter 40-1/4 33-7/8 .0825
1994
- ----
First Quarter $47 $36 $ ---
Second Quarter 39-1/2 34 ---
Third Quarter 37-3/4 31-1/4 .075
Fourth Quarter 35-3/4 28-1/4 .075
1993
- ----
First Quarter $55 $37 ---
Second Quarter 44-1/2 31-1/2 ---
Third Quarter 42 32-3/4 ---
Fourth Quarter 45-1/4 36 ---
The Company estimates there are approximately 12,200 holders of common
stock, including 602 holders of record.
33
<PAGE>
<TABLE>
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991(2)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data: (In thousands, except per share amounts)
Net sales $ 572,028 $ 524,758 $ 503,820 $ 476,335 $ 387,439
Cost of products sold 291,176 267,034 257,707 246,126 205,798
------------ ------------ ------------ ------------ ------------
Gross profit 280,852 257,724 246,113 230,209 181,641
Selling, general and administrative expenses 180,117 160,324 172,147 148,264 121,226
------------ ------------ ------------ ------------ ------------
Operating income from continuing operations
before discretionary ESOP contributions 100,735 97,400 73,966 81,945 60,415
Discretionary ESOP contributions --- --- 4,361 6,568 5,241
Interest expense 9,144 7,999 20,752 22,099 25,425
Interest income (1,265) (1,527) (370) (628) (641)
Other (income) expense, net 2,839 (734) (2,119) (1,797) 1,800
------------ ------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 90,017 91,662 51,342 55,703 28,590
Provision for income taxes 36,054 37,518 26,197 24,416 13,658
------------ ------------ ------------ ------------ ------------
Income from continuing operations 53,963 54,144 25,145 31,287 14,932
------------ ------------ ------------ ------------ ------------
Discontinued operations:
Income from the operation of discontinued
Medical business (net of income taxes of
$.6 million in 1994; $1.6 million in
1993; $1.7 million in 1992; and $1.8
million in 1991) --- 1,311 2,925 2,988 3,300
Gain on disposal of Medical business,
including provision of $.5 million for
operating losses during phase-out period
(net of income taxes of $5.5 million) --- 6,543 --- --- ---
------------ ------------ ------------ ------------ ------------
Income from discontinued operations --- 7,854 2,925 2,988 3,300
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 53,963(1) 61,998 28,070(1) 34,275 18,232
Extraordinary loss related to early
extinguishment of debt (net of
income tax benefit of $6.3 million) --- --- 14,018 --- ---
------------ ------------ ------------ ------------ ------------
Net income $ 53,963(1) $ 61,998 $ 14,052(1) $ 34,275 $ 18,232
============ ============ ============ ============ ============
<FN>
</FN>
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991(2)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings per Common Share: (In thousands, except per share amounts)
Income from continuing operations $ 2.00 $ 1.95 $ 1.02 $ 1.29 $ .65
Income from the operation of
discontinued Medical business --- .05 .12 .13 .14
Gain on disposal of Medical business --- .23 --- --- ---
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 2.00 2.23 1.14 1.42 .79
Extraordinary item --- --- (.57) --- ---
------------ ------------ ------------ ------------ ------------
Net income $ 2.00 $ 2.23 $ .57 $ 1.42 $ .79
============ ============ ============ ============ ============
Dividends per Common Share $ .3075 $ .15 $ --- $ --- $ ---
Weighted average common shares outstanding 27,012 27,776 24,598 24,220 23,099
Balance Sheet Data (at end of period):
Working capital (3) $ 122,706 $ 92,206 $ 82,779 $ 38,185 $ 46,256
Total assets (3) 591,855 466,930 466,787 450,641 374,434
Total long-term debt 68,675 12,789 95,356 192,082 162,364
Stockholders' equity 315,922 299,337 236,397 100,285 72,894
Other Data:
Depreciation and amortization (4) 21,488 18,133 17,951 15,333 14,145
Capital expenditures (4) 17,421 12,504 9,212 14,626 5,881
<FN>
(1) Includes certain unusual or non-recurring charges of approximately $3.1
million (approximately $1.8 million after tax) in 1995 and $21.8 million
(approximately $16.5 million after tax) in 1993. The effect of these unusual or
non-recurring charges on operating income from continuing operations before
discretionary ESOP contributions was approximately $17.9 million during the year
ended December 31, 1993. See Note 15 of the Notes to Consolidated Financial
Statements.
(2) The results of operations for the year ended December 31, 1991 include the
results of operations of GENDEX for the year ended March 31, 1992.
(3) Excludes net assets of discontinued operations.
(4) Excludes discontinued operations.
</FN>
</TABLE>
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On October 13, 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business which includes the
Eureka X-Ray Tube Corp. ("Eureka"), GENDEX Medical and CMW business units.
Accordingly, the Company's financial statements have been restated to reflect
the accounting treatment for discontinued operations. Management's discussion
for the results of operations covers continuing operations and discontinued
operations, separately.
Results of Operations, 1995 Compared to 1994
- --------------------------------------------
Net sales increased $47.3 million, or 9.0%, from $524.8 million in 1994 to
$572.0 million in 1995. The increase was primarily in Europe, with a significant
portion of the increase coming from the acquisition of Maillefer Instruments
S.A. ("Maillefer"). The sales increase in the United States was adversely
impacted by discontinuing certain dealer incentives in the third quarter of 1995
which previously had the effect of encouraging dealers to place large stocking
orders.
Gross profit increased $23.1 million, or 9.0%, due primarily to higher net
sales. Gross profit as a percentage of net sales was 49.1%, equal to 1994.
Improvements in the gross profit percentage in 1995 were offset by the adverse
impact of acquisition accounting for Maillefer.
Selling, general and administrative expenses increased $19.8 million, or
12.3%. As a percentage of net sales, expenses increased from 30.6% in 1994 to
31.5% in 1995. This increase was mainly due to incremental expenses incurred in
1995 to establish and operate new offices in the Pacific Rim, expenses
associated with the implementation of management information systems in Europe,
and severance payments due to cost cutting and realignment in the United States
and Europe.
The $1.4 million increase in net interest expense was primarily due to
acquisition debt and the repurchase of common shares under the share repurchase
program. Other expense of $2.8 million in 1995 compares to $.7 million of other
income in 1994 due to the one-time charge of $3.1 million to cover the costs of
closing the Company's executive offices in Illinois and consolidating its
executive offices in York, Pennsylvania.
Income from continuing operations before income taxes decreased $1.7
million, from $91.7 million in 1994 to $90.0 million in 1995. Without the
one-time charge of $3.1 million to cover the costs of closing the Company's
executive offices in Illinois, income from continuing operations before income
taxes increased $1.4 million, or 1.5%.
Income from continuing operations was $54.0 million in 1995 compared to
$54.1 million in 1994. Without the one-time after-tax charge of $1.8 million to
cover the costs of closing the Company's executive offices in Illinois, income
from continuing operations was $55.8 million, an increase of 3.1% over 1994.
During 1995, the Company repurchased 1.3 million common shares under its
share repurchase program. These repurchases are reflected in the reduction of
weighted average common shares outstanding from 27.8 million common shares in
1994 to 27.0 million common shares in 1995.
Earnings per common share from continuing operations of $2.00 for 1995
36
<PAGE>
increased $.05, or 2.6%, from $1.95 in 1994. Without the one-time after-tax
charge of $1.8 million to cover the costs of closing the Company's executive
offices in Illinois, earnings per common share from continuing operations were
$2.07, a 6.2% increase over 1994.
The net assets of CMW and Eureka were sold during November and December
1994. The sale of the GENDEX Medical business, the last remaining unit of the
discontinued medical segment, occurred in the first quarter of 1996. Net sales
of this business were $18.9 million in 1995.
Results of Operations, 1994 Compared to 1993
- --------------------------------------------
Net sales increased $21.0 million, or 4.2%, from $503.8 million in 1993 to
$524.8 million in 1994. The increase was primarily in Europe and certain other
international markets. Sales in the United States were flat mainly due to lower
shipments of dental handpieces than in 1993 when shipments reflected the
reduction of extraordinarily large backorders. Sales in 1994 were also adversely
affected by the disposition of the Valiant(Registered Trademark) product line,
removal of certain products which were distributed but not manufactured by the
Company and currency translation adjustments on foreign subsidiary sales in
Brazil.
Gross profit increased $11.6 million, or 4.7%, due primarily to higher net
sales. For the year, gross profit as a percentage of net sales increased
slightly from 48.8% in 1993 to 49.1% in 1994.
Selling, general and administrative expenses decreased $11.8 million, or
6.9%, (from 34.2% to 30.6% of net sales) largely due to the 1993 expenses
related to the Merger, the write-off of uncollectible receivables from Healthco
International, a major dental supply dealer which filed for protection from
creditors under Chapter 11 of the Federal Bankruptcy laws in June 1993, costs
associated with certain litigation and severance costs incurred for 94
supervisory and administrative personnel (the "unusual or non-recurring
charges"). As a percentage of net sales, selling, general and administrative
expenses (excluding the unusual or non-recurring charges) remained at 30.6%.
Discretionary ESOP contributions were $4.4 million for 1993. The Company
has not made discretionary ESOP contributions since May 31, 1993 and has no
plans to make such contributions in the future.
The decrease in net interest expense of $13.9 million was primarily due to
the prepayment in January 1994 of the Company's Secured Notes with principal
amount of $85.0 million from the proceeds of a public offering of the Company's
common stock completed in December 1993. Other income of $.7 million in 1994
compares to $2.1 million of other income in 1993 primarily due to the gain on
the sale of the Valiant(Registered Trademark) product line in 1993 partially
offset by significantly reduced exchange losses during 1994 in Brazil.
Income from continuing operations before income taxes increased $40.3
million, or 78.4%, to $91.7 million in 1994. Excluding the 1993 unusual or
non-recurring charges and final discretionary contributions to the ESOP, income
from continuing operations before income taxes increased $18.5 million, or
25.3%, primarily due to increased sales and lower interest expense.
The Company's effective tax rate on income from continuing operations
before income taxes decreased from 50.1% in 1993 to 40.9% in 1994 due mainly to
non-deductible 1993 Merger expenses and higher taxes, net of U.S.
37
<PAGE>
tax credits, on foreign earnings repatriated in 1993.
For 1994, income from continuing operations increased $29.0 million. If the
unusual or non-recurring charges and final discretionary contributions to the
ESOP are excluded, income from continuing operations increased $12.5 million, or
30.0%. Earnings per common share from continuing operations increased $.93 from
1993. If the unusual or non-recurring charges and final discretionary
contributions to the ESOP are excluded, earnings per common share from
continuing operations increased $.26, or 15.4%.
In 1994, the Company recorded a gain of $6.5 million (net of income taxes
of $5.5 million), or $.23 per common share, for the disposal of the medical
business. Net sales from the discontinued medical business for 1994 were $48.6
million, a decrease of $.2 million, or .4%, from net sales of $48.8 million in
1993. Income from the operation of the discontinued medical business was $1.3
million for 1994, a decrease of $1.6 million from 1993. The decrease was
primarily due to an unfavorable sales mix of medical x-ray tubes and less than a
full year's sales and income in 1994 for the businesses sold. Earnings per
common share from operation of the discontinued medical business was $.05 for
1994 compared to $.12 for 1993.
In 1993, the Company recorded an extraordinary loss of $14.0 million ($20.3
million before income tax benefit of $6.3 million), or $.57 per common share,
related to the early retirement of high interest rate debt.
Earnings per common share increased $1.66 from $.57 in 1993 to $2.23 in
1994 as a result of the items discussed previously. Weighted average common
shares outstanding increased by 3.2 million, or 13.0%, from 24.6 million in 1993
to 27.8 million in 1994 mainly due to a public offering of the Company's common
stock completed in December 1993.
Foreign Currency
- ----------------
Since approximately 44% of the Company's revenues have been generated in
currencies other than the U.S. dollar, the value of the U.S. dollar in relation
to those currencies affects the results of operations of the Company. The impact
of currency fluctuations in any given period can be favorable or unfavorable.
The impact of foreign currency fluctuations of European currencies on operating
income is offset to a significant extent by sales in the U.S. of products
sourced from plants and third party suppliers located overseas, principally in
Germany and Switzerland. The Company carefully considers the impact of currency
fluctuations in its business decisions.
Liquidity and Capital Resources
- -------------------------------
In March 1995, the Company purchased the outstanding capital stock of KV33
Corporation ("KV33") in a cash transaction for $11.5 million. KV33 designs,
develops, manufactures, and markets disposable articulators for the dental
laboratory market, and is the leading manufacturer and distributor of disposable
articulators in the United States.
In June 1995, the Company acquired approximately 96% of the outstanding
capital stock of Maillefer in a cash transaction for $65.8 million. Maillefer is
the world's leading manufacturer and distributor of endodontic instruments.
Based in Ballaigues, Switzerland, Maillefer's product offerings include
endodontic broaches, files, burs, pins and post
38
<PAGE>
systems, and a variety of other instruments and accessory products. Maillefer
products have achieved a world class reputation for high quality through
continuous new, innovative research and development and state-of- the-art
manufacturing processes.
The Company obtained the funds for these acquisitions from a new $60.0
million term loan (which has the same maturity date, interest rate structure,
and covenants as the Company's existing $175.0 million Bank Revolving Loan
Facility), short-term bank borrowings, and cash on hand.
Under its Bank Revolving Loan Facility, the Company is able to borrow up to
$175.0 million on an unsecured basis through December 23, 1999. The Revolving
Credit Agreement contains various financial and other covenants. Under its Bank
Multicurrency Revolving Credit Facility, the Company is able to borrow up to
$25.0 million for foreign working capital purposes on an unsecured basis through
August 31, 1997. In addition, the Company had unused lines of credit for
short-term financing of $63.0 million at December 31, 1995.
Investment activities for 1995 included capital expenditures of $17.6
million.
During 1995, the Company repurchased 1.3 million shares of its common stock
for $42.7 million, in accordance with the share repurchase program authorized by
the Board of Directors in December 1994. This authorization to repurchase shares
expired on December 31, 1995. In December 1995, the Board of Directors
authorized the repurchase of up to 2.8 million additional shares of common stock
on the open market or in negotiated transactions. The timing and amounts of any
additional purchases will depend upon many factors, including market conditions
and the Company's business and financial condition.
Excluding the net assets of discontinued operations, at December 31, 1995,
the Company's current ratio was 2.0 with working capital of $122.7 million. This
compares with a current ratio of 2.0 and working capital of $92.2 million at
December 31, 1994.
The Company expects to be able to finance its cash requirements, including
capital expenditures, stock repurchases, debt service and the acquisition of the
dental manufacturing and distribution operations of Tulsa Dental Instruments
L.L.C., from funds generated from operations and amounts available under its
Bank Revolving Loan Facility.
Cash flows from operating activities were $67.5 million for 1995 compared
to $63.8 million for 1994.
Impact of Inflation
- -------------------
The Company has generally offset the impact of inflation on wages and the
cost of purchased materials by reducing operating costs and increasing selling
prices to the extent permitted by market conditions.
39
<PAGE>
Management's Financial Responsibility
- -------------------------------------
The management of DENTSPLY International Inc. is responsible for the
contents of the consolidated financial statements. The consolidated financial
statements were prepared in conformity with generally accepted accounting
principles applied on a consistent basis and were based in part on reasonable
estimates, giving due consideration to materiality. Financial information
appearing elsewhere in this Annual Report is consistent with that in the
consolidated financial statements.
The Company maintains a system of internal accounting controls which, in
the opinion of management, provides reasonable assurance as to the integrity and
reliability of the financial records and the protection of assets. The internal
accounting control system is supported by written policies and procedures and
its effectiveness is monitored. Management operates the Company in compliance
with its written Code of Business Conduct.
The Audit Committee of the Board of Directors is composed entirely of
outside directors who meet periodically with management and our independent
auditors, KPMG Peat Marwick LLP. The Audit Committee reviews the financial
controls and reporting practices and generally monitors the accounting affairs
of the Company. Also, the Audit Committee recommends to the stockholders the
appointment of the independent auditors.
John C. Miles II Edward D. Yates
President and Chief Senior Vice President and
Executive Officer Chief Financial Officer
40
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the consolidated financial statements of DENTSPLY International
Inc. and subsidiaries as listed in the accompanying index on page 23. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index on page 24. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DENTSPLY
International Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
January 26, 1996
41
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1995 1994 1993
--------------------------------
(in thousands, except per share amounts)
Net sales $572,028 $524,758 $503,820
Cost of products sold 291,176 267,034 257,707
-------- -------- --------
Gross profit 280,852 257,724 246,113
Selling, general and administrative
expenses 180,117 160,324 172,147
-------- -------- --------
Operating income from continuing operations
before discretionary ESOP contributions 100,735 97,400 73,966
Other costs and expenses:
Discretionary ESOP contributions --- --- 4,361
Interest expense 9,144 7,999 20,752
Interest income (1,265) (1,527) (370)
Other (income) expense, net 2,839 (734) (2,119)
-------- -------- --------
Income from continuing operations
before income taxes 90,017 91,662 51,342
Provision for income taxes 36,054 37,518 26,197
-------- -------- --------
Income from continuing operations 53,963 54,144 25,145
-------- -------- --------
Discontinued operations:
Income from the operation of
discontinued Medical business (net of
income taxes of $.6 million in 1994
and $1.6 million in 1993) --- 1,311 2,925
Gain on disposal of Medical business,
including provision of $.5 million for
operating losses during phase-out period
(net of income taxes of $5.5 million) --- 6,543 ---
-------- -------- --------
Income from discontinued operations --- 7,854 2,925
-------- -------- --------
Income before extraordinary item 53,963 61,998 28,070
Extraordinary loss related to early
extinguishment of debt (net of income
tax benefit of $6.3 million) --- --- 14,018
-------- -------- --------
Net income $ 53,963 $ 61,998 $ 14,052
======== ======== ========
The accompanying Notes are an integral part of these Financial Statements.
42
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1995 1994 1993
--------------------------------
(in thousands, except per share amounts)
Earnings per common share:
Income from continuing operations $ 2.00 $ 1.95 $ 1.02
Income from the operation of
discontinued Medical business -- .05 .12
Gain on disposal of Medical business -- .23 --
-------- -------- --------
Income before extraordinary item 2.00 2.23 1.14
Extraordinary item -- -- (.57)
-------- -------- --------
Net income $ 2.00 $ 2.23 $ .57
======== ======== ========
Dividends per common share $ .3075 $ .15 $ ---
Weighted average common shares outstanding 27,012 27,776 24,598
The accompanying Notes are an integral part of these Financial Statements.
43
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
1995 1994
Assets -------------------
Current assets: (in thousands)
Cash and cash equivalents $ 3,974 $ 7,278
Accounts and notes receivable - trade, net 93,315 78,771
Inventories 125,704 88,899
Deferred income taxes 12,836 5,710
Prepaid expenses and other current assets 10,527 8,410
Net assets of discontinued operations 5,870 7,632
-------- --------
Total Current Assets 252,226 196,700
Property, plant and equipment, net 140,101 91,140
Other noncurrent assets, net 16,989 10,214
Identifiable intangible assets, net 39,282 35,532
Costs in excess of fair value of net assets
acquired, net 149,127 140,976
-------- --------
Total Assets $597,725 $474,562
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 7,616 $ 9,150
Accounts payable 31,785 25,488
Accrued liabilities 46,571 34,647
Income taxes payable 26,477 27,482
Current portion of deferred income taxes 11,201 95
-------- --------
Total Current Liabilities 123,650 96,862
Long-term debt 68,675 12,789
Other liabilities 47,104 40,854
Deferred income taxes 38,942 24,720
-------- --------
Total Liabilities 278,371 175,225
-------- --------
Minority interests in consolidated subsidiary 3,432 ---
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; .25 million
shares authorized; no shares issued --- ---
Common stock, $.01 par value; 100 million shares
authorized; 27.1 million and 27.8 million shares
issued at December 31, 1995 and 1994, respectively 271 278
Capital in excess of par value 149,999 182,087
Retained earnings 179,231 133,531
Cumulative translation adjustment 3,234 198
Employee stock ownership plan reserve (12,536) (14,055)
Treasury stock, at cost, .1 million shares at
December 31, 1995 and 1994 (4,277) (2,702)
-------- --------
Total Stockholders' Equity 315,922 299,337
-------- --------
Total Liabilities and Stockholders' Equity $597,725 $474,562
======== ========
The accompanying Notes are an integral part of these Financial Statements.
44
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Capital in Cumulative Total
Common Excess of Retained Translation Treasury Stockholders'
Stock Par Value Earnings Adjustment ESOP Reserve Stock Equity
---------- ------------ ----------- ----------- ------------ ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 245 $ 58,226 $ 61,650 $ (399) $(19,414) $ (23) $100,285
Issuance of 3.1 million shares
of common stock, net of
issuance costs 31 115,030 --- --- --- --- 115,061
Stock held in escrow for a
former employee --- 2,840 --- --- --- --- 2,840
Cash paid for fractional shares --- (3) --- --- --- --- (3)
Transactions of pooled company
prior to merger (A) --- (713) --- --- --- --- (713)
Exercise of stock options 1 1,896 --- --- --- --- 1,897
Tax benefit related to stock
options exercised --- 1,732 --- --- --- --- 1,732
Amortization of compensatory
stock options --- 394 --- --- --- --- 394
Translation adjustment --- --- --- (2,839) --- --- (2,839)
Net change in ESOP reserve --- --- --- --- 3,691 --- 3,691
Net income --- --- 14,052 --- --- --- 14,052
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1993 277 179,402 75,702 (3,238) (15,723) (23) 236,397
Exercise of stock options 1 749 --- --- --- --- 750
Tax benefit related to stock
options exercised --- 1,858 --- --- --- --- 1,858
Repurchase of .1 million shares
of common stock --- --- --- --- --- (2,679) (2,679)
Cash dividends declared, $.15 per
common share --- --- (4,169) --- --- --- (4,169)
Compensatory stock options granted --- 78 --- --- --- --- 78
Translation adjustment --- --- --- 3,436 --- --- 3,436
Net change in ESOP reserve --- --- --- --- 1,668 --- 1,668
Net income --- --- 61,998 --- --- --- 61,998
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1994 278 182,087 133,531 198 (14,055) (2,702) 299,337
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
45
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Capital in Cumulative Total
Common Excess of Retained Translation Treasury Stockholders'
Stock Par Value Earnings Adjustment ESOP Reserve Stock Equity
---------- ------------ ----------- ----------- ------------ ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 278 182,087 133,531 198 (14,055) (2,702) 299,337
Exercise of stock options and
warrants 2 (4,850) --- --- --- 9,100 4,252
Tax benefit related to stock
options and warrants exercised --- 4,781 --- --- --- --- 4,781
Repurchase of 1.3 million
shares of common stock --- --- --- --- --- (42,703) (42,703)
Cash dividends declared, $.3075
per common share --- --- (8,263) --- --- --- (8,263)
Cancellation of .9 million
shares of treasury stock (9) (32,019) --- --- --- 32,028 ---
Translation adjustment --- --- --- 3,036 --- --- 3,036
Net change in ESOP reserve --- --- --- --- 1,519 --- 1,519
Net income --- --- 53,963 --- --- --- 53,963
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1995 $ 271 $149,999 $179,231 $ 3,234 $(12,536) $ (4,277) $315,922
======= ======== ======== ======= ======== ======== ========
Transactions of pooled company (A)
prior to merger: 1993
-------
Proceeds from sale of common
stock $ 591
Repurchases of common stock (1,271)
Compensatory stock options
cancelled (33)
-------
$ (713)
=======
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
46
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Cash flows from operating activities: (in thousands)
<S> <C> <C> <C>
Net income $ 53,963 $ 61,998 $ 14,052
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on disposal of Medical business, before income taxes --- (12,061) ---
Extraordinary loss related to early extinguishment of
debt, before income tax benefit --- --- 20,347
Depreciation and amortization 21,488 20,027 19,753
Deferred income taxes associated with continuing operations (1,211) 9,404 (3,821)
Deferred income taxes associated with discontinued
operations (481) (5,181) ---
Other non-cash transactions 668 (27) 2,037
Gain on sale of product line --- --- (2,953)
Loss on disposal of property, plant and equipment 1,027 23 297
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures of
businesses and effects of exchange:
Accounts and notes receivable-trade, net (1,893) (13,308) (2,856)
Inventories (8,233) (7,020) (232)
Prepaid expenses and other current assets (775) 4,555 (433)
Other noncurrent assets 225 (580) (741)
Accounts payable 2,372 (4,514) (8,222)
Accrued liabilities (51) 638 (3,909)
Income taxes payable (2,971) 8,971 (2,911)
Other liabilities 3,388 882 (1,439)
-------- -------- --------
Net cash provided by operating activities 67,516 63,807 28,969
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
47
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Cash flows from investing activities: (in thousands)
<S> <C> <C> <C>
Proceeds from disposal of Medical business 3,260 44,244 ---
Proceeds from sale of product line, net --- --- 3,104
Proceeds from sale of property, plant and equipment, net 2,443 192 46
Capital expenditures (17,633) (13,766) (10,844)
Expenditures for identifiable intangible assets (60) (20) (3,751)
Acquisitions of businesses (73,407) --- (1,350)
Other direct costs of acquisition and divestiture activities (512) (561) (41)
Deferred start-up costs --- (81) (859)
-------- -------- --------
Net cash provided by (used in) investing activities (85,909) 30,008 (13,695)
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
48
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Cash flows from financing activities: (in thousands)
<S> <C> <C> <C>
Proceeds from sale of common stock, including tax benefit
of stock options exercised 9,034 2,608 119,282
Cash paid for treasury stock (42,703) (2,679) (1,274)
Dividends paid (8,123) (2,085) ---
Increase (decrease) in bank overdrafts 1,580 (1,738) 3,270
Proceeds from long-term borrowings, net of deferred
financing costs 123,635 89,272 25,543
Payments on long-term borrowings (70,915) (195,568) (144,587)
Increase (decrease) in short-term borrowings (28) 5,456 (4,660)
Decrease in employee stock ownership plan reserve, excluding
accrued contributions 1,519 1,668 3,692
-------- -------- --------
Net cash provided by (used in) financing activities 13,999 (103,066) 1,266
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents 1,090 (1,455) (2,077)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (3,304) (10,706) 14,463
Cash and cash equivalents at beginning of period 7,278 17,984 3,521
-------- -------- --------
Cash and cash equivalents at end of period $ 3,974 $ 7,278 $ 17,984
======== ======== ========
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
49
<PAGE>
<TABLE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
Supplemental disclosures of cash flow information: (in thousands)
<S> <C> <C> <C>
Interest paid $ 6,243 $ 6,766 $ 18,807
Income taxes paid 35,573 26,136 28,255
Non-cash transaction:
Accrued prepayment penalty --- --- 18,456
<FN>
In March 1995, the Company purchased all of the capital stock of KV33
Corporation ("KV33") for $11.5 million. In June 1995, the Company purchased
approximately 96% of the capital stock of Maillefer Instruments, S.A.
("Maillefer") for $65.8 million. In August 1995, the Company purchased the
assets of Dunvale Corporation ("Dunvale") for $1.8 million. In conjunction
with the acquisitions, liabilities were assumed as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
KV33 Maillefer Dunvale
-------- --------- -------
(in thousands)
<S> <C> <C> <C>
Fair value of assets acquired $ 14,329 $ 97,188 $ 1,982
Cash paid for assets or capital stock (11,450) (65,798) (1,839)
-------- --------- -------
Liabilities assumed $ 2,879 $ 31,390 $ 143
======== ========= =======
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
50
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Description of Business
- -----------------------
DENTSPLY (the "Company") designs, develops, manufactures and markets a
broad range of products for the dental market. The Company believes that it is
the world's leading manufacturer and distributor of artificial teeth, endodontic
instruments and materials, impression materials, prophylaxis paste, dental
sealants, ultrasonic scalers, and crown and bridge materials; the leading United
States manufacturer and distributor of dental x-ray equipment, dental
handpieces, dental x-ray film holders and film mounts, and a leading United
States distributor of dental cutting instruments and dental implants. The
Company distributes its dental products in over 100 countries under some of the
most well-established brand names in the industry and is committed to the
development of innovative, high quality, cost-effective new products for the
dental market.
Basis of Presentation
- ---------------------
During 1994, the Company adopted a formal plan to dispose of its Medical
segment. Accordingly, the results of discontinued operations and the gain on
disposal thereof have been reported separately from the continuing operations of
the Company (See Note 3 - Discontinued Operations).
On June 11, 1993, Dentsply International Inc. ("Old Dentsply") merged (the
"Merger") with and into GENDEX Corporation ("GENDEX"), which was the surviving
corporation in the Merger, pursuant to an Agreement and Plan of Merger dated
February 8, 1993, by and between Old Dentsply and GENDEX (See Note 4 - Merger).
The transaction was accounted for as a pooling-of-interests for financial
reporting purposes. Upon effectiveness of the Merger, GENDEX changed its name to
DENTSPLY International Inc.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company
and all significant subsidiaries. Intercompany accounts and transactions are
eliminated. Minority interests in net income of a consolidated subsidiary is not
material and is included in other (income) expense, net.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
51
<PAGE>
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Accounts and Notes Receivable-Trade
- -----------------------------------
The Company sells dental equipment and supplies primarily through a
worldwide network of distributors, although certain product lines are sold
directly to the end user. Revenue is recognized when products are shipped. For
customers on credit terms, the Company performs ongoing credit evaluation of
those customers' financial condition and generally does not require collateral
from them. Accounts and notes receivable-trade are stated net of an allowance
for doubtful accounts of $2.3 million and $1.7 million at December 31, 1995 and
1994, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost or market. At December 31, 1995
and 1994, the cost of $10.6 million, or 8%, and $10.2 million, or 11%,
respectively, of inventories was determined by the last-in, first-out (LIFO)
method. The cost of other inventories was determined by the first-in, first-out
(FIFO) or average cost method.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Except for leasehold improvements, depreciation for financial
reporting purposes is computed by the straight-line method over the following
estimated useful lives: buildings - generally 40 years and machinery and
equipment - 8 to 15 years. The cost of leasehold improvements is amortized over
the shorter of the estimated useful life or the term of the lease. For income
tax purposes, depreciation is computed using various methods.
Identifiable Intangible Assets
- ------------------------------
Identifiable intangible assets include patents, trademarks and non-compete
covenants, licensing agreements, distributor networks and product manufacturing
rights which are amortized on a straight-line basis over their estimated useful
lives, ranging from 5 to 40 years. Identifiable intangible assets are stated net
of accumulated amortization of $22.5 million and $17.8 million at December 31,
1995 and 1994, respectively. Identifiable intangible assets are reviewed for
impairment whenever events or circumstances provide evidence that suggest that
the carrying amount of the asset may not be recoverable. Impairment is
determined by using identifiable undiscounted cash flows.
Costs in Excess of Fair Value of Net Assets Acquired
- ----------------------------------------------------
The excess of costs of acquired companies and product lines over the fair
value of net assets acquired (goodwill) is being amortized on a straight-line
basis over 25 to 40 years. Costs in excess of the fair value of net assets
acquired are stated net of accumulated amortization of $20.0 million and $15.3
52
<PAGE>
million at December 31, 1995 and 1994, respectively. Costs in excess of fair
value of net assets acquired are reviewed for impairment whenever events or
circumstances provide evidence that suggest that the carrying amount of the
asset may not be recoverable. Impairment is determined by using identifiable
undiscounted cash flows.
Accounting for Long-Lived Assets
- --------------------------------
In June 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets for Long-Lived Assets to Be Disposed Of
("Statement 121"), which requires companies to review long-lived assets and
certain identifiable intangibles to be held, used or disposed of for impairment
whenever events or changes in circumstances indicated that the carrying amount
of an asset may not be recoverable. The Company is required to adopt Statement
121 for 1996. The Company believes the adoption of Statement 121 will not have a
significant effect on its financial statements.
Fair Value of Financial Instruments
- -----------------------------------
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The fair
values of financial instruments approximate their recorded values.
Derivatives
- -----------
The Company's only involvement with derivative financial instruments is
forward contracts to hedge assets and liabilities denominated in foreign
currencies.
Foreign Exchange Risk Management
- --------------------------------
The Company routinely enters into forward foreign exchange contracts to
selectively hedge assets and liabilities denominated in foreign currencies.
Market value gains and losses are recognized in income currently and the
resulting gains or losses offset foreign exchange gains or losses recognized on
the foreign currency assets and liabilities hedged. Determination of hedge
activity is based upon market conditions, the magnitude of the foreign currency
assets and liabilities and perceived risks. As of December 31, 1995, the Company
had contracts outstanding for the purchase of approximately $4.4 million of
Swiss francs. At December 31, 1994, the Company had contracts outstanding for
the purchase of approximately $8.1 million of pounds sterling. These foreign
exchange contracts generally have maturities of less than six months and
counterparties to the transactions are typically large international financial
institutions.
Foreign Currency Translation
- ----------------------------
The functional currency for foreign operations, except for those in highly
inflationary economies, has been determined to be the local currency.
53
<PAGE>
Assets and liabilities of foreign subsidiaries are translated at exchange
rates on the balance sheet date; revenue and expenses are translated at the
average year-to-date rates of exchange. The effects of these translation
adjustments are reported in a separate component of stockholders' equity.
Exchange gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved and translation
adjustments in countries with highly inflationary economies are included in
income.
Exchange gains of $.2 million in 1995, and losses of $.5 million in 1994
and $1.6 million in 1993 are included in other (income) expense, net. The
exchange losses in 1994 and 1993 resulted primarily from currency translation
adjustments in Brazil.
Research and Development Costs
- ------------------------------
Research and development costs are charged to expense as incurred and are
included in selling, general and administrative expenses. Research and
development costs amounted to approximately $12.3 million, $10.9 million and
$10.3 million for 1995, 1994 and 1993, respectively.
Stock Based Compensation
- ------------------------
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("Statement 123").
Statement 123 presents companies with the alternative of retaining the current
accounting for stock based compensation or adopting a new accounting method
based on the estimated fair value of equity instruments granted during the year.
Companies that do not adopt the fair value based method of accounting will be
required to adopt the disclosure provisions of Statement 123 for the year ending
December 31, 1996. The Company expects to continue applying its current
accounting principles and in 1996 will present the required footnote
disclosures.
Earnings per Common Share
- -------------------------
Earnings per common share are based on the weighted average number of
common shares outstanding. Common stock equivalents (options and warrants) had
no material effect on the earnings per common share computation. All shares held
by the DENTSPLY Employee Stock Ownership Plan are considered outstanding and are
included in the earnings per common share computation.
In December 1993, the Company issued common stock in a public offering, the
proceeds of which were used to retire debt. If the transaction had taken place
on January 1, 1993, earnings per common share would have been as follows:
54
<PAGE>
Income Before
Extraordinary Extraordinary Net
Item Item Income
------------- ------------- -----------
(in thousands, except per share amounts)
Income as reported $ 28,070 $ (14,018) $ 14,052
Pro forma interest savings 6,885 --- 6,885
Amortization of deferred financing 439 (439) ---
Increase in prepayment penalty --- (3,849) (3,849)
-------- --------- --------
Pro forma net income $ 35,394 $ (18,306) $ 17,088
======== ========= ========
Pro forma average common shares
outstanding 27,607 27,607 27,607
Earnings per common share $1.28 $(.66) $.62
NOTE 2 - BUSINESS ACQUISITIONS AND DIVESTITURES
- -----------------------------------------------
In March 1995, the Company purchased all of the outstanding capital stock
of KV33 Corporation ("KV33") in a cash transaction valued at $11.5 million. The
acquisition was accounted for under the purchase method of accounting and the
results of KV33's operations have been included in the accompanying financial
statements since the date of acquisition. The excess ($10.2 million) of
acquisition cost over the fair value of net assets acquired is being amortized
over 25 years. Pro forma information has been omitted due to immateriality.
In June 1995, the Company purchased approximately 96% of the outstanding
capital stock of Maillefer Instruments S.A. ("Maillefer") from Maillefer
stockholders for SFR11,000 per share in a cash transaction valued at
approximately $65.8 million. Based in Switzerland, Maillefer is a manufacturer
and distributor of principally endodontic instruments.
The acquisition was accounted for under the purchase method of accounting
and the results of Maillefer's operations have been included in the accompanying
financial statements since the date of acquisition. The aggregate purchase price
of $65.8 million plus direct acquisition costs has been allocated on the basis
of estimates of the fair values of assets acquired and liabilities assumed,
which will be finalized in 1996. Since the estimated fair value of net assets
acquired exceeded the purchase price by approximately $19.7 million, the values
otherwise assignable to noncurrent assets acquired have been reduced by a
proportionate part of the excess.
The following unaudited pro forma consolidated results of operations assume
that the acquisition of Maillefer occurred on January 1, 1994 (in thousands,
except per share amounts):
55
<PAGE>
Year Ended December 31,
-----------------------
1995 1994
-------- --------
Net sales $590,051 $559,188
Income from continuing operations 57,106 56,447
Earnings per common share from
continuing operations 2.11 2.03
The pro forma information does not purport to be indicative of the results
that actually would have been obtained had the operations been combined during
the periods presented. The difference of $.11 per common share between actual
and pro forma results in 1995 is primarily due to the inclusion in the pro forma
results of Maillefer operations prior to the June acquisition and differences in
the period in which the effects of purchase price accounting are recognized.
In August 1995, the Company purchased the assets of Dunvale Corporation
("Dunvale") in a cash transaction valued at $1.8 million. The acquisition was
accounted for under the purchase method of accounting and the results of
Dunvale's operations have been included in the accompanying financial statements
since the date of acquisition. The excess ($1.5 million) of acquisition cost
over the fair value of net assets acquired is being amortized over 25 years.
Proforma information has been omitted due to immateriality.
In September 1995, the Company announced the signing of a Letter of Intent
to purchase the dental manufacturing and distribution operations of Tulsa Dental
Instruments LLC for $75 million in cash and an earn-out provision based on the
operating performance of the acquired business. The transaction was consummated
in January 1996.
In December 1993, the Company sold the rights to the VALIANT[registered
trademark] trademark in the United States and Canada along with certain
production assets for $3.1 million. Sales for the VALIANT[registered trademark]
product line in the United States and Canada for 1993 were $4.4 million.
NOTE 3 - DISCONTINUED OPERATIONS
- --------------------------------
In October 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business. The medical
operations included the Eureka X-Ray Tube Corp. (Eureka), GENDEX Medical and CMW
business units which manufacture medical x-ray tubes, medical x-ray systems and
orthopedic bone cement, respectively. The net assets of CMW were sold in
November 1994 and substantially all of the net assets of Eureka were sold in two
transactions in November and December 1994, for a total of $44.5 million. The
$12.0 million gain on disposal, before applicable income taxes, included a
provision of $.5 million for estimated operating losses to be incurred during
the phase-out period of the GENDEX Medical business unit.
56
<PAGE>
Sales from these operations were $18.9 million, $48.6 million and $48.8
million for 1995, 1994 and 1993, respectively. Certain expenses have been
allocated to discontinued operations, including interest expense, which was
allocated based on the ratio of net assets discontinued to the total net assets
of the consolidated entity.
The components of net assets of discontinued operations included in the
Consolidated Balance Sheets at December 31, 1995 and 1994 were:
December 31,
---------------------
1995 1994
-------- --------
(in thousands)
Accounts and notes receivable-trade, net $ 2,105 $ 4,650
Inventories 6,550 6,312
Deferred income taxes 4,611 4,130
Prepaid expenses and other current assets 174 1,848
Property, plant and equipment, net 2,644 3,899
Other noncurrent assets, net 2,331 1,298
Costs in excess of fair value of net
assets acquired, net 3,348 3,448
Accounts payable (1,106) (2,649)
Accrued liabilities (9,043) (8,623)
Other liabilities (5,744) (6,681)
-------- --------
$ 5,870 $ 7,632
======== ========
The sale of the remaining operations comprising the medical business was
completed in the first quarter of 1996.
NOTE 4 - MERGER
- ---------------
On June 11, 1993, Old Dentsply merged with and into GENDEX, which was the
surviving corporation in the Merger, pursuant to an Agreement and Plan of Merger
dated February 8, 1993 by and between Old Dentsply and GENDEX. Upon
effectiveness of the Merger, GENDEX changed its name to DENTSPLY International
Inc. and changed its fiscal year end to December 31 from March 31. In the
Merger, the stockholders of Old Dentsply received 14.4 million shares of GENDEX
common stock in exchange for all the outstanding shares of Old Dentsply common
stock. The transaction was accounted for as a pooling-of-interests for financial
reporting purposes.
In connection with the Merger, the Company recorded after-tax charges of
$7.9 million during 1993. The Merger costs included expenses incurred to
consummate the transactions such as investment banking, legal fees and
accounting fees.
57
<PAGE>
NOTE 5 - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
- ----------------------------------------------------
The Company's continuing operations are conducted primarily in one industry
segment as a designer, manufacturer and distributor of dental equipment and
supplies.
The Company's operations are structured to achieve consolidated objectives.
As a result, significant interdependencies exist among the Company's operations
in different geographic areas. Intercompany sales of manufacturing materials
between areas are at prices which, in general, provide a reasonable profit after
coverage of all manufacturing costs. Intercompany sales of finished goods are at
prices intended to provide a reasonable profit for purchasing locations after
coverage of marketing and general and administrative costs.
Operating income (loss) from continuing operations before discretionary
ESOP contributions consists of net sales less related costs, direct operating
expenses and intercompany royalties allocated from Corporate for use of patents
and trademarks owned by the Company. In 1993, operating income (loss) from
continuing operations before discretionary ESOP contributions for Corporate
included $8.2 million of costs associated with the Merger. Assets by geographic
area are those used in the operations in the geographic area.
58
<PAGE>
<TABLE>
The following table sets forth information about the Company's continuing
operations in different geographic areas for 1995, 1994 and 1993:
<CAPTION>
United Adjustments/
States Europe Other Corporate Eliminations Total
-------- -------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1995 (in thousands)
- ----
Net sales:
Customers $322,929 $174,139 $ 74,960 $ --- $ --- $572,028
Intercompany 46,613 13,680 4,822 --- (65,115) ---
-------- -------- -------- -------- -------- --------
Total net sales 369,542 187,819 79,782 --- (65,115) 572,028
Operating income (loss)
from continuing operations
before discretionary
ESOP contributions 86,315 26,015 434 (10,703) (1,326) 100,735
Assets 319,429 258,723 43,631 128,823 (158,751) 591,855
1994
- ----
Net sales:
Customers $317,492 $136,505 $ 70,761 $ --- $ --- $524,758
Intercompany 41,653 7,085 4,130 --- (52,868) ---
-------- -------- -------- -------- -------- --------
Total net sales 359,145 143,590 74,891 --- (52,868) 524,758
Operating income (loss)
from continuing operations
before discretionary
ESOP contributions 88,204 15,200 3,133 (9,948) 811 97,400
Assets 287,364 162,365 39,400 110,802 (133,001) 466,930
<FN>
</FN>
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
United Adjustments/
States Europe Other Corporate Eliminations Total
-------- -------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1993 (in thousands)
- ----
Net sales:
Customers $317,940 $118,680 $ 67,200 $ --- $ --- $503,820
Intercompany 42,007 5,899 2,895 --- (50,801) ---
-------- -------- -------- -------- -------- --------
Total net sales 359,947 124,579 70,095 --- (50,801) 503,820
Operating income (loss)
from continuing operations
before discretionary
ESOP contributions 77,575 11,044 6,052 (20,227) (478) 73,966
Assets 289,889 142,014 35,305 152,749 (153,170) 466,787
<FN>
Third party export sales from the United States are less than ten percent
of total sales. In 1995, no customer accounted for 10% or more of net sales. One
customer accounted for approximately 11% and 10% of net sales in 1994 and 1993,
respectively.
</FN>
</TABLE>
60
<PAGE>
NOTE 6 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31,
--------------------
1995 1994
-------- --------
(in thousands)
Finished goods $ 70,677 $ 46,765
Work-in-process 26,440 19,238
Raw materials and supplies 28,587 22,896
-------- --------
$125,704 $ 88,899
======== ========
Pre-tax income was $.2 million lower in 1995, $1.2 million lower in 1994
and $.6 million higher in 1993 as a result of using the LIFO method as compared
to using the FIFO method. If the FIFO method had been used to determine the cost
of LIFO inventories, the amounts at which net inventories are stated would be
lower than reported at December 31, 1995 and 1994 by $2.0 million and $2.2
million, respectively.
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
December 31,
--------------------
1995 1994
-------- --------
Assets, at cost: (in thousands)
Land $ 17,395 $ 16,130
Buildings and improvements 67,903 41,420
Machinery and equipment 88,417 61,103
Construction in progress 9,039 5,244
-------- --------
182,754 123,897
Less: Accumulated depreciation 42,653 32,757
-------- --------
$140,101 $ 91,140
======== ========
NOTE 8 - ACCRUED LIABILITIES
- ----------------------------
Accrued liabilities consist of the following:
December 31,
--------------------
1995 1994
-------- --------
Payroll, commissions, bonuses (in thousands)
and other cash compensation $ 10,441 $ 10,042
Employee benefits 6,947 6,931
Other 29,183 17,674
-------- --------
$ 46,571 $ 34,647
======== ========
61
<PAGE>
NOTE 9 - FINANCING ARRANGEMENTS
- -------------------------------
Short-Term Borrowings
- ---------------------
Short-term bank borrowings amounted to $7.6 million and $9.1 million at
December 31, 1995 and 1994, respectively. Unused lines of credit for short-term
financing at December 31, 1995 and 1994 were $63.0 million and $59.4 million,
respectively. Substantially all unused lines of credit have no major
restrictions and are renewable annually. Interest is charged on borrowings under
these lines of credit at various rates, generally under prime or equivalent
money rates.
Long-Term Borrowings
- --------------------
December 31,
--------------------
1995 1994
-------- --------
(in thousands)
$175.0 million bank revolving loan facility
maturing December 23, 1999 $ --- $ 10,000
$60.0 million bank term loan maturing
December 23, 1999, Swiss Francs 45.9 million
and Pounds Sterling 12.5 million outstanding
at December 31, 1995, bearing interest at a
weighted average of 2.4% for Swiss Franc
borrowings and 6.9% for Pounds Sterling
borrowings 59,172 ---
$25.0 million bank multicurrency revolving credit
facility maturing August 31, 1997, various
currencies outstanding at December 31, 1995,
bearing interest at a weighted average of 9.1% 9,496 2,771
Other borrowings, various currencies and rates 7 71
-------- --------
68,675 12,842
Less: Current portion (included in notes
payable and current portion of
long-term debt) --- 53
-------- --------
$ 68,675 $ 12,789
======== ========
The bank revolving credit agreement contains certain affirmative and
negative covenants as to the operations and financial condition of the Company,
the most restrictive of which pertain to asset dispositions, maintenance of
certain levels of net worth, and prescribed ratios of indebtedness to total
capital and operating income plus depreciation and amortization to interest
expense. The Company pays a facility fee of .10 percent annually on the entire
amount of the commitment. Interest rates on amounts borrowed under the facility
will depend on the maturity of the borrowing, the interest rate option selected,
and, in the event of a LIBOR borrowing, the ratio of interest expense to
operating income.
62
<PAGE>
The bank term loan and the bank multicurrency revolving credit facility
contain affirmative and negative covenants as to the operations and financial
condition of the Company, which are substantially equivalent to those in the
bank revolving credit agreement. The Company pays a facility fee of .10 percent
annually on the entire amount of the bank multicurrency revolving credit
facility commitment.
In 1993 the Company recorded an extraordinary loss of $14.0 million ($20.3
million before income tax benefit) or $.57 per common share for the early
retirement of debt. The extraordinary loss consisted primarily of a prepayment
premium on $85.0 million of Secured Notes.
NOTE 10 - OTHER LIABILITIES
- ---------------------------
Other liabilities consist of the following:
December 31,
--------------------
1995 1994
-------- --------
(in thousands)
Pension $ 30,635 $ 26,479
Medical and other postretirement
benefits 10,729 10,009
Other 5,740 4,366
-------- --------
$ 47,104 $ 40,854
======== ========
NOTE 11 - STOCKHOLDERS' EQUITY
- ------------------------------
In December 1994, the Board of Directors authorized the repurchase of up to
2.8 million shares of common stock on the open market or in negotiated
transactions. This authorization to repurchase shares expired on December 31,
1995. In December 1995, the Board of Directors authorized the repurchase of up
to 2.8 million additional shares of common stock on the open market or in
negotiated transactions. This authorization to repurchase shares expires on
December 31, 1996. The Company repurchased 1.3 million shares for $42.7 million
and .1 million shares for $2.7 million in 1995 and 1994, respectively.
In January 1994, the Company granted options to purchase 15,000 shares to
the Chairman of the Board at an exercise price of $44.50, which was equal to the
market price on the date of grant. The options were immediately exercisable and
expire ten years from date of grant.
In December 1993, the Company issued 3.1 million shares of its common stock
in a public offering resulting in net proceeds of $115.1 million.
63
<PAGE>
In connection with the Merger, the number of authorized shares of common
stock was increased from 25 million to 100 million shares and the par value of
all shares was changed from $1.00 to $.01 per share. Common stock and capital in
excess of par value and all transactions involving common stock have been
restated to reflect the revised par value.
The Company has four stock option plans (1987 Plan, 1992 Plan, 1993 Stock
Option Conversion Plan and 1993 Plan). Under the 1987 and 1992 Plans, a
committee appointed by the Board of Directors may grant to key employees and
directors of the Company up to one million option shares of common stock at an
exercise price determined by such committee, but not less than the fair market
value of the common stock on the date of grant. Options expire ten years and one
month or ten years and one day after date of grant under the 1987 Plan and 1992
Plan, respectively.
The 1993 Stock Option Conversion Plan provides for the conversion of all
options to acquire shares of common stock of Old Dentsply outstanding at the
time of the Merger into options to acquire shares of the common stock of the
Company. Options to acquire shares of Old Dentsply were converted into options
to acquire 28,000 shares of common stock of the Company at exercise prices
ranging from $5.89 to $8.95 per share. Outstanding options under the 1993 Stock
Option Conversion Plan expire on various dates but not later than April 9, 1996.
No further options can be granted under this plan.
The 1993 Plan enables the Company to grant "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, to key employees of the Company, and stock options which do not
constitute ISOs ("NSOs") to key employees and non-employee directors of the
Company. Each non-employee director receives automatic and non-discretionary
NSOs to purchase 3,000 shares of common stock on the date he or she becomes a
non-employee director and an additional 3,000 shares on the third anniversary of
the date the non-employee director was last granted an option. Grants of options
to key employees are solely discretionary. ISOs and NSOs generally expire ten
years from date of grant and become exercisable over a period of three years
after the date of grant at the rate of one-third per year, except that they
become immediately exercisable upon death, disability or retirement. The
committee may shorten or lengthen the exercise schedule for any or all options
granted to key employees. The exercise price of ISOs and NSOs is generally equal
to the fair market value on the date of grant. ISOs granted to an individual who
possesses more than 10% of the combined voting power of all classes of stock of
the Company have an exercise price of 110% of fair market value and expire five
years from the date of grant. The number of shares available for options under
the 1993 Plan is adjusted annually to equal 5% of the outstanding common shares
of the Company on each January 1.
Options granted under any of the four Plans may be exercised only while the
grantee is employed by the Company or is a member of the Board of Directors or
within defined periods after termination.
64
<PAGE>
Transactions involving the Plans are summarized as follows:
Option
Price Available
per Share Outstanding Exercisable for Grant
------------ ----------- ----------- ---------
Balance at December 31, 1992 $2.66-$46.25 620,213 497,586 2,249,832
Authorized --- --- 1,000,000
Granted $37.00-$39.75 54,000 --- (54,000)
Became exercisable --- 114,146 ---
Exercised $2.66-$25.44 (192,521) (192,521) ---
Expired/Canceled (14,342) (5,861) (1,905,832)
-------- -------- ---------
Balance at December 31, 1993 $3.13-$46.25 467,350 413,350 1,290,000
Authorized --- --- 388,299
Granted $8.95-$44.50 387,385 --- (387,385)
Became exercisable --- 18,885 ---
Exercised $3.13-$ 8.95 (146,493) (146,493) ---
Expired/Canceled (33,600) --- 33,600
-------- -------- ---------
Balance at December 31, 1994 $4.56-$46.25 674,642 285,742 1,324,514
Authorized --- --- 2,975
Granted $31.00-$37.75 447,300 --- (447,300)
Became exercisable --- 132,834 ---
Exercised $4.56-$23.81 (188,881) (188,881) ---
Expired/Canceled (67,000) (33,132) 67,000
-------- -------- ---------
Balance at December 31, 1995 $5.25-$44.50 866,061 196,563 947,189
======== ======== =========
The Company issued 180,000 stock purchase warrants in August 1990 in
connection with an acquisition to the principals of an investment banking firm,
one of whom is a director of the Company. The warrants are exercisable at any
time through August 28, 2000, at an exercise price of $6.125 per share (market
price at date issued). During 1995, 140,000 of the warrants were exercised and
40,000 remain outstanding at December 31, 1995.
NOTE 12 - INCOME TAXES
- ----------------------
The components of income from continuing operations before income taxes are
as follows:
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
United States $ 66,403 $ 74,479 $ 36,602
Foreign 23,614 17,183 14,740
-------- -------- --------
$ 90,017 $ 91,662 $ 51,342
======== ======== ========
65
<PAGE>
The components of the provision for income taxes are as follows:
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
Current:
U.S. federal $ 21,526 $ 17,774 $ 21,375
U.S. state 4,112 3,403 2,445
Foreign 11,627 6,937 6,198
-------- -------- --------
Total 37,265 28,114 30,018
-------- -------- --------
Deferred:
U.S. federal (994) 6,863 (3,450)
U.S. state (170) 1,584 (646)
Foreign (47) 957 275
-------- -------- --------
Total (1,211) 9,404 (3,821)
-------- -------- --------
$ 36,054 $ 37,518 $ 26,197
======== ======== ========
The provision for income taxes is reconciled to income from continuing
operations before income taxes as follows:
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Statutory federal income
tax rate 35.0% 35.0% 35.0%
Effect of:
State income taxes, net of
federal benefit 3.0 3.5 2.3
Nondeductible amortization
of goodwill 1.5 1.0 1.9
Nondeductible merger and
acquisition costs - - 4.9
Foreign losses with no tax
benefit 1.4 1.2 2.1
Tax on foreign earnings
repatriated - - 2.3
Other (0.8) 0.2 2.5
-------- -------- --------
40.1% 40.9% 51.0%
======== ======== ========
66
<PAGE>
The tax effect of temporary differences giving rise to deferred tax
liabilities and assets are as follows:
December 31, 1995 December 31, 1994
----------------------- -----------------------
Current Noncurrent Current Noncurrent
Asset Asset Asset Asset
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
(in thousands)
Employee benefit accruals $ 972 $ 4,968 $ 2,201 $ 2,851
Product warranty accruals 929 --- 789 ---
Differences in financial
reporting and tax basis
for:
Inventory (3,845) --- (185) ---
Property, plant and
equipment --- (28,852) --- (19,728)
Identified intangible assets --- (9,943) --- (7,053)
Accrued costs associated with
discontinued operations 4,611 --- 4,130 ---
Insurance premium accruals 1,884 --- 1,360 ---
Other 1,695 (1,087) 1,450 (587)
Foreign tax credit
carryforwards --- 1,070 --- 950
Tax loss carryforwards in
foreign jurisdictions --- 4,882 --- 2,936
Valuation allowance for
foreign tax credit and
tax loss carryforwards --- (5,952) --- (3,886)
-------- -------- -------- --------
$ 6,246 $(34,914) $ 9,745 $(24,517)
======== ======== ======== ========
Current and non-current deferred tax assets and liabilities are included in
the following balance sheet captions:
December 31,
--------------------
1995 1994
-------- --------
(in thousands)
Deferred income taxes $ 12,836 $ 5,710
Net assets of discontinued operations 4,611 4,130
Current portion of deferred income taxes (11,201) (95)
Other noncurrent assets, net 4,028 203
Deferred income taxes (38,942) (24,720)
The provision for income taxes was reduced due to utilization of tax loss
carryforwards by $47,000 in 1994 and $.4 million in 1993. Certain foreign
subsidiaries of the Company have tax loss carryforwards of $11.8 million at
December 31, 1995, of which $9.7 million expire through 2000 and $2.1 million
may be carried forward indefinitely. The tax benefit of these tax loss
carryforwards has been offset by a valuation allowance.
67
<PAGE>
At December 31, 1995, the Company had foreign tax credits available for
carryforward of $1.1 million, which expire in 1997. The tax benefit of these tax
credit carryforwards has been offset by a valuation allowance.
Income taxes have not been provided on $28.4 million of undistributed
earnings of foreign subsidiaries, which will continue to be reinvested. If
remitted as dividends, these earnings could become subject to additional tax. It
is not practicable to estimate the amount of additional tax that might be
payable; however, the Company believes that U.S. foreign tax credits would
largely eliminate any U.S. tax payable.
NOTE 13 - BENEFIT PLANS
- -----------------------
Substantially all of the employees of the Company and its subsidiaries are
covered by government or Company-sponsored pension plans. Total pension costs
for Company-sponsored defined benefit, defined contribution and employee stock
ownership plans amounted to $7.5 million in 1995, $6.0 million for 1994 and $9.8
million for 1993. The Company maintains an Employee Stock Ownership Plan (the
"ESOP") covering substantially all the U.S. non-union employees of DENTSPLY.
Contributions to the ESOP for 1995, 1994 and 1993 were $1.7 million, $1.9
million and $5.7 million, respectively. In addition, interest expense incurred
on ESOP loans and participant notes approximated $.2 million for 1995, $.5
million for 1994 and $.6 million for 1993.
The Company makes annual contributions to the ESOP of not less than the
amounts required to service ESOP debt. In connection with the refinancing of
ESOP debt in March 1994, the Company will also make additional cash
contributions of at least $3.6 million over the next eight years. Dividends
received by the ESOP on allocated shares are passed through to Plan
participants. Most ESOP shares were initially pledged as collateral for its
debt. As the debt is repaid, shares are released from collateral and allocated
to active employees, based on the proportion of debt service paid in the year.
At December 31, 1995, the ESOP held 6.7 million shares, of which 5.8 million
shares were allocated to Plan participants and .9 million shares were
unallocated and pledged as collateral for ESOP debt. Unallocated shares held by
the ESOP were acquired prior to December 31, 1992 and are accounted for in
accordance with Statement of Position 76-3.
The Employee Stock Ownership Plan reserve consists of a loan receivable
from the Employee Stock Ownership Plan bearing interest at 3.06%, payable in
equal quarterly installments through March 31, 2004.
The Company maintains pension plans for its employees in Germany and for
employees of Maillefer in Switzerland. These plans provide benefits based upon
age, years of service and remuneration. The German plans are unfunded book
reserve plans. The pension provision for the German and Swiss plans included the
following components:
68
<PAGE>
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
Service cost $ 1,935 $ 1,021 $ 798
Interest cost on projected benefit
obligations 2,839 2,009 1,749
Net investment return on plan assets (251) --- ---
Net amortization and deferral 296 87 (19)
-------- -------- --------
$ 4,819 $ 3,117 $ 2,528
======== ======== ========
The funded status and amounts recognized in the consolidated balance sheets for
these retirement plans were as follows:
December 31, 1995 December 31, 1994
------------------------ ------------------------
Assets Accumulated Assets Accumulated
Exceeded Benefits Exceeded Benefits
Accumulated Exceeded Accumulated Exceeded
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
Actuarial present value of: (in thousands)
Vested benefit
obligations $ 18,936 $ 25,660 $ --- $ 21,922
======== ======== ======== ========
Accumulated benefit
obligations $ 18,936 $ 27,756 $ --- $ 24,184
======== ======== ======== ========
Actuarial present value
of projected benefit
obligations $ 20,443 $ 32,382 $ --- $ 28,191
Plan assets at fair value 25,526 --- --- ---
-------- -------- -------- --------
Plan assets less (greater)
than projected benefit
obligations (5,083) 32,382 --- 28,191
Unrecognized obligation --- (1,870) --- (1,838)
Unrecognized net gain 630 905 --- 686
-------- -------- -------- --------
(Prepaid pension expense)
pension liability $ (4,453) $ 31,417 $ --- $ 27,039
======== ======== ======== ========
The projected benefit obligations for these plans were determined using
discount rates of 7.5 percent as of December 31, 1995 and 1994 in Germany and
4.5 percent as of December 31, 1995 in Switzerland. The assumed long-term rate
of return on Swiss plan assets for 1995 was 5.0 percent. The weighted average
rate of increase used for future compensation levels was 5.0 percent for 1995,
1994 and 1993 in Germany and 3.0 percent for 1995 in Switzerland.
69
<PAGE>
The Company sponsors an unfunded defined benefit postretirement medical
plan that covers certain U.S. based non-union employees. This postretirement
healthcare plan is contributory, with retiree contributions adjusted annually to
limit the Company's contribution to $21 per month per retiree for most
participants who retired after June 1, 1985. The Company also sponsors unfunded
non-contributory postretirement medical plans for a limited number of union
employees and their spouses and retirees of a discontinued operation.
The following table sets forth the combined status of the plans:
December 31,
--------------------
1995 1994
-------- --------
Accumulated postretirement benefit (in thousands)
obligation:
Retirees $ 8,317 $ 6,698
Fully eligible active plan
participants 468 608
Other active plan participants 1,498 1,362
-------- --------
Accumulated postretirement benefit
obligation at end of period 10,283 8,668
Unrecognized gain 446 1,341
-------- --------
Net postretirement benefit
liability $ 10,729 $ 10,009
======== ========
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Net periodic postretirement benefit (in thousands)
cost for the period included the
following components:
Service cost - benefits attributed
to service during the period $ 188 $ 178 $ 197
Interest cost on accumulated
postretirement benefit obligation 804 679 627
-------- -------- --------
Net periodic postretirement
benefit cost $ 992 $ 857 $ 824
======== ======== ========
For measurement purposes, the annual rate of increase in the per capita
cost of covered healthcare benefits assumed for 1995 and thereafter was 10% in
1995 and 1994 and 9.5% in 1993. The healthcare cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed healthcare cost trend rates by one percentage point in each year would
70
<PAGE>
increase the accumulated postretirement benefit obligation at December 31, 1995
by $.8 million and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost by $.1 million for the year then ended.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% for 1995 and 1994.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company leases automobiles and certain office, warehouse, machinery and
equipment and manufacturing facilities under noncancellable operating leases.
These leases generally require the Company to pay insurance, property taxes and
other expenses related to the leased property. Total rental expense for all
operating leases was $8.8 million for 1995, $8.1 million for 1994 and $7.4
million for 1993.
Rental commitments, principally for real estate (exclusive of taxes,
insurance and maintenance), automobiles and office equipment amount to: $7.3
million for 1996, $5.3 million for 1997, $3.6 million for 1998, $2.3 million for
1999, $1.5 million for 2000 and $11.5 million thereafter (net of sublease
rentals of $.3 million in 1996, $.2 million in 1997, $.1 million in 1998, $.1
million in 1999, $.1 million in 2000, and $.9 million thereafter).
The Company has sold certain receivables with recourse liability and
entered into third party guarantees approximating $1.0 million at December 31,
1995 and $2.0 million at December 31, 1994.
At December 31, 1995, the Company had a contractual commitment to purchase
implant, prosthetic and laboratory products from Core-Vent Corporation. This
commitment is estimated at $175.4 million at December 31, 1995, for years
through 2003 as follows:
(in thousands)
1996 $ 18,897
1997 21,057
1998 22,321
1999 23,660
2000 25,079
Later years 64,337
--------
$175,351
========
Purchases under the contract were $19.4 million in 1995, $19.1 million in
1994 and $15.6 million in 1993.
The Company has certain noncancellable purchase commitments for dental burs
and x-ray units and parts amounting to $3.9 million in 1996, $.2 million in 1997
and zero thereafter.
The Company has employment agreements with its executive officers and
certain other management employees. These agreements generally provide for
salary continuation for a specified number of months under certain
circumstances. If all of the employees under contract were to be terminated by
the Company without cause (as defined) the Company's liability would be
approximately $4.4 million at December 31, 1995.
71
<PAGE>
The Company is from time to time a party to lawsuits arising out of its
operations. The Company believes that pending litigation to which it is a party
will not have a material adverse effect upon its consolidated financial position
or results of operations.
NOTE 15 - UNUSUAL OR NON-RECURRING ITEMS
- ----------------------------------------
During 1995 and 1993, the Company recorded certain unusual or non-recurring
charges which impacted the comparison with other periods. These unusual or
non-recurring charges, on an after tax basis, included the following:
Year Ended December 31,
-----------------------
1995 1993
-------- --------
(in thousands)
Costs associated with consolidation of
all executive functions in York, PA $ 1,452 $ ---
Loss on sale of corporate aircraft 369 ---
Merger transaction costs --- 7,863
Write-off of accounts receivable from
Healthco International, a major distributor
which filed for Chapter 11 bankruptcy
protection in June 1993 --- 4,310
Additional reserves and accruals for certain
litigation --- 1,110
Final discretionary contributions to the ESOP
related to Old Dentsply and severance costs
for 94 supervisory and administrative
personnel --- 3,173
-------- --------
$ 1,821 $ 16,456
======== ========
The impact of these expenses on earnings per common share was $.07 in 1995
and $.67 in 1993.
NOTE 16 - RELATED PARTY TRANSACTIONS
- ------------------------------------
The Company leases its Des Plaines, Illinois office and manufacturing
facility from a partnership whose partners include a director and former
directors of the Company. Under terms of the noncancellable operating lease, the
Company currently pays $.7 million per year with provisions for an annual
increase, as defined, of up to 3% per annum. The Company is responsible for
paying property taxes, utilities, insurance, maintenance and repair costs with
respect to the facility. The lease expires in August 2011 and provides the
Company with an option to extend the term of the lease for an additional
five-year period.
The Company purchased 800,000 shares from the McDonough family interests
for an aggregate purchase price of $27.6 million pursuant to an agreement
entered into on February 8, 1995, in connection with John J. McDonough's
resignation as Chief Executive Officer of the Company.
72
<PAGE>
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- -----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
1995: (in thousands except per share amounts)
- -----
Net sales $133,105 $139,878 $137,330 $161,715
Gross profit 66,435 70,163 62,919 81,335
Operating income from continuing
operations before discretionary
ESOP contributions 22,911 26,912 17,342 33,570
Net income 12,972 13,237 9,479 18,275
Earnings per common share .48 .49 .35 .68
Dividends per common share .075 .075 .075 .0825
1994:
- -----
Net sales $126,848 $127,967 $129,930 $140,012
Gross profit 61,120 64,082 65,615 66,906
Operating income from continuing
operations before discretionary
ESOP contributions 21,873 24,605 24,583 26,339
Income from continuing
operations 11,588 13,566 13,781 15,209
Income from the operation
of discontinued Medical
business 767 468 75 ---
Gain on disposal of
Medical business --- --- --- 6,543
-------- -------- -------- --------
Net income $ 12,355 $ 14,034 $ 13,856 $ 21,752
======== ======== ======== ========
Earnings per common share:
Income from continuing
operations $ .42 $ .49 $ .50 $ .55
Income from the operation
of discontinued Medical
business .03 .02 --- ---
Gain on disposal of
Medical business --- --- --- .23
----- ----- ----- -----
Net income $ .45 $ .51 $ .50 $ .78
===== ===== ===== =====
Dividends per common share --- --- $.075 $.075
73
<PAGE>
<TABLE>
Schedule II DENTSPLY INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS(a)
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
Additions
---------
Balance at Charged to Charged to Write-offs Balance
Beginning Costs and Other Net of Translation at End
Description of Period Expenses Accounts Recoveries Adjustment of Period
----------- ---------- ---------- ---------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
For Year Ended December 31,
1993 $1,751 $7,602 $ - $(7,625) $ 14 $ 1,742
1994 1,742 163 - (287) 59 1,677
1995 1,677 515 209 (b) (213) 66 2,254
Allowance for trade discounts:
For Year Ended December 31,
1993 447 2,180 - (2,310) (2) 315
1994 315 2,662 - (2,466) (5) 506
1995 506 2,446 - (2,220) 5 737
Inventory valuation reserves:
For Year Ended December 31,
1993 8,295 1,462 (813) (3,518) (52) 5,374
1994 5,374 1,886 2 (1,765) 125 5,622
1995 5,622 908 15,608 (c) (1,869) 459 20,728
<FN>
- ------------------
(a) Excludes discontinued operations.
(b) Includes Maillefer acquisition $209.
(c) Includes Maillefer acquisition $15,531.
</FN>
</TABLE>
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DENTSPLY INTERNATIONAL INC.
April 1, 1996 By:/s/ Burton C. Borgelt
-----------------------
Burton C. Borgelt
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Burton C. Borgelt
- ------------------------- Chairman of the Board April 1, 1996
Burton C. Borgelt and a Director
(Principal Executive Officer)
/s/ John C. Miles, II
- ------------------------- President and Chief April 1, 1996
John C. Miles, II Executive Officer and
a Director
/s/ Edward D. Yates
- ------------------------- Senior Vice President April 1, 1996
Edward D. Yates and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
/s/ Douglas K. Chapman
- ------------------------- Director April 1, 1996
Douglas K. Chapman
/s/ Michael J. Coleman April 1, 1996
- ------------------------- Director
Michael J. Coleman
/s/ Arthur A. Dugoni April 1, 1996
- ------------------------- Director
Arthur A. Dugoni, D.D.S., M.S.D.
/s/ C. Frederick Fetterolf
- -------------------------- Director April 1, 1996
C. Frederick Fetterolf
75
<PAGE>
/s/ William S. Green Director April 1, 1996
- -------------------------
William S. Green
/s/ Arthur L. Herbst Director April 1, 1996
- -------------------------
Arthur L. Herbst, M.D.
/s/ Leslie A. Jones Director April 1, 1996
- -------------------------
Leslie A. Jones
/s/ W. Keith Smith Director April 1, 1996
- -------------------------
W. Keith Smith
76
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
10.3 Amended and Restated Split Dollar 78
Insurance Agreement between The
McDonough Insurance Trust and the
Company dated October 25, 1995
10.11 Employment Agreement dated January 1, 83
1996 between the Company and Burton C.
Borgelt
10.12 (b) Amendment to Employment Agreement 88
between the Company and John C.
Miles, II dated February 16, 1996,
effective January 1, 1996
10.17 Employment Agreement dated January 1, 89
1996 between the Company and W.
William Weston
10.18 Employment Agreement dated January 1, 96
1996 between the Company and Thomas L.
Whiting
10.31 (b) Amendment to Letter Agreement between 103
the Company and John J. McDonough dated
July 6, 1995
10.35 Multi-Currency Term Loan Agreement among 105
Dentsply Ltd., the banks named therein,
and ABN AMRO Bank N.V., dated as of May 12,
1995 (Note: All attachments have been
omitted. Copies of such attachments
will be furnished supplementally to the
Securities and Exchange Commission upon
request.)
11 Computation of earnings per share 153
21.1 Subsidiaries of the Company 154
23.1 Consent of KPMG Peat Marwick LLP 156
27 Financial Data Schedule 157
77
<PAGE>
AMENDED AND RESTATED
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AMENDED AND RESTATED SPLIT DOLLAR INSURANCE AGREEMENT, made and
entered into this 25th day of October, 1995, between DENTSPLY INTERNATIONAL INC.
(formerly known as GENDEX CORPORATION), a Delaware corporation, hereinafter
referred to "Employer" and THE McDONOUGH INSURANCE TRUST, hereinafter referred
to "Owner."
W I T N E S S E T H:
WHEREAS, Employer and Owner are parties to that certain Split Dollar
Insurance Agreement dated as of April 4, 1988 (the "1988 Agreement"), relating
to the payment of premiums on an insurance policy through a split dollar life
insurance program established as an additional form of compensation to John J.
McDonough ("Employee"); and
WHEREAS, Employer and Owner wish to amend and restate the 1988
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises set forth herein,
Owner and Employer hereby agree as follows:
1. Amendment and Restatement.
--------------------------
This Agreement amends and restates the 1988 Agreement in its
entirety.
2. Policy.
-------
This Agreement applies to and is executed in respect of life
insurance policy number 1A2196287-0 (the "Policy") issued by Pacific Mutual Life
Insurance Company (the "Insurer") on the life of the Employee's wife, Marilyn
McDonough (the "Insured").
3. Premium Payment.
----------------
The parties acknowledge that pursuant to the 1988 Agreement,
Employer has paid premiums under the Policy in an aggregate amount of $662,100
(the "Loan Amount"). From and after the date of this Agreement, Employer will
have no further obligation to make premium payments under the Policy.
4. Repayment.
----------
Upon the earlier of the termination of the Policy or the death of
the Insured, Owner shall pay to Employer an amount equal to the Loan Amount
without interest. Employee has the right and option to make annual payments to
Employer in connection herewith, and all such amounts shall reduce the Loan
Amount. Such payments, if any, by Employee shall be made on or about the
anniversary of the execution of this Agreement.
78
<PAGE>
5. Security.
---------
To secure the right of Employer to receive the Loan Amount, Owner
has, contemporaneously with the execution of the 1988 Agreement, assigned the
Policy to Employer as collateral under that certain Collateral Assignment dated
April 4, 1988. Said Assignment grants Employer the limited power to enforce its
rights to be paid the Loan Amount by realizing on the cash value of the Policy,
as defined therein, and on a portion of the death benefit thereof. The interest
of Employer in and to the Policy shall be specifically limited to the recovery
of the Loan Amount in the event the Policy is surrendered or cancelled by Owner
as provided below, and upon the death of the Insured. Owner shall have the right
at any time to require Employer to execute a release of the Collateral
Assignment of the Policy hereunder upon payment to Employer of the Loan Amount.
Upon the execution hereof, Employer shall release any and all security and
collateral, other than the Collateral Assignment, securing payment of the Loan
Amount.
6. Surrender.
----------
Owner shall have the sole right to surrender or cancel the Policy
and to receive the proceeds therefrom; provided that the unpaid Loan Amount
shall promptly be remitted to Employer by Insurer. The balance of the cash
surrender value, if any, shall belong to Owner.
7. Death.
------
Upon the death of the Insured, Employer shall be entitled to
receive a portion of the death benefit provided under the Policy equal to the
unpaid Loan Amount. The balance of the death benefit under the Policy shall
belong to and shall be paid directly to the beneficiary or beneficiaries
designated by Owner in the manner and in the amount provided by the beneficiary
designation endorsed on the Policy. Any beneficiary designation provision on
said Policy shall comply with the provisions of this Agreement.
8. Remedies.
---------
If Owner fails to repay Employer the Loan Amount as provided
herein, Owner shall execute any instruments and perform all acts which may be
required by the Insurer to perfect Employer's security interest in the Policy
and to vest all rights in Employer. After the execution of such instruments and
performance of such acts, Owner shall have no further interest in the Policy or
in this Agreement.
9. Ownership.
----------
Owner is now and shall be the owner of the Policy and shall
exercise all ownership rights granted to the owner of the Policy by the terms
thereof. The rights reserved to Owner include, but are not limited to, the right
to assign its interest in the Policy to the extent thereof; the right to change
the beneficiary of the portion of the proceeds to which
79
<PAGE>
it is entitled hereunder; the right to make and receive all loans against the
Policy; the right to exercise settlement options; the right to amend or modify
the Policy, including without limitation, the amount of the death benefit
thereof, provided that any such amendment or modification shall not result in a
reduction of the death benefit to an amount less than the unpaid Loan Amount;
and the right to cancel or surrender the Policy. It is the intention of the
parties to this Agreement that Employer have no incidents of ownership of any
kind with respect to the Policy, and that the only interest of Employer in the
Policy be its right to receive the Loan Amount upon the termination of the
Policy or the death of the Insured, and its security interest in the cash value
thereof and proceeds therefrom as herein provided. Employer shall not assign any
of its interests in the Policy to anyone other than Owner, and Employer shall
not have, or exercise, any right in and to the Policy which would endanger,
defeat or impair any of the rights of Owner in the Policy.
10. Transfers.
----------
In the event that Owner shall transfer all or any portion of its
interest in the Policy, then such portion of Owner's interest in the Policy so
transferred shall be vested in its transferee, who shall be substituted as a
party hereunder, and who shall be bound by the provisions hereof.
11. Modifications and Amendments; Notices.
--------------------------------------
This Agreement may be modified or amended, in whole or in part,
or terminated, by the mutual consent of the parties hereto or their successors
or assigns by writing signed by them. Any notice, consent, modification,
amendment or demand required or permitted to be given under the provisions of
this Agreement shall be made or given in writing signed by the party giving or
making the same, delivered either personally or by mailing the same first class
mail, to the other party addressed as follows:
If to Owner: The McDonough Insurance Trust
c/o Edwin McDonough
4731 R.F.D.
Long Grove, IL 60047
With a copy to: Richard J. Bliss
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
If to Employer: DENTSPLY INTERNATIONAL, INC.
570 W. College Avenue
York, PA 17405
Attn: Secretary
With respect to any notice, consent or demand, the date thereof
shall be the date of delivery if delivered personally or three days after the
date of mailing if delivered by mail.
12. ERISA.
------
80
<PAGE>
The following provisions are part of this Agreement and are
intended to meet the requirements of the Employee Retirement Income Security Act
of 1974 with respect to the relative rights and obligations of Employer (herein
referred to as the "Company") and Owner:
(a) The named fiduciary: The Secretary of the Company.
(b) The funding policy under this plan is that all premiums on
the Policy be remitted to the Insurer when due.
(c) Direct payment by the Insurer is the basis of payment of
benefits under this plan, with those benefits in turn being
based on the payment of premiums as provided in the plan.
(d) For claims procedure purposes, the "Claims Manager" shall be
a designee of the President of the Company.
(e) If for any reason a claim for benefits under this plan
is denied by the Company, the Claims Manager shall
deliver to the claimant a written explanation setting
forth the specific reasons for the denial, pertinent
references to the plan section on which the denial is
based, such other data as may be pertinent and
information on the procedures to be followed by the
claimant in obtaining a review of his claim, all
written in a manner calculated to be understood by
the claimant. For this purpose:
(i) The claimant's claim shall be deemed filed when
presented orally or in writing to the Claims Manager.
(ii) The Claims Manager's explanation shall be in writing
delivered to the claimant within 90 days of the date
the claim is filed.
(iii) The claimant shall have 60 days following his receipt
of the denial of the claim to file with the Claims
Manager a written request for review of the denial.
For such review, the claimant or his representative
may submit pertinent documents and written issues and
comments.
(iv) The Claims Manager shall decide the issue on
review and furnish the claimant with a copy
within 60 days of receipt of the claimant's
request for review of his claim. The decision on
review shall be in writing and shall include
specific reasons for the decision written in a
manner calculated to be understood by the
claimant, as well as specific references to the
pertinent plan provisions on which the decision
is based. If a copy of the decision is not so
furnished to the claimant within such 60 days,
the claim shall be deemed denied on review.
81
<PAGE>
13. Binding Agreement.
------------------
This Agreement shall bind Employer, Owner and their respective
successors, heirs, personal representatives, administrators and transferees,
together with any beneficiaries of the Policy.
14. Choice of Law.
--------------
This Agreement and the rights of the parties hereunder shall be
governed by and construed pursuant to the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
DENTSPLY INTERNATIONAL, INC. THE McDONOUGH INSURANCE TRUST
By: By:
------------------------- -----------------------------
(Title) Edwin McDonough, Co-Trustee
Attest: By:
------------------------- -----------------------------
(Title) Frederick Holzl, Co-Trustee
82
<PAGE>
EMPLOYMENT AGREEMENT
between
DENTSPLY INTERNATIONAL INC.
and
BURTON C. BORGELT
THIS AGREEMENT is entered into as of January 1, 1996, by and between
DENTSPLY INTERNATIONAL INC., a Delaware corporation (the "Company") and BURTON
C. BORGELT ("Employee").
WHEREAS, Employee has for several years effectively served the
Company, its predecessors and Affiliates (as hereinafter defined);
WHEREAS, Employee entered into an Employment Agreement with the Company
dated February 8, 1995, which Employment Agreement will terminate January 1,
1996, and be replaced by the terms and conditions of this Agreement; and
WHEREAS, it is in the best interest of the Company and Employee that the
terms and conditions of Employee's continued services be formally set forth.
NOW, THEREFOR, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed as follows:
1. Services.
---------
1.1 The Company employs Employee and Employee initially accepts such
employment and agrees to serve as the Chairman of the Board of Directors of the
Company until the 1996 Dentsply Annual Meeting of Stockholders. Employee shall
be responsible for the activities and duties presently associated with this
position. Thereafter, Employee shall perform such other services consistent
within his experience and prior positions held with the Company as shall from
time to time be assigned to him by the Board of Directors of the Company.
Employee's services shall be performed at a location suitable for the
performance of the Employee's assigned duties and should not present an
unnecessary hardship on the Employee.
1.2 Employee shall at all times devote the time required to perform
his duties and to promote the best interests of the Company and its Affiliates.
2. Period of Employment.
---------------------
Employment shall continue from January 1, 1996, and terminate on
December 31, 1999, or upon the happening of any of the following events:
2.1 Death.
------
The date of death of Employee;
2.2 Termination by Employee.
------------------------
83
<PAGE>
The date specified in a written notice of termination given to
the Company by Employee at which date the Employee's obligation to perform
services pursuant to this Agreement shall cease.
2.3 Termination by the Company.
---------------------------
The date of a written notice of termination given to Employee by
the Company. The Employee's obligation to perform services pursuant to this
Agreement shall cease as of the date of such notice.
3. Payments by the Company.
------------------------
3.1 During the Period of Employment, the Company shall pay to the
Employee for all services to be performed by Employee hereunder a salary of not
less than $350,000 per annum, or such larger amount as may from time to time be
fixed by the Board of Directors of the Company or, if applicable, by the
Executive Compensation Committee of the Company, payable in approximately equal
monthly installments on or about the twenty-fifth day of each month.
3.2 During the Period of Employment, the Employee shall not be
entitled to participate in any bonus plan for Senior Management Employees nor
shall he be entitled to a Year-End Christmas Bonus. However, the Employee shall
be entitled to receive other fringe benefits including participation in the ESOP
Plan and medical and dental plans which he was entitled to receive as of the
date of the Employment Agreement including any replacements therefor." Any
payments to be made to Employee under other provisions of this Section 3 shall
not be diminished by any payments made or to be made to Employee or his
designees pursuant to any such plan, nor shall any payments to be made to
Employee or his designees pursuant to any such plan be diminished by any payment
made or to be made to Employee under other provisions of this Section 3.
3.3 Upon termination of the Period of Employment for whatever reason,
Employee shall be entitled to receive the compensation accrued and unpaid as of
the date of his termination.
3.4 If the Period of Employment terminates upon the death of Employee,
the Company shall continue payment of his then current salary through December
31, 1999 from the date of death to Employee's designated beneficiary or, if no
beneficiary has been effectively designated, then to Employee's estate.
3.5 If the Period of Employment is terminated by the Employee under
Section 2.2, the Company shall continue to pay compensation and provide benefits
to the Employee to the date specified in the notice of termination from the
Employee.
3.6 If the Period of Employment is terminated by the Company under
Section 2.3, the Company shall continue to pay compensation and provide benefits
to the Employee or his estate until December 31, 1999 provided, however, if the
Company terminates Employee's employment because the Employee accepts employment
with a competitive business, the Company shall continue to pay compensation and
provide benefits to the Employee to the date specified in the Notice of
Termination to the Employee.
84
<PAGE>
4. Non-Competition Agreement.
--------------------------
During the Period of Employment and for a period of five (5) years
after the termination thereof, Employee shall not, without the written consent
of the Company, directly or indirectly be employed or retained by, or render any
services for, or be financially interested in, any firm or corporation engaged
in any business which is competitive with any business in which the Company or
any of its Affiliates may have been engaged during the Period of Employment. The
foregoing restriction shall not apply to the purchase by Employee of an amount
not to exceed 5% of the outstanding shares of capital stock of any corporation
whose securities are listed on any national securities exchange.
5. Loyalty Commitments.
--------------------
During and after the Period of Employment: (a) Employee shall not
disclose any confidential business information about the affairs of the Company
or any of its Affiliates; and (b) Employee shall not, without the prior written
consent of the Company, induce or attempt to induce any employee or agency
representative of the Company or any Affiliate to leave the employment or
representation of the Company or such Affiliate.
6. Separability of Provisions.
---------------------------
The terms of this Agreement shall be considered to be separable from
each other, and in the event any shall be found to be invalid, it shall not
affect the validity of the remaining terms.
7. Binding Effect.
---------------
This Agreement shall be binding upon and inure to the benefit of (a)
the Company and its successors and assigns, and (b) Employee, his personal
representatives, heirs and legatees.
8. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement between the parties
and supersedes and revokes all prior oral or written understandings between the
parties relating to Employee's employment. The Agreement may not be changed
orally but only by a written document signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
9. Definitions.
------------
The following terms herein shall (unless otherwise expressly provided)
have the following respective meanings:
9.1 "Affiliate" when used with reference to the Company means any
corporations, joint ventures or other business enterprises directly or
indirectly controlling, controlled by, or under common control with the Company.
For purposes of this definition, "control" means ownership or
85
<PAGE>
power to vote 50% or more of the voting stock, venture interests or other
comparable participation in such business enterprises.
9.2 "Period of Employment" means the period commencing on the date
hereof and terminating pursuant to Section 2.
9.3 "Beneficiary" means the person or persons designated in
writing by Employee to Company
9.4 "Parent" means any Affiliate directly or indirectly controlling
(within the meaning of Section 9.1) the Company.
10. Notices.
--------
Where there is provision herein for the delivery of written notice to
either of the parties, such notice shall be deemed to have been delivered for
the purposes of this Agreement when delivered in person or placed in a sealed,
postpaid envelope addressed to such party and mailed by registered mail, return
receipt requested to:
Burton C. Borgelt Eagle Ranch
2497 North Hoover Road
Route 4, Box 286
Nashville, IN 47448
Dentsply International Inc. 570 West College Avenue
York, PA 17405
Attention: Secretary
11. Arbitration.
------------
Any controversy arising from or related to the Agreement shall be
determined by arbitration in the City of Philadelphia, Pennsylvania, in
accordance with the rules of the American Arbitration Association, and judgment
upon any such determination or award may be entered in any court having
jurisdiction. In the event of any arbitration between Employee and Company
related to the Agreement, if Employee shall be the successful party, Company
will indemnify and reimburse Employee against any reasonable legal fees and
expenses incurred in such arbitration.
12. Applicable Law.
---------------
The Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed the Agreement on the day and
year first written.
DENTSPLY INTERNATIONAL INC.
By
------------------------------------
86
<PAGE>
Attest: President and Chief
Executive Officer
- -------------------------------- ------------------------------------
Secretary Employee
87
<PAGE>
February 16, 1996
John C. Miles, II
570 West College Avenue
York, PA 17405
Re: Amendment to Employment Agreement
Dear John:
This letter agreement shall amend your Employment Agreement dated December 31,
1987 with Dentsply Holdings Inc., the predecessor in interest to Dentsply
International Inc. (the "Company"), as described herein. In consideration for
your appointment as President and Chief Executive Officer of the Company, you
agree that for a period of two years ending December 31, 1997, the Company may
reappoint you to the position of President and Chief Operating Officer at any
time during said two year period. In the event you decline said reappointment,
severance payments made to you pursuant to Section 3.5 of your Employment
Agreement will be based upon the rate of salary and other benefits paid to you
as President and Chief Operating Officer immediately prior to your appointment
as President and Chief Executive Officer on January 1, 1996. In all other
respects, your Employment Agreement shall remain in full force and effect.
If this letter correctly sets forth your agreement with the Company, please sign
the duplicate copy of this letter and return it to me.
Very truly yours,
Burton C. Borgelt
Chairman
Accepted this day of
February, 1996.
- ---------------------------------
John C. Miles II
88
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
DENTSPLY INTERNATIONAL INC.
AND
W. WILLIAM WESTON
THIS AGREEMENT is entered into as of January 1, 1996, by and between
DENTSPLY INTERNATIONAL INC., a Delaware corporation (the "Company") and W.
William Weston, ("Employee").
WHEREAS, Employee has for several years effectively served the
Company, its predecessors and Affiliates (as hereinafter defined); and
WHEREAS, the parties entered into a service contract in July of 1990 with
the German subsidiaries of the Company, which Agreement will terminate January
1, 1996 and be replaced by the terms and conditions of this Agreement.
WHEREAS, it is in the best interest of the Company and Employee that the
terms and conditions of Employee's continued services be formally set forth:
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed as follows:
1. Services
--------
1.1 The Company employs Employee and Employee accepts such employment
and agrees to serve as Senior Vice President, European Group and, if elected
thereto, as an officer or director of any Affiliate, for the term and on the
conditions herein set forth. Employee shall be responsible for the activities
and duties presently associated with these positions. Employee shall perform
such other services not inconsistent with his position as shall from time to
time be assigned to him by the Board of Directors or the President of the
Company. Employee's services shall be performed at a location suitable for the
performance of the Employee's assigned duties and should not present an
unnecessary hardship on the Employee.
1.2 Employee shall at all times devote his full business time and
efforts to the performance of his duties and to promote the best interests of
the Company and its Affiliates.
2. Period of Employment shall continue from January 1, 1996 and
terminate on the happening of any of the following events:
2.1 Death.
------
The date of death of Employee;
2.2 Termination by Employee Without Good Reason.
--------------------------------------------
The date specified in a written notice of termination given to
the Company by Employee not less than 180 days in advance of such
89
<PAGE>
specified date, at which date the Employee's obligation to perform services
pursuant to this Agreement shall cease.
2.3 Termination by Employee with Good Reason.
-----------------------------------------
Thirty (30) days following the date of a written notice of
termination given to the Company by Employee within thirty (30) days after any
one or more of the following events have occurred:
(a) failure by the Company to maintain the duties, status and
responsibilities of the Employee substantially consistent
with those of Employee's position as of the date of the
Agreement, or
(b) a reduction by the Company in Employee's base salary as
in effect as of the date hereof plus all increases
therein subsequent thereto; other than any reduction
implemented as part of a formal austerity program
approved by the Board of Directors of the Company and
applicable to all continuing employees of the Company,
provided such reduction does not reduce Employee's
salary by a percentage greater than the average
reduction in the compensation of all employees who
continue as employees of the Company during such
austerity program; or
(c) the failure of the Company to maintain and to continue
Employee's participation in the Company's benefit plans as
in effect from time to time on a basis substantially
equivalent to the participation and benefits of Company
employees similarly situated to the Employee; or
(d) any substantial and uncorrected breach of the Agreement
by the Company.
2.4 Termination by the Company.
---------------------------
The date of a written notice of termination given to Employee by
the Company. The Employee's obligation to perform services pursuant to this
Agreement shall cease as of the date of such notice.
3. Payments by the Company.
------------------------
3.1 During the Period of Employment, the Company shall pay to the
Employee for all services to be performed by Employee hereunder a salary of not
less than DM 400,000 per annum, or such larger amount as may from time to time
be fixed by the Board of Directors of the Company or, if applicable, by the
Executive Compensation Committee of the Company, payable in approximately equal
monthly installments on or about the twenty-fifth day of each month.
3.2 During the Period of Employment, Employee shall be entitled to
participate in all plans and other benefits made available by the Company
generally to its German operations employees including disability,
90
<PAGE>
insurance, mandatory employee contributions for the social security system
(sickness, pension and unemployment insurance), Company pension plan and
vacation. In addition, the Company will provide the Employee with a Company car
(BMW 740 or equivalent). The Employee is entitled to use this Company car also
for private purposes as long as he actively renders services to the Company
within the framework of the employment agreement. The Company's obligations to
provide the Employee with a Company car ceases immediately upon the giving of
notice of termination by either party. Taxes applicable to the use of the
Company car or other travel expense incurred in the course of Company business
shall be reimbursed by the Company. Any payments to be made to Employee under
other provisions of this section 3 shall not be diminished by any payments made
or to be made to Employee or his designees pursuant to any such plan, nor shall
any payments to be made to Employee or his designees pursuant to any such plan
be diminished by any payment made or to be made to Employee under other
provisions of this section 3.
3.3 Upon termination of the Period of Employment for whatever reason,
Employee shall be entitled to receive the compensation accrued and unpaid as of
the date of his termination. If Employee at the time of termination is eligible
to participate in any Company incentive or bonus plan then in effect, Employee
shall be entitled to receive a pro-rata share of such incentive or bonus award
based upon the number of days he is employed during the plan year up to the date
of his termination. Such pro-rata amount shall be calculated in the usual way
and paid at the usual time.
3.4 If the Period of Employment terminates upon the death of Employee,
the Company shall continue payment of his then current salary for a period of 12
months from the date of death, together with his pro-rata share of any incentive
or bonus payments due for the period prior to his death, to Employee's
designated beneficiary or, if no beneficiary has been effectively designated,
then to Employee's estate.
3.5 If the Period of Employment is terminated by the Employee under
section 2.3, or by the Company under section 2.4, the Company shall continue to
pay compensation and provide benefits to the employee as provided in this
section 3.5 for a period (the "Termination Period") beginning on the date of the
termination notice and ending on the earlier of: (i) the second annual
anniversary of the date of such termination notice; or (ii) the date on which
the Employee would attain age 65, as follows:
(a) Compensation shall be paid to the Employee at the rate of salary
being paid to Employee under section 3.1 immediately before the
termination.
(b) Bonus and incentive compensation shall be paid to the Employee if
approved by the Board of Directors, in accordance with plans in
which the Employee participated at time of termination, using the
same formula and calculations as if termination had not occurred.
(c) Employee shall receive the benefits that would have been accrued
by the Employee during the Termination Period under any pension,
profit sharing, employee stock ownership plan ("ESOP") or similar
retirement plan or plans of the Company
91
<PAGE>
or any Affiliate in which the Employee participated immediately
before the termination (or, if not available, in lieu thereof be
compensated for such benefits), based on service the Employee
would have had during the Termination Period and compensation
(and, if applicable, bonus and incentive compensation) as
determined under section (a) (and, if applicable, subsection (b)
above); and
(d) Employee shall receive continued coverage during the
Termination Period under all employee disability, annuity,
insurance or other employee welfare benefit plans, programs
or arrangements of the Company or any Affiliate in which
Employee participated immediately before the notice of
termination, plus all improvements subsequent thereto (or,
if not available, in lieu thereof be compensated for such
coverage).
Except as provided in section 3.6, payment of compensation under
subsection 3.5(a) above shall be made at the same time as payments of
compensation under section 3.1, and payments of other benefits under subsection
3.5(b) and (c) shall be paid at the same time and to the same person as
compensation or benefits would have been paid under the plan, program or
arrangement to which they relate (after taking into account any election made by
the Employee with respect to payments under such plan, program or arrangement).
3.6 If at any time after a Change of Control the Period of Employment is
terminated by the Employee with good reason under section 2.3, or the Company
terminates or gives written notice of termination of the Period of Employment to
the Employee (whether or not in accordance with section 2.4), then in lieu of
the periodic payment of the amounts specified in subsections 3.5(a), (b) and (c)
(except as may be otherwise prohibited by law or by said plans), the Company, at
the written election of Employee, shall pay to Employee within five (5) business
days of such termination or notice of termination the present value of the
amounts specified in subsections 3.5(a), (b) and (c), discounted at the greatest
rate of interest then payable by Mellon Bank on any federally insured savings
account into which Employee could deposit such amount and make immediate
withdrawals therefrom without penalty, and shall provide for the remainder of
the Termination Period, if any, the benefit coverage required by subsection
3.5(d). Employee shall not be required to mitigate damages payable under this
section 3.6.
3.7 In no event will the Company be obligated to continue Employee's
compensation and other benefits under the Agreement beyond Employee's
sixty-fifth (65th) birthday or if Employee's employment is terminated because of
gross negligence or significant willful misconduct (i.e. conviction of
misappropriation of corporate assets or heinous criminal offense).
4. Non-Competition Agreement.
--------------------------
During the Period of Employment and for a period of five (5) years
after the termination thereof, Employee shall not, without the written consent
of the Company, directly or indirectly be employed or retained by, or render any
services for, or be financially interested in,
92
<PAGE>
any firm or corporation engaged in any business which is competitive with any
business in which the Company or any of its Affiliates may have been engaged
during the Period of Employment. The foregoing restriction shall not apply to
the purchase by Employee of not to exceed 5% of the outstanding shares of
capital stock of any corporation whose securities are listed on any national
securities exchange.
5. Loyalty Commitments.
--------------------
During and after the Period of Employment: (a) Employee shall not
disclose any confidential business information about the affairs of the Company
or any of its Affiliates; and (b) Employee shall not, without the prior written
consent of the Company, induce or attempt to induce any employee or agency
representative of the Company or any Affiliate to leave the employment or
representation of the Company or such Affiliate.
6. Separability of Provisions.
---------------------------
The terms of this Agreement shall be considered to be separable from
each other, and in the event any shall be found to be invalid, it shall not
affect the validity of the remaining terms.
7. Binding Effect.
---------------
This Agreement shall be binding upon and inure to the benefit of (a)
the Company and its successors and assigns, and (b) Employee, his personal
representatives, heirs and legatees.
8. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement between the parties
and supersedes and revokes all prior oral or written understandings between the
parties relating to Employee's employment. The Agreement may not be changed
orally but only by a written document signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
9. Definitions.
------------
The following terms herein shall (unless otherwise expressly provided)
have the following respective meanings:
9.1 "Affiliate" when used with reference to the Company means any
corporations, joint ventures or other business enterprises directly or
indirectly controlling, controlled by, or under common control with the Company.
For purposes of this definition, "control" means ownership or power to vote 50%
or more of the voting stock, venture interests or other comparable participation
in such business enterprises.
9.2 "Period of Employment" means the period commencing on the date
hereof and terminating pursuant to section 2.
93
<PAGE>
9.3 "Beneficiary" means the person or persons designated in
writing by Employee to Company.
9.4 "Change of Control" means any event by which (i) an Acquiring
Person has become such, or (ii) Continuing Directors cease to comprise a
majority of the members of the Board of directors of the Company or the
applicable Parent of the Company (a "Board"). For purposes of this definition:
(a) An "Acquiring Person" means any person or group (as
defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder as in effect on the date of this
Agreement (the "Exchange Act") who or which, together
with all affiliates and associates (as defined in Rule
12B-2 under the Exchange Act) becomes, by way of any
transaction, the beneficial owner of shares of the
Company, or such Parent, having 20% or more of the
total number of votes that may be cause for the
election of directors of the Company or such Parent;
and
(b) "Continuing Director" means any member of a Board,
while such person is a member of such Board who is not
an Acquiring Person, or an affiliate or associate of an
Acquiring Person or a representative of an Acquiring
Person or of any such affiliate or associate and who
(i) was a member of such Board prior to the date of
this Agreement, or (ii) subsequently becomes a member
of such Board and whose nomination for election or
election to such Board is recommended or approved by
resolution of a majority of the Continuing Directors or
who is included as a nominee in a proxy statement of
the Company or the applicable Parent distributed when a
majority of such Board consists of Continuing
Directors.
9.5 "Parent" means any Affiliate directly or indirectly controlling
(within the meaning of section 9.1) the Company.
10. Notices.
--------
Where there is provision herein for the delivery of written notice to
either of the parties, such notice shall be deemed to have been delivered for
the purposes of this Agreement when delivered in person or placed in a sealed,
postpaid envelope addressed to such party and mailed by registered mail, return
receipt requested to:
William W. Weston Oeschlestrasse 53
D-78315 Radolfzell
(Bohringen)
Germany
Dentsply International Inc. 570 West College Avenue
York, PA 17405
94
<PAGE>
Attention: Secretary
11. Arbitration.
------------
Any controversy arising from or related to the Agreement shall be
determined by arbitration in the City of Philadelphia, Pennsylvania, in
accordance with the rules of the American Arbitration Association, and judgment
upon any such determination or award may be entered in any court having
jurisdiction. In the event of any arbitration between Employee and Company
related to the Agreement, if employee shall be the successful party, Company
will indemnify and reimburse Employee against any reasonable legal fees and
expenses incurred in such arbitration.
12. Applicable Law.
---------------
The Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed the Agreement on the day and
year first above written.
DENTSPLY INTERNATIONAL INC.
By:
------------------------------------
President and Chief
Executive Officer
------------------------------------
Employee
95
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
DENTSPLY INTERNATIONAL INC.
AND
THOMAS L. WHITING
THIS AGREEMENT is entered into as of January 1, 1996, by and between
DENTSPLY INTERNATIONAL INC., a Delaware corporation (the "Company") and Thomas
L. Whiting, ("Employee").
WHEREAS, Employee has for several years effectively served the
Company, its predecessors and Affiliates (as hereinafter defined); and
WHEREAS, it is in the best interest of the Company and Employee that the
terms and conditions of Employee's continued services be formally set forth:
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed as follows:
1. Services.
---------
1.1 The Company employs Employee and Employee accepts such employment
and agrees to serve as Senior Vice President, Pacific Rim, Latin America, Gendex
and Tulsa Dental Products and, if elected thereto, as an officer or director of
any Affiliate, for the term and on the conditions herein set forth. Employee
shall be responsible for the activities and duties presently associated with
these positions. Employee shall perform such other services not inconsistent
with his position as shall from time to time be assigned to him by the Board of
Directors or the President of the Company. Employee's services shall be
performed at a location suitable for the performance of the Employee's assigned
duties and should not present an unnecessary hardship on the Employee.
1.2 Employee shall at all times devote his full business time and
efforts to the performance of his duties and to promote the best interests of
the Company and its Affiliates.
2. Period of Employment shall continue from January 1, 1996 and
terminate on the happening of any of the following events:
2.1 Death.
------
The date of death of Employee.
2.2 Termination by Employee Without Good Reason.
--------------------------------------------
The date specified in a written notice of termination given to the
Company by Employee not less than 180 days in advance of such specified date, at
which date the Employee's obligation to perform services pursuant to this
Agreement shall cease.
2.3 Termination by Employee with Good Reason.
-----------------------------------------
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Thirty (30) days following the date of a written notice of
termination given to the Company by Employee within thirty (30) days after any
one or more of the following events have occurred:
(a) failure by the Company to maintain the duties, status and
responsibilities of the Employee substantially consistent
with those of Employee's position as of the date of the
Agreement, or
(b) a reduction by the Company in Employee's base salary as
in effect as of the date hereof plus all increases
therein subsequent thereto; other than any reduction
implemented as part of a formal austerity program
approved by the Board of Directors of the Company and
applicable to all continuing employees of the Company,
provided such reduction does not reduce Employee's
salary by a percentage greater than the average
reduction in the compensation of all employees
who continue as employees of the Company during such
austerity program; or
(c) the failure of the Company to maintain and to continue
Employee's participation in the Company's benefit plans as
in effect from time to time on a basis substantially
equivalent to the participation and benefits of Company
employees similarly situated to the Employee; or
(d) any substantial and uncorrected breach of the Agreement
by the Company.
2.4 Termination by the Company.
---------------------------
The date of a written notice of termination given to Employee by
the Company. The Employee's obligation to perform services pursuant to this
Agreement shall cease as of the date of such notice.
3. Payments by the Company.
------------------------
3.1 During the Period of Employment, the Company shall pay to the
Employee for all services to be performed by Employee hereunder a salary of not
less than $195,000 per annum, or such larger amount as may from time to time be
fixed by the Board of Directors of the Company or, if applicable, by the
Executive Compensation Committee of the Company, payable in approximately equal
monthly installments on or about the twenty-fiftH day of each month.
3.2 During the Period of Employment, Employee shall be entitled to
participate in all plans and other benefits made available by the Company
generally to its domestic executive employees, including (without limitation)
benefits under any pension, profit sharing, employee stock ownership, stock
option, bonus, performance stock appreciation right, management incentive,
vacation, disability, annuity or insurance plans or programs provided, however,
Employee shall not be paid an annual Christmas bonus previously paid to Old
Dentsply employees. Any payments to be made to Employee under other provisions
of this section 3 shall not be
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diminished by any payments made or to be made to Employee or his designees
pursuant to any such plan, nor shall any payments to be made to Employee or his
designees pursuant to any such plan be diminished by any payment made or to be
made to Employee under other provisions of this section 3.
3.3 Upon termination of the Period of Employment for whatever reason,
Employee shall be entitled to receive the compensation accrued and unpaid as of
the date of his termination. If Employee at the time of termination is eligible
to participate in any Company incentive or bonus plan then in effect, Employee
shall be entitled to receive a pro-rata share of such incentive or bonus award
based upon the number of days he is employed during the plan year up to the date
of his termination. Such pro-rata amount shall be calculated in the usual way
and paid at the usual time.
3.4 If the Period of Employment terminates upon the death of Employee,
the Company shall continue payment of his then current salary for a period of 12
months from the date of death, together with his pro-rata share of any incentive
or bonus payments due for the period prior to his death, to Employee's
designated beneficiary or, if no beneficiary has been effectively designated,
then to Employee's estate.
3.5 If the Period of Employment is terminated by the Employee under
section 2.3, or by the Company under section 2.4, the Company shall continue to
pay compensation and provide benefits to the employee as provided in this
section 3.5 for a period (the "Termination Period") beginning on the date of the
termination notice and ending on the earlier of: (i) the second annual
anniversary of the date of such termination notice; or (ii) the date on which
the Employee would attain age 65, as follows:
(a) Compensation shall be paid to the Employee at the rate of
salary being paid to Employee under section 3.1 immediately
before the termination.
(b) Bonus and incentive compensation shall be paid to the
Employee if approved by the Board of Directors, in
accordance with plans in which the Employee participated at
time of termination, using the same formula and calculations
as if termination had not occurred.
(c) Employee shall receive the benefits that would have
been accrued by the Employee during the Termination
Period under any pension, profit sharing, employee
stock ownership plan ("ESOP") or similar retirement
plan or plans of the Company or any Affiliate in which
the Employee participated immediately before the
termination (or, if not available, in lieu thereof be
compensated for such benefits), based on service the
Employee would have had during the Termination
Period and compensation (and, if applicable, bonus and
incentive compensation) as determined under section (a)
(and, if applicable, subsection (b) above); and
(d) Employee shall receive continued coverage during the
Termination Period under all employee disability,
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annuity, insurance or other employee welfare benefit plans,
programs or arrangements of the Company or any Affiliate in
which Employee participated immediately before the notice of
termination, plus all improvements subsequent thereto (or,
if not available, in lieu thereof be compensated for such
coverage).
Except as provided in section 3.6, payment of compensation under
subsection 3.5(a) above shall be made at the same time as payments of
compensation under section 3.1, and payments of other benefits under subsection
3.5(b) and (c) shall be paid at the same time and to the same person as
compensation or benefits would have been paid under the plan, program or
arrangement to which they relate (after taking into account any election made by
the Employee with respect to payments under such plan, program or arrangement).
3.6 If at any time after a Change of Control the Period of Employment
is terminated by the Employee with good reason under section 2.3, or the Company
terminates or gives written notice of termination of the Period of Employment to
the Employee (whether or not in accordance with section 2.4), then in lieu of
the periodic payment of the amounts specified in subsections 3.5(a), (b) and (c)
(except as may be otherwise prohibited by law or by said plans), the Company, at
the written election of Employee, shall pay to Employee within five (5) business
days of such termination or notice of termination the present value of the
amounts specified in subsections 3.5(a), (b) and (c), discounted at the greatest
rate of interest then payable by Mellon Bank on any federally insured savings
account into which Employee could deposit such amount and make immediate
withdrawals therefrom without penalty, and shall provide for the remainder of
the Termination Period, if any, the benefit coverage required by subsection
3.5(d). Employee shall not be required to mitigate damages payable under this
section 3.6.
3.7 In no event will the Company be obligated to continue Employee's
compensation and other benefits under the Agreement beyond Employee's
sixty-fifth (65th) birthday or if Employee's employment is terminated because of
gross negligence or significant willful misconduct (i.e. conviction of
misappropriation of corporate assets or heinous criminal offense).
4. Non-Competition Agreement.
--------------------------
During the Period of Employment and for a period of five (5) years
after the termination thereof, Employee shall not, without the written consent
of the Company, directly or indirectly be employed or retained by, or render any
services for, or be financially interested in, any firm or corporation engaged
in any business which is competitive with any business in which the Company or
any of its Affiliates may have been engaged during the Period of Employment. The
foregoing restriction shall not apply to the purchase by Employee of not to
exceed 5% of the outstanding shares of capital stock of any corporation whose
securities are listed on any national securities exchange.
5. Loyalty Commitments.
--------------------
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During and after the Period of Employment: (a) Employee shall not
disclose any confidential business information about the affairs of the Company
or any of its Affiliates; and (b) Employee shall not, without the prior written
consent of the Company, induce or attempt to induce any employee or agency
representative of the Company or any Affiliate to leave the employment or
representation of the Company or such Affiliate.
6. Separability of Provisions.
---------------------------
The terms of this Agreement shall be considered to be separable from
each other, and in the event any shall be found to be invalid, it shall not
affect the validity of the remaining terms.
7. Binding Effect.
---------------
This Agreement shall be binding upon and inure to the benefit of (a)
the Company and its successors and assigns, and (b) Employee, his personal
representatives, heirs and legatees.
8. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement between the parties
and supersedes and revokes all prior oral or written understandings between the
parties relating to Employee's employment. The Agreement may not be changed
orally but only by a written document signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
9. Definitions.
------------
The following terms herein shall (unless otherwise expressly provided)
have the following respective meanings:
9.1 "Affiliate" when used with reference to the Company means any
corporations, joint ventures or other business enterprises directly or
indirectly controlling, controlled by, or under common control with the Company.
For purposes of this definition, "control" means ownership or power to vote 50%
or more of the voting stock, venture interests or other comparable participation
in such business enterprises.
9.2 "Period of Employment" means the period commencing on the date
hereof and terminating pursuant to section 2.
9.3 "Beneficiary" means the person or persons designated in
writing by Employee to Company.
9.4 "Change of Control" means any event by which (i) an Acquiring
Person has become such, or (ii) Continuing Directors cease to comprise a
majority of the members of the Board of directors of the Company or the
applicable Parent of the Company (a "Board"). For purposes of this definition:
(a) An "Acquiring Person" means any person or group (as
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defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, and the rules and regulations
promulgated thereunder as in effect on the date of this
Agreement (the "Exchange Act") who or which, together with
all affiliates and associates (as defined in Rule 12B-2
under the Exchange Act) becomes, by way of any transaction,
the beneficial owner of shares of the Company, or such
Parent, having 20% or more of the total number of votes that
may be cause for the election of directors of the Company or
such Parent; and
(b) "Continuing Director" means any member of a Board,
while such person is a member of such Board who is not
an Acquiring Person, or an affiliate or associate of an
Acquiring Person or a representative of an Acquiring
Person or of any such affiliate or associate and who
(i) was a member of such Board prior to the date of
this Agreement, or (ii) subsequently becomes a member
of such Board and whose nomination for election or
election to such Board is recommended or approved by
resolution of a majority of the Continuing Directors or
who is included as a nominee in a proxy statement of
the Company or the applicable Parent distributed when a
majority of such Board consists of Continuing
Directors.
9.5 "Parent" means any Affiliate directly or indirectly controlling
(within the meaning of section 9.1) the Company.
10. Notices.
--------
Where there is provision herein for the delivery of written notice to
either of the parties, such notice shall be deemed to have been delivered for
the purposes of this Agreement when delivered in person or placed in a sealed,
postpaid envelope addressed to such party and mailed by registered mail, return
receipt requested to:
Thomas L. Whiting 1440 Wyndham Drive
York, PA 17404
Dentsply International Inc. 570 West College Avenue
York, PA 17405
Attention: Secretary
11. Arbitration.
------------
Any controversy arising from or related to the Agreement shall be
determined by arbitration in the City of Philadelphia, Pennsylvania, in
accordance with the rules of the American Arbitration Association, and judgment
upon any such determination or award may be entered in any court having
jurisdiction. In the event of any arbitration between Employee and Company
related to the Agreement, if employee shall be the successful party, Company
will indemnify and reimburse Employee against any reasonable
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legal fees and expenses incurred in such arbitration.
12. Applicable Law.
---------------
The Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed the Agreement on the day and
year first above written.
DENTSPLY INTERNATIONAL INC.
By:
-------------------------------------
President and Chief
Executive Officer
-------------------------------------
Employee
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July 6, 1995
Mr. John J. McDonough
717 Forest Avenue
Lake Forest, Illinois 60045
Dear John:
This letter will: (i) amend Section A, Paragraph 5 ("Section A,5") of the Letter
Agreement dated February 8, 1995 between you and the Company; and, (ii) set
forth the terms of a Sub-Sublease between you and the Company. Notwithstanding
the present language of Section A,5, you will be entitled to use your current
office in Lake Forest Illinois ("Lake Forest Office") at the Company's expense
through December 31, 1995. You will, however, be responsible for the cost of the
use of any secretarial services after September 30, 1995.
Effective January 1, 1996 you agree to Sub-Sublease the Lake Forest Office on a
year-to-year basis in accordance with all other terms and conditions of the
Sublease dated December 9, 1993 between Packaging Resources Inc. ("Sublessor")
and DENTSPLY International Inc. ("Sublessee"), a copy of which is attached
hereto as Exhibit I. As Sub-Sublessee, you agree to perform all of the
obligations of the Sublessee under the terms of the Sublease set forth in
Exhibit I.
The Sub-Sublease shall automatically renew for the calendar year 1997 if you do
not give Dentsply written notice of termination on or before July 1, 1996.
If this letter correctly sets forth our agreement, please sign four copies of
this letter and obtain the written consents of the Master Landlord and the
Sublessor to the
Sub-Sublease granted to you hereunder.
Very truly yours,
DENTSPLY International Inc.
By: ______________________________
Chairman of the Board and
Chief Executive Officer
Accepted this 6th day of July, 1995.
- ---------------------------------
John J. McDonough
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APPROVED
LANDLORD: SHOWGATE PARTNERS
By:
----------------------------------
Market Square Limited Partnership,
its managing general partner
By:
----------------------------------
Broadacre Market Square, Inc.,
its general partner
By:
----------------------------------
President
SUBLESSOR: PACKAGING RESOURCES, INCORPORATED
By:
----------------------------------
Vice President
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MULTI-CURRENCY TERM LOAN AGREEMENT
- ----------------------------------
THIS MULTI-CURRENCY TERM LOAN AGREEMENT (the "Agreement") is made as of the
12th day of May, 1995, among DENTSPLY LIMITED, a company organized under the
laws of the Cayman Islands (the "Borrower"), the BANKS (as hereinafter defined),
and ABN AMRO BANK N.V., a bank organized under the laws of The Netherlands, in
its capacity as agent for the Banks under this Agreement (hereinafter referred
to in such capacity as the "Agent").
WHEREAS, Borrower desires to borrow funds in Pounds Sterling and Swiss
Francs to finance the acquisition by Borrower (as described in this sentence,
the "Acquisition") of approximately 95% of the outstanding capital stock of
Maillefer Instruments S.A., a company organized under the laws of Switzerland
("Maillefer");
WHEREAS, Borrower and the Banks are parties to a Competitive Advance,
Revolving Credit and Guaranty Agreement, dated as of November 15, 1993, among
Borrower, Banks, other banks named therein, DENTSPLY International Inc., a
Delaware corporation ("DII"), various other subsidiaries of DII, and Chemical
Bank as agent (the "Chemical Agreement"), as amended by a First Amendment to the
Competitive Advance, Revolving Credit and Guaranty Agreement, dated as of
December 23, 1994 (the "First Amendment"), among the same parties (the Chemical
Agreement, as amended solely by the First Amendment, is referred to herein as
the "Syndicated Agreement");
WHEREAS, the Syndicated Agreement does not provide multicurrency term
loans to Borrower;
WHEREAS, Borrower desires to borrow and Banks desire to lend such
funds;
NOW, THEREFORE, intending to be legally bound hereby and incorporating the
above-defined terms herein and in consideration of the foregoing and of the
agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
- -----------
1.01 Terms Defined in Syndicated Agreement; Listed Definitions.
----------------------------------------------------------
As used herein: (a) unless the context of this Agreement otherwise clearly
requires, capitalized terms not expressly defined herein shall have the
respective meanings ascribed to them by the Syndicated Agreement; and (b) the
following terms shall have the meanings herein specified:
"Affiliate" shall mean, with respect to the Person in question, (a) any
Person (including any member of the immediate family of any such natural
Person) which (i) directly or indirectly beneficially owns or controls 10%
or more of the total voting power of shares of capital stock having the
right to vote for directors under ordinary
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circumstances (if such Person is a corporation), (ii) is a general partner
(if such Person is a partnership) or (iii) is otherwise empowered, by
contract, voting trust or otherwise, to direct the business or affairs, of
such Person and (b) any Person controlling, controlled by or under common
control with any such Person (within the meaning of Rule 405 under the
Securities Act of 1933), and (c) any director, general partner or
executive officer of any such Person.
"Applicable Percentage" shall mean on any date with respect to any
Borrowing Tranche of the Term Loans the applicable percentage set forth in
the table below based upon the Consolidated Interest Coverage Ratio of DII
for the four fiscal quarters immediately preceding such date (determined
in accordance with Subsections 2.06(a) and (c)):
Term Loans Borrowing Tranche Applicable Percentage Table
--------------------------------------------------------
If the Applicable Applicable
Consolidated Interest Percentage for
Coverage Ratio is: Term Loans Borrowing Tranches
--------------------- -----------------------------
Greater than or
equal to 16.0:1.0 .25%
Less than 16.0:1.0
but greater than or
equal to 10.0:1.0 .30%
Less than 10.0:1.0
but greater than or
equal to 6.0:1.0 .40%
Less than 6.0:1.0
but greater than or
equal to 4.0:1.0 .50%
Less than 4.0:1.0 .625%
"Assignment and Acceptance" shall mean an agreement in the form of Exhibit
A entered into pursuant to Subsection 7.07, executed by the assignor,
assignee, and other parties contemplated thereby. "Banks" shall mean the
financial institutions named on Schedule 1.01-A and their respective
successors and assigns as permitted hereunder, each of which is referred
to herein as a "Bank".
"Borrowing Date" shall mean the date on which the Term Loans are made,
which shall be a Business Day occurring no later than the last Business
Day of July , 1995; there shall occur only one Borrowing Date hereunder.
"Borrowing Tranche" shall mean any portion of the Term
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Loans which is denominated in the same Optional Currency and which has the
same Interest Period commencing on the same date; any such portion of the
Term Loans shall constitute one Borrowing Tranche.
"Business Day" shall mean (i) any day other than a Saturday, Sunday, or
other day on which commercial banks in New York City or London are
authorized or required to close by Law and (ii) with respect to matters
relating to a LIBOR Term Loan, an Interest Period, or a notice with
respect thereto, also a day on which dealings in deposits in the relevant
Optional Currency are carried on in the London interbank market, and (iii)
for the purpose of advances or payments in an applicable Optional
Currency, also any day on which banks and foreign exchange markets are
open for business in the principal financial center of the country of such
currency.
"Change in Control" shall mean any circumstance under which DII (together
with any Subsidiary, if any, the capital stock of which is wholly owned by
DII) shall for any reason cease directly or through or together with one
or more Subsidiaries (the capital stock of which shall be wholly owned by
DII or by or together with a wholly owned Subsidiary thereof) to own the
capital stock of Borrower.
"Closing Date" shall mean the Business Day on which the Loan Documents are
executed by Borrower, which shall be May 12, 1995, or such other date as
the parties agree. The closing shall take place at 10:00 A.M., New York
time, on the Closing Date at the offices of DII or at such other time and
place as the parties agree.
"Dollar," "US Dollar," "dollar," and "$" all shall each mean lawful
currency of the United States of America.
"Equivalent Amount" shall mean, as determined by Agent, (i) in relation to
any advance, loan, payment, or like event denominated in an Optional
Currency, the amount of such Optional Currency converted from the relevant
amount of Dollars at the mean of Agent's spot buying and selling rates
(based on the market rates then prevailing and available to Agent) for the
exchange of Dollars and such other currency at a time determined by Agent
on the second Business Day immediately preceding the drawing date or such
other event for which such calculation is made, or (ii) in relation to any
payment, calculation, or like event denominated in Dollars, the amount of
Dollars converted from the relevant amount of such Optional Currency at
Agent's spot selling rate (based on the market rates then prevailing and
available to Agent) for the exchange of such Optional Currency and Dollars
at a time determined by Agent on the second Business Day immediately
preceding the payment or such other event for which such calculation is
made.
"GAAP" shall mean generally accepted accounting principles
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as are in effect in the United States from time to time, subject to the
provisions of Section 1.02, and applied on a consistent basis both as to
classification of items and amounts.
"Guaranties" shall have the meaning ascribed to such term
by Subsection 3.01(f).
"Guarantors" shall mean each and every of the Persons listed on Schedule
1.01-B, jointly and severally, and "Guarantor" shall mean any one of them.
"Interest Period" shall mean the period of interest as determined in
accordance with Subsection 2.07.
"Interest Period Request" shall have the meaning ascribed to such term by
Subsection 2.07.
"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, interpretation, release,
ruling, order, injunction, writ, decree, or award of any Official Body;
the use of the term, "Lawful," herein shall embody the concept of "Law" as
defined herein.
"LIBO Rate Reserve Percentage" shall mean the maximum percentage (rounded
upward to the nearest 1/16th of 1 percent) as determined by Agent (which
determination shall be conclusive absent manifest error) which is in
effect during any relevant period: (i) as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) (the "Board")
for determining the reserve requirements (including supplemental, special,
marginal, and emergency reserve requirements and without benefit of or
credit for proration, exceptions, or offsets which may be available from
time to time to any Bank under Regulation D of the Board) with respect to
eurocurrency funding (currently referred to by the Board as "Eurocurrency
Liabilities" in Regulation D of the Board) of a member bank in such
System; and (ii) to be maintained by a Bank as required for reserve
liquidity, special deposit, or similar purposes by any other governmental
or monetary authority of any country, or any political subdivision thereof
(including the Bank of England or any other central bank), against (A) any
category of liabilities that includes deposits by reference to which LIBOR
for LIBOR Term Loans or Borrowing Tranches is to be determined, or (B) any
category of extension of credit or other assets that includes LIBOR Term
Loans or Borrowing Tranches.
"LIBOR" shall mean with respect to each LIBOR Term Loan or Borrowing
Tranche for any Interest Period, the interest rate per annum determined by
Agent by dividing (the resulting quotient rounded upward to the nearest
1/16th of 1 percent per annum) (i) the rate of interest per annum
determined by Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest
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error) to be the rate of interest per annum for deposits in the currency
concerned offered to Agent in the London interbank market at approximately
11:00 a.m. London time two (2) Business Days prior to the first day of
such Interest Period for delivery on the first day of such Interest Period
for a period, and in an amount, comparable to the Interest Period and
principal amount of the LIBOR Term Loan or portion of the Borrowing
Tranche which shall be made by Agent and outstanding during such Interest
Period ("LIBO Rate") by (ii) a number equal to 1.00 minus the LIBO Rate
Reserve Percentage. LIBOR may also be expressed by the following formula:
LIBOR = LIBO RATE
-----------------------------------
1 - LIBO Rate Reserve Percentage
LIBOR shall be adjusted, with respect to any LIBOR Term Loan or Borrowing
Tranche outstanding, on the effective date of any change in the LIBO Rate
Reserve Percentage as of such effective date.
"LIBOR Term Loan" shall mean a Term Loan made by a Bank bearing interest
calculated with reference to LIBOR and one or more appropriate Applicable
Percentages.
"Loan Documents" shall mean this Agreement, the Notes, and any other
instruments, certificates, guaranties, or documents delivered or
contemplated to be delivered hereunder or thereunder or in connection
herewith or therewith, as the same may be supplemented or amended from
time to time in accordance herewith or therewith, and "Loan Document"
shall mean any of the Loan Documents.
"Notes" shall mean collectively and "Note" shall mean separately all of
the Term Notes (as defined at Subsection 2.04) of the Borrower evidencing
the Term Loans, together with all amendments, extensions, renewals,
replacements, refinancings or refunds thereof in whole or in part.
"Obligations" shall mean the obligation of Borrower to make due and
punctual payment of principal of and interest on the Term Loans, the
Facility Fees, and all other monetary obligations of Borrower to any of
the Banks or Agent under this Agreement, the Notes or any other present or
future document, instrument, or agreement relating thereto.
"Official Body" shall mean any national, federal, state, local, or other
government or political subdivision or any agency, authority, bureau,
central bank, commission, department, or instrumentality of any of the
foregoing, or any court, tribunal, grand jury, or arbitrator, in each case
whether foreign or domestic.
"Optional Currency" shall mean Pounds Sterling or Swiss
Francs.
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"Person" shall mean any individual, corporation, partnership, association,
limited liability company, joint-stock company, trust, unincorporated
organization, joint venture, Official Body, or any other entity.
"Pounds Sterling," "Pounds," and "(pound)" shall mean the lawful currency
of the United Kingdom.
"Principal Office" shall mean the main banking office of the Agent in New
York, New York.
"Ratable Share" shall mean the proportion that a Bank's Term Loan
outstanding bears to the aggregate Term Loans outstanding of all of the
Banks; provided that prior to and on the Borrowing Date, "Ratable Share"
shall mean the proportion that a Bank's Term Loan Commitment bears to the
Term Loan Commitments of all Banks.
"Required Banks" shall mean (i) if there are no Term Loans outstanding,
Banks whose Term Loan Commitments aggregate at least 60% of the Term Loan
Commitments of all Banks, or (ii) if there are Term Loans outstanding,
Banks whose Term Loans outstanding aggregate at least 60% of the total
principal amount of the Term Loans outstanding hereunder.
"Subsidiary" shall mean, with respect to any Person (referred to in this
sentence as "such Person"), any other Person of which more than 50% of the
securities or other ownership interests having ordinary voting power is,
at the time of which any determination is being made, owned or controlled
by such Person or one or more Subsidiaries of such Person.
"Swiss Francs" and "SFR" shall mean the lawful currency of
Switzerland.
"Termination Date" shall mean December 23, 1999.
"Term Loan Commitment" shall mean, as to any Bank at any time, the Dollar
amount initially set forth opposite its name on Schedule 1.01 A in the
column labeled "Amount of Commitment for Term Loans," and thereafter on
Schedule I to the most recent Assignment and Acceptance Agreement; and,
"Term Loan Commitments" shall mean the aggregate Term Loan Commitments of
all of the Banks.
"Term Loans" shall mean collectively and "Term Loan" shall mean separately
all Term Loans or any Term Loan made by the Banks or one of the Banks to
the Borrower pursuant to Section 2. As used herein, "LIBOR Term Loan" and
"Term Loan" are synonymous.
"Term Loan Request" shall have the meaning ascribed to such term by
Subsection 3.02(b).
1.02 Miscellaneous Definitions, Usage, and Meanings.
-----------------------------------------------
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Unless the context of this Agreement otherwise clearly requires:
references to the plural include the singular and vice versa, "or" has the
inclusive meaning represented by the phrase "and/or," and "including" is not a
term of limitation and shall mean "including without limitation." As used in
this Agreement, the words "hereof," "herein," "hereunder," and terms of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement. References to "determination" of or by the Agent or a Bank shall
be deemed to include good faith estimates by the Agent or a Bank (in the case of
quantitative determinations) and good faith beliefs by the Agent or a Bank (in
the case of qualitative determinations) and such determination shall be
conclusive absent manifest error. The section and other headings contained in
this Agreement and the Table of Contents at the beginning hereof are for
reference purposes only and shall not control or affect the construction or
interpretation of this Agreement. Section, subsection, clause, schedule, and
exhibit references are to this Agreement unless otherwise specified. The
masculine and neuter genders used herein shall include the masculine, feminine,
and neuter genders as well. Reference to any agreement, document, or instrument
(including this Agreement and any other Loan Document together with the
schedules and exhibits hereto or thereto, but excluding the Syndicated Agreement
and documents, instruments, and agreements relating thereto), or to any Term
Loan or Borrowing Tranche means such agreement, document, instrument, or
facility as amended, modified, replaced, renewed, substituted for, superseded,
restated, or the like. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such parties unless the context expressly states otherwise. Reference
to a Person in a particular capacity excludes such Person in any other capacity.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement, or pursuant to other
agreements incorporated herein, shall be made and prepared in accordance with
generally accepted accounting principles as are in effect in the United States
from time to time (including principles of consolidation where appropriate), and
applied on a consistent basis (except for changes in application in which DII's
independent certified public accountants concur and as to which change(s) notice
thereof is promptly provided to Agent and the Banks) both as to classification
of items and amount ("GAAP"), and all accounting or financial terms shall have
the meanings ascribed to such terms by GAAP.
SECTION 2
TERM LOANS
- ----------
2.01 Term Loan Commitments.
----------------------
Subject to the terms and conditions hereof, and relying upon the
representations and warranties herein set forth or otherwise incorporated herein
by reference, each Bank severally (but not jointly) agrees to make a term loan
(each, a "Term Loan") in one or more Optional Currencies to Borrower on or after
the Closing Date (but in no event after the Borrowing Date) in such principal
amount as Borrower shall request up to but not exceeding such Bank's Term Loan
Commitment.
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2.02 Nature of Banks' Obligations with Respect to Term Loans.
--------------------------------------------------------
The obligation of each Bank to make a Term Loan to Borrower shall be in
the proportion that such Bank's Term Loan Commitment bears to the aggregate Term
Loan Commitments of all Banks to Borrower, but subject to Subsection 2.13(b),
each Bank's Term Loan to Borrower shall not exceed its Term Loan Commitment;
adjustments with respect thereto shall be made in accordance with the terms of
Subsection 2.13(b) hereof. The failure of any Bank to make a Term Loan shall not
relieve any other Bank of its obligation to make a Term Loan nor shall it impose
any additional liability on any other Bank hereunder. The Banks shall have no
obligation to make Term Loans hereunder after the Borrowing Date. The Term Loan
Commitments are not revolving credit commitments and Borrower shall have no
right to borrow, repay, and reborrow thereunder.
2.03 Term Loan Facility Fee.
-----------------------
Borrower agrees to pay in immediately available Dollars to Agent for the
account of each Bank, as consideration for such Bank's Term Loan Commitment, a
nonrefundable facility fee equal to .06% of such Bank's Term Loan Commitment,
payable on the Closing Date (the "Facility Fee").
2.04 Term Loan Notes; Principal Repayment Date.
------------------------------------------
The Obligation of Borrower to repay the unpaid principal amount of the
Term Loan made by a Bank, together with interest thereon, shall be evidenced by
a promissory note (or two promissory notes, denominated in the Optional Currency
in which one or the other portion of the Term Loan was made by such Bank) dated
as of the Borrowing Date and payable to the order of such Bank (each, a "Term
Note" and, collectively, the "Term Notes"). The principal amount of the Term
Notes shall be due and payable on the Termination Date in the Optional Currency
in which they are denominated.
2.05 Use of Proceeds.
----------------
The proceeds of the Term Loans shall be used solely to finance the cost to
Borrower of the Acquisition; none of the Term Loans shall be used for currency
speculation or similar purposes.
2.06 Interest Rate, Borrowing Tranches, Currency.
--------------------------------------------
The Borrower shall pay interest in respect of the out-standing unpaid
principal amount of the Term Loans based upon LIBOR (as more fully set forth
herein), it being understood that, subject to the provisions of this Agreement,
the Borrower may from time to time select different Interest Periods to apply
simultaneously to those portions of the Term Loans comprising different
Borrowing Tranches provided that there shall not be at any one time outstanding
more than eight (8) Borrowing Tranches in the aggregate among all the Term
Loans. If at any time the rate applicable to any Term Loan (or any portion
thereof) made by any Bank exceeds such Bank's highest Lawful rate, the rate of
interest on such Bank's Term Loan (or any portion thereof) shall be limited to
such Bank's highest Lawful rate .
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Interest on the principal amount of a Term Loan which was made in an Optional
Currency shall be paid in such Optional Currency.
(a) Term Loan Interest Rate; Calculations.
--------------------------------------
Subject to Subsection 2.06(d) and Subsection 2.14, each Borrowing
Tranche shall accrue interest at a rate per annum equal to LIBOR for the
Interest Period in effect for such Borrowing Tranche plus the Applicable
Percentage then in effect and determined as set forth at Subsection
2.06(c) below. Interest on LIBOR Borrowing Tranches shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed;
provided that, for LIBOR Borrowing Tranches in an Optional Currency for
which a 365- day basis is the only market practice available to Agent for
such Borrowing Tranche, interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be, for the actual days elapsed.
(b) Rate Quotations.
----------------
Borrower may call Agent on or before the date on which an Interest
Period Request is to be delivered to receive an indication of the rates
then in effect, but it is acknowledged by Borrower that such indication
shall not be binding on Agent or the Banks nor affect the rate of interest
which thereafter is actually in effect.
(c) Applicable Percentage.
----------------------
The Applicable Percentage shall change in accordance with Subsection
2.06(a) above based on the Consolidated Interest Coverage Ratio at the end
of each fiscal quarter of DII for the preceding four fiscal quarters then
ended, effective as to each Borrowing Tranche upon the expiration of the
Interest Period with respect thereto expiring at least five (5) Business
Days after delivery by DII to the Agent of (x) financial statements
pursuant to Section 5.05 of the Syndicated Agreement as at the end of such
quarter, and (y) a certificate of a Financial Officer of DII in form
reasonably satisfactory to the Agent setting forth the calculation in
reasonable detail of the Consolidated Interest Coverage Ratio as at the
end of such quarter and the Applicable Percentage corresponding thereto in
accordance with the table set forth in the definition of such term at
Subsection 1.01(b) hereof.
(d) Post-Maturity Rate.
-------------------
(i) All amounts not paid when due shall bear interest (computed and
adjusted in the same manner and with the same effect as interest on
pre-maturity principal is calculated hereunder) payable on demand
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at a rate per annum equal to two percent (2%) above the interest rate
otherwise applicable to such amount prior to maturity (such interest
rate to include the Applicable Percentage then in effect) during the
balance of any Interest Period applicable thereto, and thereafter at
a rate per annum equal to two percent (2%) in excess of the sum of
the then Applicable Percentage plus LIBOR for a one month Interest
Period recalculated for successive one-month Interest Periods until
paid. Interest shall be payable in accordance with the terms hereof
regardless whether one or more judgments or defaults have occurred.
In no event shall any interest rate or any other fees or charges in
the nature of interest at any time exceed the maximum rate permitted
by applicable Law; in the event that such limitation is exceeded,
such amount shall be credited by the Bank collecting such excessive
interest as a payment of principal unless Borrower otherwise directs.
(ii) Borrower acknowledges that such post-maturity rate reflects,
among other things, that such amounts have become a substantially
greater risk given their default status and that the Banks are
entitled to additional compensation for such risk; and, all such
interest shall be payable by Borrower upon demand by Agent.
2.07 Interest Periods.
-----------------
Each Borrowing Tranche shall be subject to an Interest Period as selected
by Borrower. Borrower shall notify Agent of its selection of the Interest Period
to be applicable to a Borrowing Tranche at least four (4) Business Days prior to
the expiration of the Interest Period then applicable to any Borrowing Tranche
by delivering to Agent a request for an Interest Period (an "Interest Period
Request"). The Interest Period Request shall specify the Borrowing Tranche to
which it is applicable, the last date of the then current Interest Period
applicable to such Borrowing Tranche, and the proposed interest period (the
"Interest Period") for which LIBOR shall be redetermined, such Interest Period
to be one, two, three, six, or twelve months (to the extent available),
provided, that:
(a) any Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
(b) any Interest Period which begins on or about the last day of a
calendar month for which there is no numerically corresponding day in the
subsequent calendar month during which such Interest Period is to end
shall end on the last Business Day of such subsequent month;
(c) each Borrowing Tranche shall be in integral multiples
of SFR540,000 or (pound)240,000, as applicable;
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(d) Borrower shall not select an Interest Period for any
Borrowing Tranche that would end after the Termination
Date; and
(e) the first day of a new Interest Period for any Borrowing Tranche shall
be the last day of the preceding Interest Period for such Borrowing
Tranche, without duplication in payment of interest for such day.
2.08 Selection of Interest Periods.
------------------------------
If Borrower fails to timely select a new Interest Period to apply to any
Borrowing Tranche at the expiration of the existing Interest Period therefor in
accordance with the provisions of Section 2.07 or if Borrower has not timely
provided a prepayment notice to Agent with respect thereto, Borrower shall be
deemed to have selected an Interest Period of one month, subject however to
Subsection 2.07(d).
2.09 Payments.
---------
All payments and prepayments to be made in respect of principal, interest,
fees, or other amounts due from the Borrower hereunder shall be payable prior to
12:00 noon (New York time) on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by
Borrower, and without setoff, counterclaim or other deduction of any nature, and
an action therefor shall immediately accrue; payment after such time shall cause
interest at the applicable rate to accrue thereon as if such payment had not
been made on such date. All payments of principal and interest shall be made to
the Agent at its Principal Office for the ratable accounts of the Banks with
respect to the Term Loans in the Optional Currency in which such Term Loan or
portion thereof was made and in immediately available funds in such Optional
Currency, and the Agent shall promptly distribute such amounts to the Banks in
immediately available funds in such Optional Currency. The Agent's and each
Bank's statement of account, ledger, or other relevant books and records shall,
in the absence of manifest error, be conclusive as the statement of the Optional
Currencies in which made and the amount of principal of and interest on the Term
Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
2.10 Pro Rata Treatment of Banks.
----------------------------
The borrowing of the Term Loans, each Borrowing Tranche, and each payment
or prepayment by Borrower with respect to principal or interest due from
Borrower hereunder to the Banks with respect to the Term Loans, shall (except as
provided in Subsection 2.12(b), Subsection 2.14(b) or Subsection 2.15) be made
in proportion to the Ratable Share of each Bank.
2.11 Interest Payment Dates.
-----------------------
Interest on each Borrowing Tranche of the Term Loans shall be due and
payable on the last day of each Interest Period therefor, except that if
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any Interest Period for a Borrowing Tranche is longer than three months,
interest on such Borrowing Tranche shall also be due as if the Borrowing Tranche
was subject to successive three month Interest Periods. Interest on payments or
prepayments of principal together with any other amount due thereon in
accordance with the terms hereof shall be due also on the date such payment or
prepayment is due. Interest on the principal amount of each Term Loan, or
portion thereof, or other monetary Obligation shall be due and payable on demand
after such principal amount or other monetary Obligation becomes due and payable
(whether on the stated maturity date, upon acceleration, or otherwise).
2.12 Voluntary Prepayments.
----------------------
(a) Borrower shall have the right at its option from time to time to
prepay that portion of the Term Loans described below without premium or
penalty (except as provided in Clause (b) directly below or in Subsection
2.15) solely as set forth below:
(i) on the last day of the applicable Interest Period with respect to
a Borrowing Tranche, provided that any prepayment of a Borrowing
Tranche or portion thereof shall be in an integral multiple of
SFR540,000 or (pound)240,000, as applicable,
(ii) on the date specified in a notice by any Bank pursuant to
Subsection 2.14 with respect to any Term Loan or portion thereof.
Whenever Borrower desires to prepay any Term Loan or portion thereof,
it shall provide a prepayment notice to the Agent at least four (4)
Business Days prior to the date of such prepayment setting forth the
following information:
(x) the date, which shall be a Business Day, on which
the proposed prepayment is to be made;
(y) a statement indicating the Term Loan, portion of a Term Loan, or
Borrowing Tranche (as the case may be) being repaid, the Interest
Period(s) applicable thereto, and the Optional Currency(ies) in which
it is denominated; and
(z) the total principal amount of such prepayment, which shall not be
less than the amount of such Borrowing Tranche or the integral
multiple of one of the amounts set forth directly above in clause (i)
of any one Borrowing Tranche or the amount required to be prepaid
pursuant to Clause (ii) directly above.
All prepayment notices shall be irrevocable. The principal amount of
the Term Loans for which a prepayment notice is given, together with
interest on such principal amount, shall be due and payable in the
Optional Currency or Optional Currencies borrowed with respect thereto on
the date specified in such prepayment notice as the date on
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which the proposed prepayment is to be made. If Borrower prepays all or a
portion of a Term Loan but fails to specify the applicable Borrowing
Tranche(s) which the Borrower is prepaying, Agent may apply the prepayment
in any manner it chooses notwithstanding other costs that may result to
Borrower. Any prepayment hereunder shall be subject to the Borrower's
Obligation to indemnify the Banks under Subsection 2.15.
(b) In the event any Bank (i) gives notice under Subsection 2.14(b) or
Subsection 2.15(a), (ii) does not approve any action as to which consent
of the Required Banks is requested by the Borrower and obtained hereunder,
or (iii) becomes subject to the control of an Official Body (other than
normal and customary supervision), then the Borrower shall have the right
at its option, with the consent of Agent, which shall not be unreasonably
withheld, to prepay the Term Loans of such Bank in whole together with all
interest accrued thereon within ninety (90) days after (w) receipt of such
Bank's notice under Subsection 2.14(b) or 2.15(a), (x) the date of
obtaining the consent which such Bank has not approved, or (y) the date
such Bank became subject to the control of an Official Body, as
applicable; provided that the Borrower shall also pay to such Bank at the
time of such prepayment any amounts required under Subsection 2.15 and any
accrued interest due on such amount and any related fees; provided,
however, that the Term Loan Commitment and any Term Loan of such Bank
shall be provided by one or more of the remaining Banks or a replacement
bank acceptable to the Agent; provided, further, that the remaining Banks
shall have no obligation hereunder to increase their Term Loan
Commitments. Notwithstanding the foregoing, the Agent may only be replaced
subject to the requirements of Subsection 6.14.
2.13 Mandatory Payment and Prepayment.
---------------------------------
(a) Maturity.
---------
All principal, accrued and unpaid interest, and other amounts
outstanding under this Agreement or any Note shall, if not sooner paid, be
due and payable on the Termination Date.
(b) Currency Fluctuations, Repayment.
---------------------------------
If on or about the last day of an Interest Period of any Borrowing
Tranche (as determined by Agent four (4) Business Days prior thereto), the
aggregate Equivalent Amount in Dollars of all Term Loans outstanding is
equal to or greater than 110% of the aggregate Term Loan Commitments of
all Banks, then Borrower shall pay or prepay at the end of such Interest
Period an aggregate principal amount of
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that Borrowing Tranche the Interest Period of which is then expiring, or
make such other accommodation with the Banks as the Required Banks shall
approve, such that the aggregate Equivalent Amount in Dollars of all Term
Loans outstanding does not exceed the aggregate Term Loan Commitments of
all Banks.
(c) Currency Repayments.
--------------------
Notwithstanding anything contained herein to the contrary, the entire
amount of principal of and interest on any portion of each Term Loan of
each Bank shall be repaid in the same Optional Currency in which such
portion of the Term Loan was borrowed; provided, however, that if it is
impossible or illegal for Borrower to effect payment of a portion of a
Term Loan of any Bank in the Optional Currency in which such portion of
the Term Loan was borrowed, or if Borrower defaults in its obligations to
do so, such Bank may at its option permit such payment to be made (i) at
and to a different location of such Bank, or (ii) in the Equivalent Amount
of Dollars or (iii) in an equivalent amount (such term to be calculated
for such other currency in a similar manner as set forth for the term,
Equivalent Amount, as such term is applied to the conversion of an
Optional Currency to Dollars) of such other currency (freely convertible
into Dollars) as such Bank may designate, in any of which events, Borrower
shall make such payment and Borrower agrees to hold such Bank harmless
from and against any loss incurred by such Bank arising from the cost to
such Bank of any premium, any costs of exchange, the cost of hedging and
covering the Optional Currency in which such portion of the Term Loan was
originally made, and from any change in the value of Dollars, or such
other currency, in relation to the Optional Currency that was due and
owing, such loss to be calculated for the period commencing with the
Closing Date for such portion of a Term Loan and continuing through the
date of payment thereof. Without prejudice to the survival of any other
agreement of Borrower hereunder, Borrower's obligations under this Clause
(c) shall survive termination of this Agreement.
2.14 LIBOR Rate Unascertainable.
---------------------------
(a) If on any date on which LIBOR would otherwise be determined, Agent
shall have determined (which determination shall be conclusive absent
manifest error) that:
(i) adequate and reasonable means do not exist for
ascertaining LIBOR, or
(ii) a contingency has occurred which materially and adversely
affects the London interbank market relating to LIBOR or the
availability of an Optional Currency;
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or
(b) if at any time any Bank shall have determined (which determination
shall be conclusive absent manifest error) that:
(i) the making, maintenance, or funding of any Term Loan or portion
thereof to which LIBOR applies or shall apply has been made
impracticable or unlawful by compliance by Bank in good faith with
any Law, or any change therein, or any change in the interpretation
or administration thereof by any Official Body or with any request or
directive (whether or not having the force of Law) of any such
Official Body, or
(ii) such LIBOR will not adequately and fairly reflect the cost to
such Bank of the establishment or maintenance of a Term Loan or
portion thereof, or
(iii) after making all reasonable efforts, that deposits of the
relevant amount in the requested Optional Currency for the relevant
Interest Period for a Term Loan or a portion thereof to which LIBOR
applies, are not available to such Bank in the London interbank
market at the effective cost of funding a Term Loan or a portion
thereof,
then, in the case of any event specified in Clause (a) directly above,
Agent shall so notify the Banks and Borrower thereof and, in the case of
an event specified in Clause (b) directly above, such Bank shall so notify
Agent and endorse a certificate to such notice as to the specific
circumstances of such notice and Agent shall promptly send copies of such
notice and certificate to the other Banks and Borrower. Upon such date as
shall be specified in any such notice (which shall not be earlier than the
date such notice is given), the obligation of (A) the Banks in the case of
such notice given by Agent or (B) such Bank in the case of such notice
given by such Bank to allow Borrower to obtain the relevant Term Loan or
portion thereof shall be suspended until Agent or such Bank shall have
determined (which determination shall be conclusive absent manifest error)
that the circumstances giving rise to such previous determination no
longer exist. If at any time any Bank notifies the Agent of a
determination under Clause (b) directly above, Borrower shall, subject to
Borrower's indemnification Obligations under Subsection 2.15(b), on the
date specified in such notice either convert such relevant Term Loan or
portion thereof to an interest rate mutually acceptable to Borrower and
such Bank or prepay such Term Loan or portion thereof in accordance with
the terms hereof. Absent due notice from Borrower of such agreed upon
conversion, such Term Loan or portion thereof shall automatically be due
and payable subject to the indemnification provisions of Subsection
2.15(b).
2.15 Additional Compensation in Certain Circumstances.
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-------------------------------------------------
(a) Increased Costs or Reduced Return Resulting From
Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc.
-----------------------------------------------------
If any Law, guideline, or interpretation or any change in any Law or
guideline, interpretation, or application thereof by any Official Body
charged with the interpretation, administration or application thereof, or
if compliance with any request or directive (whether or not having the
force of Law) of any Official Body:
(i) subjects any Bank to any tax or changes the basis of taxation
with respect to this Agreement, the Notes, the Term Loans, or
payments by Borrower of principal, interest, fees, or other amounts
due from Borrower hereunder or under any Note (except for taxes on
the overall net income of such Bank),
(ii) imposes, modifies, or deems applicable any reserve, special
deposit, assessment, or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or
contingent) of, deposits with or for the account of, or other
acquisitions of funds by, any Bank, or
(iii) imposes, modifies, or deems applicable to any Bank (or any
corporation or company controlling such Bank) any capital adequacy or
similar requirement (A) against assets (funded or contingent) of, or
other credits or commitments to extend credit extended by, any Bank,
or (B) otherwise applicable to the obligations of any Bank under this
Agreement, and the result of any of the foregoing is to increase the
cost to, reduce the income receivable by, or impose any expense
(including loss of margin) upon any Bank (or any corporation or
company controlling any such Bank) with respect to this Agreement,
any Note, or the making, maintenance, or funding of any part of the
Term Loans (or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the rate of return on the
capital of such Bank (or any corporation or company controlling such
Bank), taking into consideration such Bank's (or its holding
company's) customary policies with respect to capital adequacy) by an
amount which such Bank in its sole discretion deems to be material,
such Bank shall from time to time notify Borrower of the amount
determined in good faith (using any averaging and attribution methods
employed in good faith) by such Bank (which determination shall be
conclusive absent manifest error) to be necessary to compensate such
Bank for such increase in cost, reduction of income, or additional
expense. Such notice shall set forth in reasonable detail the basis
for such determination.
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Such amount shall be due and payable by Borrower to such Bank ten
(10) Business Days after such notice is given.
(b) Indemnity; Funding Breakage.
----------------------------
In addition to the compensation required by Clause (a) of this
Subsection 2.15, Borrower shall indemnify each Bank against all
liabilities, losses, and expenses (including loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties
or incurred in terminating or unwinding any contracts, and any loss or
expense incurred in connection with Optional Currencies or other funds
acquired by a Bank to fund or maintain any part of the Term Loans) which
such Bank sustains or incurs as a consequence of any:
(i) payment or prepayment of any Term Loan or portion thereof or the
conversion or renewal of any interest rate applicable to any Term
Loan or portion thereof, to which LIBOR applies, on a day other than
the last day of the corresponding Interest Period (whether or not
such payment or prepayment is mandatory, voluntary, or automatic and
whether or not such payment or prepayment is then due),
(ii) attempt by Borrower to revoke (expressly, by later inconsistent
notices, or otherwise) in whole or part any notice relating to
Interest Periods, loans of any nature, payments, or prepayments, or
(iii) default by Borrower in the performance or observance of any
covenant or condition contained in or incorporated into this
Agreement or any other Loan Document, including without limitation
any failure of Borrower to pay when due (by acceleration or
otherwise) any principal, interest, fee, or any other amount due
hereunder.
If any Bank sustains or incurs any such loss or expense, it shall
from time to time notify Borrower of the amount determined in good faith
by such Bank (which determination shall be conclusive absent manifest
error and may include such assumptions, allocations of costs and expenses,
and averaging or attribution methods as such Bank shall deem reasonable)
to be necessary to indemnify such Bank for such loss or expense. Such
notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by Borrower to such
Bank ten (10) Business Days after such notice is given.
2.16 Taxes.
------
(a) No Deductions.
--------------
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All payments made by Borrower hereunder and under each Note shall be
made free and clear of and without deduction for any present or future
taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on the net
income of any Bank and all income and franchise taxes applicable to any
Bank of the United States (all such non- excluded taxes, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by Law to deduct
any Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Subsection) each Bank receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) Borrower shall make such deductions and (iii) Borrower shall
timely pay the full amount deducted to the relevant tax authority or other
authority in accordance with applicable Law.
(b) Stamp Taxes.
------------
In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder or from the
execution, delivery, or registration of, or otherwise with respect to,
this Agreement or any Note (herein-after referred to as "Other Taxes").
(c) Indemnification for Taxes Paid by a Bank.
-----------------------------------------
Borrower shall indemnify each Bank for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Subsection) paid
by any Bank and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date a Bank makes
written demand therefor.
(d) Certificate.
------------
Within 30 days after the date of any payment of any Taxes by
Borrower, Borrower shall furnish to each Bank, at its address referred to
herein, the original or a certified copy of a receipt evidencing payment
thereof. If no Taxes are payable in respect of any payment by Borrower,
such Borrower shall, if so requested by a Bank, provide a certificate of
an officer of Borrower to that effect.
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(e) Survival.
---------
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in Clauses
(a) through (d) directly above shall survive the payment in full of
principal and interest hereunder and under any instrument delivered
hereunder.
2.17 Judgment Currency.
------------------
(a) If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due hereunder or under a Note in any currency (the "Original
Currency") into another currency (the "Other Currency"), the parties hereby
agree, to the fullest extent permitted by Law, that the rate of exchange used
shall be that at which in accordance with normal banking procedures each Bank
could purchase the Original Currency with the Other Currency after any premium
and costs of exchange on the Business Day preceding that on which final judgment
is given.
(b) The obligation of Borrower in respect of any sum due from Borrower to
any Bank hereunder shall, notwithstanding any judgment in an Other Currency,
whether pursuant to a judgment or otherwise, be discharged only to the extent
that, on the Business Day following receipt by any Bank of any sum adjudged to
be so due in such Other Currency, such Bank may in accordance with normal
banking procedures purchase the Original Currency with such Other Currency. If
the amount of the Original Currency so purchased is less than the sum originally
due to such Bank in the Original Currency, Borrower agrees, as a separate
obligation and notwithstanding any such judgment or payment, to indemnify such
Bank against such loss.
2.18 London Interbank Market, Presumption.
-------------------------------------
For all purposes of this Agreement and each Note with respect to any
aspects of LIBOR or any Term Loan (or portion thereof) or any Optional Currency,
each Bank and Agent shall be presumed to have obtained rates, funding,
currencies, deposits, and the like in the London interbank market regardless
whether it did so or not; and, each Bank's and Agent's determination of amounts
payable under, and actions required or authorized by, Subsections 2.14 and 2.15
shall be calculated, at each Bank's and Agent's option, as though each Bank and
Agent funded its Term Loans and each Borrowing Tranche through the purchase of
deposits of the types and maturities corresponding to the deposits used as a
reference in accordance with the terms hereof in determining LIBOR applicable to
such Term Loans or portion(s) thereof, whether in fact that is the case or not.
SECTION 3
CONDITIONS OF LENDING
- ---------------------
3.01 Conditions Precedent to Closing.
--------------------------------
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The obligation of each Bank to enter into this Agreement is conditioned
upon satisfaction of those matters set forth below and upon Borrower delivering
to Agent the following documents, in form and substance satisfactory to the
Banks, each dated on or before the date hereof as follows:
(a) A certificate of good standing and the Certificate of Incorporation
and the Bylaws (or similar organizational documents) of Borrower certified
respectively by the appropriate Official Body or official of the Borrower
as true and complete on or just prior to the Closing Date;
(b) Certified copies of the resolutions or actions of the Board of
Directors or similar governing body of Borrower authorizing the execution,
delivery, and performance of this Agreement, the Notes, and the other Loan
Documents and the borrowings contemplated herein, and the assumption of
all other undertakings provided for herein and therein;
(c) Incumbency certificates signed by the Secretary or Assistant Secretary
or similar official of Borrower for each of the person(s) executing on
behalf of Borrower this Agreement, the Notes, and any other Loan Document;
(d) Opinions from Cayman Island and English legal counsel
for Borrower in form satisfactory to the Banks;
(e) Such updated Schedules to the Syndicated Agreement as
are necessary to reflect any changes since the date of such
agreement;
(f) The guaranty by each of the Guarantors of the payment
and performance by Borrower of its Obligations arising
hereunder (the "Guaranties"), together with documents of
each such Guarantor comparable to those set forth in
Clauses (a) through (c) above, together with an opinion of
J. Patrick Clark, Esquire, counsel to Guarantors;
(g) Borrower shall pay the Facility Fees of the Banks as set forth herein
and all of the fees, costs, and expenses of Agent (including reasonable
attorneys' fees) arising out of this transaction.
3.02 Conditions Precedent to Banks Making Term Loans.
------------------------------------------------
The obligation of the Banks to make their respective Term Loans to
Borrower hereunder shall expire immediately after the Borrowing Date and is
conditioned upon satisfaction of those matters set forth below and upon Borrower
delivering to Agent the following documents, in form and substance satisfactory
to the Banks:
(a) Properly executed Notes, dated as of the Borrowing Date and delivered
to Agent with the Term Loan Request (defined below);
(b) Borrower shall provide to Agent a request for Term
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Loans (the "Term Loan Request") executed by Borrower, in form satisfactory
to Agent and the Banks and accompanied by the fully executed Notes,
setting forth (i) the amount denominated in the Optional Currency of each
Borrowing Tranche comprising the Term Loans, and (ii)the initial Interest
Period applicable to each such Borrowing Tranche (all of which Interest
Periods shall commence on the same date); Borrower shall provide the Term
Loan Request and accompanying Notes to Agent by 10:00 a.m. New York time
four (4) Business Days prior to the Borrowing Date, and in the event that
Borrower desires to borrow the Term Loans on or within three (3) Business
Days after the Closing Date, Borrower shall include in such Term Loan
Request Borrower's irrevocable agreement, substantially in the form of
Subsection 2.15(b) hereof, pursuant to which Borrower agrees to indemnify
each Bank for any break funding and related costs incurred by any such
Bank in obtaining Optional Currencies to fund a Term Loan (or portion
thereof) prior to the execution hereof by Borrower.
(c) The Optional Currencies in the amounts requested in the Term Loan
Request shall be freely available to the Banks on the proposed Borrowing
Date; and, LIBOR with respect thereto shall be readily calculable and
maintainable therefor;
(d) All representations and warranties made by Borrower herein and made by
Borrower or any Guarantor in the Syndicated Agreement shall be true and
correct on the Borrowing Date as though made as of such date (except to
the extent that any such representation or warranty may relate to an
earlier date), and there shall not be any Event of Default hereunder nor
shall any event have occurred and be continuing that with notice or lapse
of time, or both, would constitute an Event of Default;
(e) All documents and instruments relating to the making of the Term
Loans, and all proceedings taken by or on behalf of Borrower or any
Guarantor on or prior to the Borrowing Date in connection with the
performance of this Agreement shall be satisfactory to the Banks, and each
Bank shall have received copies of all such documents or other evidence as
it may reasonably request in order to establish the fulfillment of all
conditions precedent and the truth and correctness of all representations
and warranties set forth herein or incorporated herein.
(f) There shall have occurred no material adverse change in the business,
assets, condition (financial or otherwise), or results of operations of
Borrower or Guarantors taken as a whole since the Closing Date, except as
previously disclosed in writing to the Banks prior to the Borrowing Date.
3.03 Interest Period Requests.
-------------------------
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The Term Loan Request and each Interest Period Request given hereunder
shall be deemed to be a representation and warranty by Borrower: (i) that at the
date of such Interest Period Request there exists no condition, event, or act
which constitutes an Event of Default, and no condition, event or act which,
with notice or lapse of time, or both, would constitute such an Event of
Default, and (ii) that all representations and warranties of Borrower and each
Guarantor set forth herein or in any other Loan Document or in the Syndicated
Agreement are true and correct at the date of such Term Loan Request or Interest
Period Request as if made on such date (except to the extent any representation
or warranty may expressly relate to an earlier date and except to the extent
that any Schedule submitted by Borrower or any Guarantor pursuant to any
Guaranty or Subsection 3.01(e) hereof on or before the date hereof may modify
any such representation or warranty).
SECTION 4
REPRESENTATIONS, WARRANTIES, COVENANTS; INCORPORATION OF TERMS
- --------------------------------------------------------------
In order to induce Agent and each Bank to enter into this Agreement and so
long as this Agreement is in effect or any portion of any Term Loan is
outstanding, Borrower hereby agrees (and shall cause each Guarantor to similarly
agree) as follows:
4.01 Incorporation.
--------------
The Syndicated Agreement is hereby incorporated herein by reference and
made a part hereof (other than with respect to the obligations of the banks
under such agreement). As of the Closing Date, Borrower hereby makes to the
Agent and the Banks and restates directly to the Agent and the Banks all of the
representations and warranties made by Borrower (except to the extent that any
representation or warranty may expressly relate to an earlier date, and except
to the extent that any Schedule submitted by or on behalf of Borrower pursuant
Subsection 3.01(e) hereof on or before the date hereof may modify any such
representation or warranty), and Borrower hereby promises and covenants and
restates to Agent and the Banks all of the affirmative and negative covenants
applicable to Borrower, set forth in the Syndicated Agreement all as if such
representations, warranties, and covenants were fully set forth herein and made
directly by Borrower to Agent and the Banks, mutatis mutandis.
4.02 Representations, Compliance.
----------------------------
Accordingly, Borrower hereby represents and warrants to Agent and the
Banks that all representations and warranties set forth in the Syndicated
Agreement remain true and correct as of the Closing Date (except to the extent
that any such representation or warranty may expressly relate to an earlier date
and except to the extent that any Schedule submitted by or on behalf of Borrower
pursuant to Subsection 3.01(e) hereof on or before the date hereof may modify
any such representation or warranty), and Borrower hereby agrees with Agent and
the Banks to remain in compliance with all affirmative and negative covenants
set forth in the Syndicated Agreement applicable to Borrower on or after the
Closing Date regardless whether or
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not the Syndicated Agreement remains in effect, the commitments thereunder
expire or terminate, or any indebtedness or obligations or liabilities under the
Syndicated Agreement are paid in full.
4.03 Amendments.
-----------
No amendment or modification to or any waiver of any provision of the
Syndicated Agreement by any of the parties thereto shall amend or modify or
waive for the purposes hereof any of the provisions of the Syndicated Agreement
which have been incorporated herein unless Agent and the Banks shall have
provided their written consent thereto (which consent shall not be unreasonably
withheld); and, the occurrence of any breach, default, or Event of Default under
the Syndicated Agreement at any time shall be a default, breach, and Event of
Default under this Agreement and under each and every document, instrument, and
agreement between any Bank or Agent and Borrower or given by Borrower to any
Bank or Agent relating to any of the Obligations of Borrower arising under this
Agreement, notwithstanding any term or provision hereof to the contrary, or any
term or provision of any document, instrument, or agreement between Borrower,
any Guarantor, and Agent or any Bank to the contrary.
4.04 Party to Syndicated Agreement.
------------------------------
Borrower shall become on or before the Closing Date a Guarantor under and
a party to the Syndicated Agreement.
4.05 Notices.
--------
Borrower shall provide prompt written notice to Agent and each of the
Banks in the event of:
(a) any amendment, modification, or the like to or any
waiver of any provision of the Syndicated Agreement; or
(b) any event or omission that could reasonably be expected to or does
result in an Event of Default hereunder or under the Syndicated
Agreement.
4.06 The Acquisition.
----------------
Borrower hereby covenants and agrees with Agent and the Banks that as of
the close of business on the Borrowing Date: the Acquisition, shall have been
consummated; all amounts payable by Borrower in connection therewith shall have
been paid or escrowed, or otherwise committed, in favor of sellers of the
capital stock of Maillefer; Borrower shall be the sole owner of approximately
95% of the capital stock of Maillefer and such stock shall be subject to no
claims or encumbrances or rights of assessment; except to the extent that any
failure to do so would not result in a material adverse change to the business
or financial condition of Borrower or Maillefer, Maillefer shall be in
compliance with all applicable Laws (including those relating to the
environment, labor, occupational safety, pension, and the exportation and
importation of goods); and, there are no material claims or suits asserted or
threatened against Maillefer or
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its property. As soon as practicable and in any event within thirty (30) days
after the date hereof, Borrower shall cause to be provided to Agent and the
Banks an opinion or certificate of Swiss legal counsel to Borrower (or from an
Official Body or from a Person acceptable to the Banks) to the effect that the
foregoing provisions of this Subsection 4.06 are true and correct.
4.07 Assignees.
----------
In the event that any assignee or participant pursuant to Subsection 7.07
is not a party to the Syndicated Agreement, Borrower agrees to provide and to
cause each Guarantor to provide to such assignee or participant all financial
and other information, reports, certificates, notices, and the like which
Borrower or any Guarantor is required pursuant to the Syndicated Agreement to
provide to the original Bank parties to this Agreement.
4.08 Enforceability, No Conflict, Etc.
---------------------------------
Borrower has the corporate power to execute, deliver, and perform this
Agreement, the Notes, and the other Loan Documents; and, the execution,
delivery, and performance of this Agreement, the Notes, and the other Loan
Documents have been duly authorized by all necessary corporate action, require
no approval of any Official Body, and neither now nor hereafter shall
contravene, conflict with, or result in a breach of any Law or any memorandum,
articles, charter or certificate of association or incorporation or any bylaws,
instrument, indenture or agreement, governing or binding upon Borrower or any of
its property. This Agreement, the Notes, and the other Loan Documents shall,
when executed and delivered to Agent, constitute legal, valid, and binding
agreements of Borrower enforceable against Borrower in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 5
DEFAULT
- -------
5.01 Events of Default.
------------------
An "Event of Default" shall mean the occurrence or existence of any one or
more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
(a) Default by Borrower in any payment required to be made under this
Agreement or any Note and, in the case solely of interest thereon,
such default shall continue unremedied for five (5) Business Days;
(b) The occurrence of any Event of Default under the
Syndicated Agreement;
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(c) Default shall be made with respect to the payment of
any amount due under any agreement or other evidence of
Indebtedness for borrowed money (other than defaults as
to payments upon borrowings directly relating to
Clauses (a) or (b) directly above) of Borrower or any
of the Guarantors in an aggregate outstanding principal
amount of $10,000,000 or more or its equivalent in
another currency, or any other default shall be made
with respect to any such Indebtedness and such
Indebtedness shall have been accelerated so that any
payment in respect of such Indebtedness shall be or
become due prior to its maturity or scheduled due date;
(d) Any representation or warranty made by Borrower or any Guarantor
herein or incorporated herein or in any writing furnished in
connection with or pursuant to this Agreement shall be false or
incorrect in any material respect as of the time it was made or
furnished or deemed made or furnished;
(e) Default by Borrower or any Guarantor in the performance or observance
of any covenant, term, condition, or agreement contained or
incorporated herein or in any other Loan Document, if such default
shall not have been remedied within thirty (30) days after the
occurrence thereof, other than defaults referred to in Clauses (a)
through (d) directly above;
(f) This Agreement, any Note, any Guaranty, or any other
Loan Document given now or hereafter in connection
herewith shall (i) not remain in full force and effect,
be declared null and void, or shall not be enforceable
against any of the parties thereto (in whole or in
part) in accordance with its terms and shall not be
reinstated to full force and effect and enforceability
against each party thereto in accordance with its terms
within 30 days or (ii) be disaffirmed or repudiated by
the Borrower or any Guarantor or any successor thereof
or trustee therefor;
(g) A Change in Control shall occur.
5.02 Consequences of Event of Default.
---------------------------------
(a) In the case of the happening of any Event of Default
described above, then, upon the occurrence thereof and
at any time thereafter during the continuance of such
Event of Default, the Agent may (unless, in the case of
each Event of Default other than that specified in
Clause(a) above or in paragraph (b) of Article VII of
the Syndicated Agreement, the Required Banks shall have
waived such Event of Default in writing, and, in the
case of an Event of Default specified in Clause (a)
above or in paragraph (b) of Article VII of the
Syndicated Agreement, each of the Banks shall have
waived such Event of Default in writing), and, upon
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direction of the Required Banks, will by written notice to Borrower,
take any of the following actions, at the same or different times: (i)
terminate the Term Loan Commitments (if the Term Loans have not yet
been made) and (ii) declare the Notes to be forthwith due and payable,
whereupon the Notes and all other fees and amounts owing hereunder
shall become forthwith due and payable, both as to principal and
interest, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived, anything contained
herein or in the Notes to the contrary notwithstanding.
Notwithstanding the foregoing, if an Event of Default specified in
paragraph (g) or (h) of Article VII of the Syndicated Agreement occurs
with respect to the Borrower or a Guarantor, the Notes shall become
immediately due and payable, both as to the principal and interest,
without any action by the Agent and without presentment, demand,
protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding.
(b) Set-Off.
--------
If any Event of Default shall have occurred and be continuing and any
Bank shall have requested the Agent to declare the Notes immediately
due and payable pursuant to this Section 5, each Bank is hereby
authorized at any time and from time to time, to the fullest extent
permitted by Law, to set off and apply any and all deposits (general
and special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by such Bank to or for the
credit or the account of the Borrower or any Guarantor against any of
and all the Obligations now or hereafter existing under this Agreement
and the Notes held by such Bank, irrespective of whether or not such
Bank shall have made any demand under this Agreement or such Notes and
although such obligations may be unmatured. Each Bank agrees promptly
to notify the Borrower after any such setoff and application made by
such Bank, but the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Bank under
this Subsection 5.02(b) are in addition to other rights and remedies
(including other rights of setoff) which such Bank may have.
SECTION 6
THE AGENT
- ---------
6.01 Appointment.
------------
Each Bank hereby irrevocably designates, appoints and authorizes ABN
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AMRO Bank N.V. to act as Agent for such Bank under this Agreement to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. ABN AMRO Bank N.V. agrees to act as
the Agent on behalf of the Banks to the extent provided in this Agreement.
6.02 Delegation of Duties.
---------------------
The Agent may perform any of its duties hereunder by or through agents or
employees (provided such delegation does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 6.05 and 6.06, shall be entitled to
engage and pay for the advice or services of any attorneys, accountants, or
other experts concerning all matters pertaining to its duties hereunder and to
rely upon any advice so obtained.
6.03 Nature of Duties; Independent Credit Investigation.
---------------------------------------------------
The Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Each Bank expressly acknowledges: (i) that the Agent
has not made any representations or warranties to it and that no act by the
Agent hereafter taken, including any review of the affairs of any of the
Borrower or any Guarantors or any other Subsidiaries or Affiliates thereof,
shall be deemed to constitute any representation or warranty by the Agent to any
Bank; (ii) that it has made and will continue to make, without reliance upon the
Agent, its own independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of each of Borrower, the
Guarantors, and each of their Subsidiaries and Affiliates in connection with
this Agreement and the making and continuance of the Term Loans hereunder; and
(iii) except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of the Term Loans or at any time or times
thereafter.
6.04 Actions in Discretion of Agent; Instructions from the
Banks.
-----------------------------------------------------
The Agent agrees, upon the written request of the Required Banks, to take
or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the
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Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or any other Loan
Document or applicable Law. In the absence of a request by the Required Banks,
the Agent shall have authority, in its sole discretion, to take or not to take
any such action, unless this Agreement specifically requires the consent of the
Required Banks or all of the Banks. Any action taken or failure to act pursuant
to such instructions or discretion shall be binding on the Banks, subject to
Section 6.06. Subject to the provisions of Section 6.06, no Bank shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
6.05 Reimbursement and Indemnification of Agent by the Borrower. --
- ---------------------------------------------------------
Borrower agrees unconditionally upon demand to pay or reimburse the Agent
and save the Agent harmless against (a) liability for the payment of all
reasonable out-of-pocket costs, expenses and disbursements (including the
reasonable fees and expenses of counsel for the Agent) incurred by Agent (i) in
connection with the negotiation, preparation, printing, execution,
administration, syndication, and interpretation of this Agreement and the other
Loan Documents, (ii) relating to any amendments, waivers, or consents pursuant
to the provisions hereof, (iii) in connection with the enforcement of this
Agreement or any other Loan Document or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy, receivership, or
similar proceedings or otherwise, and (iv) in connection with any workout or
restructuring, or in connection with the protection, preservation, exercise, or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document, or in connection with any foreclosure, collection, or
bankruptcy proceedings, and (b) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including reasonable
attorneys' fees), or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent, in its capacity as such,
in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Agent hereunder or thereunder,
provided that Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements to the extent the same is found by a final judgment
to have resulted from the Agent's gross negligence or willful misconduct, or if
the Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrower
shall remain liable to the extent such failure to give notice does not result in
a loss to the Borrower), or if the same results from a compromise or settlement
agreement entered into without the consent of the Borrower, which shall not be
unreasonably withheld. Borrower agrees unconditionally to pay all excise and
similar taxes, and all stamp, document, transfer, recording, and filing taxes or
fees and similar impositions, and any and all penalties related thereto, now or
hereafter determined by Agent to be payable in connection with this Agreement,
any Note, any other document or agreement executed or given in connection
herewith, or any transactions or actions taken hereunder or thereunder, and
Borrower agrees unconditionally to save Agent harmless from and against any and
all present or future claims, penalties, liabilities, or losses with respect to
or resulting from any
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omission to pay or delay in paying any such taxes, fees, or impositions.
6.06 Exculpatory Provisions.
-----------------------
Neither the Agent nor any of its directors, officers, employees, agents,
attorneys, Affiliates, or Subsidiaries shall (a) be liable to any Bank for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith including pursuant to any Loan Document, unless to the extent the same
is found by a final judgment to have resulted from its or their own gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness, enforceability, genuineness, validity, or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report, or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or to
inquire as to the performance or observance of any of the terms, covenants, or
conditions hereof or thereof on the part of Borrower, any Guarantor or any other
Subsidiary or Affiliate of Borrower, or the financial condition of any of them,
or the existence or possible existence of any Event of Default or potential
default hereunder or under the Syndicated Agreement. Neither the Agent nor any
Bank nor any of their respective directors, officers, employees, agents,
attorneys, subsidiaries, or affiliates shall be liable to Borrower, any
Guarantor, or any Subsidiary or Affiliate of Borrower for consequential damages
resulting from any breach of contract, tort, or other wrong in connection with
the negotiation, documentation, administration, or collection of any portion of
the Term Loans or any of the Loan Documents.
6.07 Reimbursement and Indemnification of Agent by Banks.
----------------------------------------------------
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrower and without limiting the Obligation of the Borrower
to do so) in proportion to its Ratable Share from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including reasonable attorneys' fees), or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent, in its capacity as such, in any way relating to or arising out of this
Agreement or any other Loan Documents or any action taken or omitted by the
Agent hereunder or thereunder, provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements (a) to the extent the same
is found by a final judgment to have resulted from the Agent's gross negligence
or willful misconduct, or (b)if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld.
6.08 Reliance by Agent.
------------------
The Agent shall be entitled to rely upon any writing, telegram, telex
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or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order, or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed,
sent, or made by the proper Person or Persons, and upon the advice and opinions
of counsel and other professional advisers selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any action hereunder
unless it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
6.09 Notice of Default.
------------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any potential default or Event of Default unless the Agent has
received written notice from a Bank or the Borrower referring to this Agreement,
describing such potential default or Event of Default and stating that such
notice is a "notice of default."
6.10 Notices.
--------
The Agent shall send to each Bank a copy of all notices received from the
Borrower pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof.
6.11 Banks in Their Individual Capacities.
-------------------------------------
With respect to the Term Loan made by it, the Agent shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not the Agent, and the term "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. ABN AMRO Bank
N.V. and its Affiliates and Subsidiaries and each of the Banks and their
respective Subsidiaries and Affiliates may, without liability to account, except
as prohibited herein, make loans to, accept deposits from, discount drafts for,
act as trustee under indentures of, and generally engage in any kind of banking
or trust business with, the Borrower, any Guarantor, and their Subsidiaries and
Affiliates, in the case of the Agent, as though it were not acting as Agent
hereunder and, in the case of each Bank, as though such Bank were not a Bank
hereunder.
6.12 Holders of Notes.
-----------------
The Agent may deem and treat any payee of any Note as the owner thereof
for all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority,
or consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, or assignee of such Note or of any Note or
Notes issued in exchange therefor.
6.13 Equalization of Banks.
----------------------
The Banks and the holders of any participations in any Notes agree
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among themselves that, with respect to all amounts received by any Bank or any
such participant for application on any Obligation hereunder or under any Note
or under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such
participants in proportion to their interests in payments under the Notes,
except as otherwise provided in Subsections 2.12(b), 2.14(b), 2.15, 2.16, 6.05,
6.07, or 7.03. The Banks or any such participant receiving any such amount shall
purchase for cash from each of the other Banks an interest in such Bank's Term
Loans in such amount as shall result in a ratable participation by the Banks and
each such holder in the aggregate unpaid amount under the Notes, provided that
if all or any portion of such excess amount is thereafter recovered from the
Bank or the participant making such purchase, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, together with
interest or other amounts, if any, required by Law to be paid by the Bank or the
participant making such purchase.
6.14 Successor Agent.
----------------
The Agent (a) may resign as Agent or (b) shall resign if such resignation
is requested by the Required Banks (if the Agent is a Bank, the Agent's Term
Loans and its Term Loan Commitment shall be considered in determining whether
the Required Banks have requested such resignation), in either case of (a) or
(b) by giving not less than thirty (30) days' prior written notice to the
Borrower. If the Agent shall resign under this Agreement, then either (i) the
Required Banks shall appoint from among the Banks a successor agent for the
Banks, subject to the consent of the Borrower, such consent not to be
unreasonably withheld, or (ii) if a successor agent shall not be so appointed
and approved within the thirty (30) day period following the Agent's notice to
the Banks of its resignation, then the Agent shall appoint, with the consent of
the Borrower, such consent not to be unreasonably withheld, a successor agent
who shall serve as Agent until such time as the Required Banks appoint and the
Borrower consents to the appointment of a successor agent. Upon its appointment
pursuant to either Clause (i) or (ii) above, such successor agent shall succeed
to the rights, powers, and duties of the Agent and the term "Agent" shall mean
such successor agent, effective upon its appointment, and the former Agent's
rights, powers, and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement. After the resignation of any Agent hereunder, the provisions of
this Section 6 shall inure to the benefit of such former Agent.
6.15 Availability of Funds.
----------------------
Unless the Agent shall have been notified by a Bank prior to the date upon
which a Term Loan is to be made that such Bank does not intend to make available
to the Agent such Bank's Term Loan or a portion thereof, the Agent may assume
that such Bank has made or will make such proceeds available to the Agent on
such date and the Agent may, in reliance upon such assumption (but shall not be
required to), make available to the Borrower a corresponding amount. If such
corresponding amount is not in
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fact made available to the Agent by such Bank, the Agent shall be entitled to
recover such amount on demand from such Bank (or, if such Bank fails to pay such
amount forthwith upon such demand from the Borrower) together with interest
thereon (all in the currency in which such loan was made), in respect of each
day during the period commencing on the date such amount was made available to
the Borrower and ending on the date the Agent recovers such amount, at a rate
per annum equal to the applicable interest rate(s) in respect of such Term Loan
or relevant portion thereof.
6.16 Calculations.
-------------
In the absence of a final judgment of gross negligence or willful
misconduct on the part of Agent, the Agent shall not be liable for any error in
computing any amount payable to any Bank whether in respect of the Term Loans,
fees, or any other amounts due to the Banks under this Agreement. In the event
an error in computing any amount payable to any Bank is made, the Agent, the
Borrower, and each affected Bank shall, forthwith upon discovery of such error,
make such adjustments as shall be required to correct such error.
6.17 Beneficiaries.
--------------
Except as expressly provided herein, the provisions of this Section 6 are
solely for the benefit of the Agent and the Banks, and none of the Borrower,
Guarantors or any Subsidiaries or Affiliates thereof shall have any rights to
rely on or enforce any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the Banks
and does not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for the Borrower, any
Guarantors or any Subsidiaries or Affiliates thereof.
SECTION 7
MISCELLANEOUS
- -------------
7.01 Modifications, Amendments or Waivers.
-------------------------------------
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrower may from time to time enter into
written agreements amending or changing any provision of this Agreement or any
other Loan Document or the rights of the Banks, Borrower, or Guarantors
hereunder or thereunder, or may grant written waivers or consents to a departure
from the due performance of the Obligations of Borrower or any Guarantor
hereunder or thereunder. Any such agreement, waiver, or consent made with such
written consent shall be effective to bind all the Banks and Borrower and each
Guarantor; provided, that, without the written consent of all the Banks, no such
agreement, waiver, or consent may be made which will:
(a) increase the amount of the Term Loan Commitment of any Bank hereunder
(subject, however, to the potential increase in Term Loan Commitments
addressed by
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Subsection 2.13(b)) or extend the Termination Date;
(b) extend the time for payment of principal or interest of any Term Loan
or Borrowing Tranche or the Facility Fee, or reduce the principal
amount of or the rate of interest borne by any Borrowing Tranche or
reduce any Facility Fee, or otherwise affect the terms of payment of
the principal of or interest of any Term Loan or Borrowing Tranche or
any fee payable to any Bank; or
(c) amend Subsections 2.10, 6.06, 6.13, or this Section 7.01, alter any
provision regarding the pro rata treatment of the Banks, change the
definition of Required Banks, or change any requirement providing for
the Banks or the Required Banks to authorize the taking of any action
hereunder.
No agreement, waiver, or consent which would modify the interests, rights,
or obligations of the Agent in its capacity as Agent shall be effective without
the written consent of the Agent.
7.02 No Implied Waivers; Cumulative Remedies; Writing Required.
----------------------------------------------------------
No course of dealing and no delay or failure of the Agent or any Bank in
exercising any right, power, remedy, or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof; nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy,
or privilege preclude any further exercise thereof or of any other right, power,
remedy, or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent, or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. In the event of any
irreconcilable inconsistency between the terms of this Agreement, the Note, or
any other document or agreement executed or given in connection herewith, the
terms hereof shall control.
7.03 Reimbursement and Indemnification of Banks by the Borrower;
Taxes.
-----------------------------------------------------------
The Borrower agrees unconditionally upon demand to pay or reimburse to
each Bank (other than the Agent solely in such capacity, as to which the
Borrower's Obligations are set forth in Section 6.05) and to save each Bank
harmless against (a) liability for the payment of all reasonable out-of-pocket
costs, expenses, and disbursements (including reasonable fees and expenses of
counsel for each Bank except with respect to (i) and (ii) below), incurred by
such Bank (i) in connection with the administration and interpretation of this
Agreement and the other Loan Documents, (ii) relating to any amendments,
waivers, or consents pursuant to the provisions hereof, (iii) in connection with
the enforcement of this Agreement or any
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other Loan Document or collection of amounts due hereunder or thereunder or the
proof and allowability of any claim arising under this Agreement or any other
Loan Document, whether in bankruptcy, receivership, or similar proceedings or
otherwise, and (iv) in connection with any workout or restructuring, or in
connection with the protection, preservation, exercise, or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document, or
in connection with any foreclosure, collection, or bankruptcy proceedings, or
(b) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including reasonable attorneys' fees), or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against such Bank, in its capacity as such, in any way relating
to or arising out of this Agreement or any other Loan Documents or any action
taken or omitted by such Bank hereunder or thereunder, provided that Borrower
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
(A) to the extent the same is found by a final judgment to have resulted from
such Bank's gross negligence or willful misconduct, or (B)if the Borrower was
not given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that the Borrower shall remain liable to
the extent such failure to give notice does not result in a loss to the
Borrower), or (C) if the same results from a compromise or settlement agreement
entered into without the consent of the Borrower, which shall not be
unreasonably withheld. Borrower agrees unconditionally to pay all stamp,
intangible, document, transfer, recording or filing taxes or fees and similar
impositions now or hereafter determined by any Bank to be payable in connection
with this Agreement, any Note, or any other Loan Document, or any transactions
or actions taken hereunder or thereunder, and Borrower agrees unconditionally to
save Banks harmless from and against any and all present or future claims,
penalties, liabilities, or losses with respect to or resulting from any omission
to pay or delay in paying any such taxes, fees, or impositions.
7.04 Holidays.
---------
Whenever any payment or action to be made or taken hereunder shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Subsection 2.07 with respect to Interest Periods) and such extension of time
shall be included in computing interest or fees, if any, in connection with such
payment or action.
7.05 Funding by Branch, Subsidiary or Affiliate.
-------------------------------------------
(a) Notional Funding.
-----------------
Each Bank shall have the right from time to time, without notice to
Borrower, to deem any branch, Subsidiary, or Affiliate of such Bank to
have made, maintained, or funded any Term Loan or any portion thereof
provided that immediately following and as a result of such change
Borrower would not be under any greater financial obligation pursuant
to Subsection
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2.15 than it would have been in the absence of such change. Notional
funding offices may be selected by each Bank without regard to the
Bank's actual methods of making, maintaining, or funding the Loans or
any sources of funding actually used by or available to such Bank.
(b) Actual Funding.
---------------
Each Bank shall have the right from time to time to make or maintain
any Term Loan or portion thereof by arranging for a branch,
Subsidiary, or Affiliate of such Bank to make or maintain such Term
Loan or a portion thereof subject to the last sentence of this
Subsection 7.05(b). If any Bank causes a branch, Subsidiary, or
Affiliate of such Bank to make or maintain any part of the Term Loans
hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise, be applicable to such
part of the Term Loans to the same extent as if such Term Loans were
made or maintained by such Bank, but in no event shall any Bank's use
of such a branch, Subsidiary, or Affiliate to make or maintain any
part of the Term Loans hereunder cause such Bank or such branch,
Subsidiary, or Affiliate to incur any material cost or expenses
payable by the Borrower hereunder or require the Borrower to pay any
other material compensation to any Bank (including any expenses
incurred or payable pursuant to Subsection 2.15) which would otherwise
not be incurred.
7.06 Notices.
--------
All notices, requests, demands, directions, and other communications (as
used in this Section 7.06 collectively referred to as "notices") given to or
made upon any party hereto under the provisions of this Agreement shall be in
writing (including telex or facsimile communication) unless otherwise expressly
permitted hereunder and shall be delivered or sent by telex or facsimile to the
respective parties at the addresses and numbers set forth under their respective
names on the signature pages hereof or in accordance with any subsequent
unrevoked written direction from any party to the others. All notices shall,
except as otherwise expressly herein provided, be effective (a) in the case of
telex or facsimile, when received, (b) in the case of hand-delivered notice,
when hand delivered, (c) in the case of telephone, when telephoned, provided,
however, that in order to be effective, telephonic notices must be confirmed in
writing no later than the next day by hand delivery, facsimile or telex, (d) if
given by mail, four (4) days after such communication is deposited in the mails
with first class postage prepaid, return receipt requested, and (e) if given by
any other means (including by air courier), when delivered; provided, that
notices to the Agent shall not be effective until received. Any Bank giving any
notice to Borrower or any Guarantor shall simultaneously send a copy thereof to
the Agent and other Banks.
7.07 Successors and Assigns; Participations; Assignments.
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----------------------------------------------------
This Agreement shall be binding upon and shall inure to the benefit of the
Banks, the Agent, Borrower, and their respective successors and assigns, except
that Borrower may not assign or transfer any of its rights or Obligations
hereunder or any interest herein.
(a) Each Bank may without the consent of the Borrower sell
participations to one or more banks or other entities
in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Term
Loan Commitment and the Term Loans owing to it and the
Notes held by it); provided, however, that (i) such
Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the
performance of such obligations, (iii) the
participating banks or other entities shall be entitled
to the cost protection provisions contained in
Subsection 2.15 but shall not be entitled to receive
pursuant to such provisions an amount larger than its
share of the amount to which the Bank granting such
participation would have been entitled and (iv)
Borrower, Agent, and the other Banks shall continue to
deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this
Agreement; provided, further, that each Bank shall
retain the sole right and responsibility vis-a-vis
Borrower to enforce the obligations of Borrower
relating to the Term Loans and shall retain all voting
rights, including the right to approve any amendment,
modification, or waiver of any provision of this
Agreement other than amendments, modifications, or
waivers with respect to any Facility Fees, the amount
of principal or the rate of interest payable on, or the
maturity of, the Term Loans as applicable to the
participating banks or other entities (as to which such
participating banks or other entities shall be afforded
the right to vote).
(b) Each of the Banks originally party hereto may
(but only with the prior written consent of Borrower,
which consent shall not be unreasonably withheld, and
(unless the assignee is a bank or trust company with a
combined capital and surplus of at least $100,000,000)
with the written consent of Agent, which consent shall
not be unreasonably withheld) assign to one or more
banks or other entities all or a portion of its
interests, rights, and obligations under this Agreement
(including all or a portion of its Term Loan Commitment
and the same portion of the Term Loans at the time
owing to it and the Notes held by it); provided,
however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of the
assigning Bank's rights and obligations under this
Agreement, and (ii) the amount of the Term Loan
Commitment and Term Loan of the assigning Bank subject
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to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment is delivered to the
Bank) shall be either the entire Term Loan Commitment or Term Loan of
such Bank or a portion thereof in a principal amount of $5,000,000 or
a larger integral multiple of $1,000,000, and (iii) the parties to
each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as defined below), an
Assignment and Acceptance, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $3,500. Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be not earlier than five (5) Business Days after
the date of acceptance and recording by the Agent, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and under the other Loan Documents and (y) the assigning
Bank thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of the assigning Bank's rights and obligations under
this Agreement, such assigning Bank shall cease to be a party hereto).
(c) Notwithstanding the other provisions of this Subsection
7.07, each Bank may at any time assign all or a portion
of its interests, rights, and obligations under this
Agreement (including, without limitation, all or a
portion of its Term Loan Commitment and the same
portion of the Term Loans at any time owing to it and
the Notes held by it) to (i) any Affiliate of such Bank
described in clause (b) of the definition of Affiliate
or (ii) any other Bank hereunder.
(d) By executing and delivering an Assignment and
Acceptance, the assigning Bank thereunder and the
assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i)
other than the representation and warranty that it is
the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim,
the assigning Bank makes no representation or warranty
and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with this Agreement or the execution,
legality, validity, enforceability, genuineness,
sufficiency, or value of the Loan Documents or any
other instrument or document furnished pursuant hereto
or thereto; (ii) such Bank assignor makes no
representation or warranty and assumes no
responsibility with respect to the financial condition
of the Borrower, any Guarantor, or any of the
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Subsidiaries or Affiliates of Borrower or any Guarantor or any other
obligor under the Loan Documents or the performance or observance by
the Borrower (on behalf of itself or its Subsidiaries or Affiliates)
or any of the Guarantors or any other obligor under the Loan Documents
of any of their respective obligations under the Loan Documents or any
other instrument or document furnished pursuant hereto or thereto;
(iii) such assignee confirms that it has received a copy of this
Agreement and the Syndicated Agreement, together with copies of the
most recent financial statements delivered pursuant to Sections
5.05(a) and 5.05(b) of the Syndicated Agreement (or if none of such
financial statements shall have then been delivered, then copies of
the financial statements referred to in Section 3.05 thereof) and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without
reliance upon the assigning Bank, the Agent, or any other Person that
has become a Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v)
such assignee appoints and authorizes the Agent to take such action as
the Agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
(e) The Agent shall maintain at its address at which
notices are to be given to it pursuant to Subsection
7.06 a copy of each Assignment and Acceptance and a
register for the recordation of the names and addresses
of the Banks and the Term Loan Commitments of, and
principal amount of the Term Loans owing to, each Bank
from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and the Banks may
treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of the
Loan Documents. The Register shall be available for
inspection by the Borrower or any Bank at any
reasonable time and from time to time upon reasonable
prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee together with any Notes subject to such
assignment and evidence of the Borrower's written consent to such
assignment, the Agent shall, if such Assignment and Acceptance has
been completed and is in the form of Exhibit A hereto, (i) accept such
Assignment and Acceptance, (ii) record
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the information contained therein in the Register and (iii) give
prompt written notice thereof to the Borrower. Within five (5)
Business Days after receipt of the notice, the Borrower, at its own
expense, shall execute and deliver to the Bank, in exchange for the
surrendered Notes, (x) a new Note or Notes to the order of such
assignee in an amount and currency equal to the portion of the Term
Loan Commitment or Term Loan assumed by it pursuant to such Assignment
and Acceptance and, (y) a new Note or Notes to the order of the
assigning Bank in an amount and currency equal to the portion of the
Term Loan Commitment or Term Loan retained by it hereunder. Such new
Notes shall be in the aggregate principal amount and Optional
Currencies equal to the aggregate principal amount in such Optional
Currencies of such assumed Term Loan Commitment or Term Loan and
retained Term Loan Commitment or Term Loan, such new Notes shall be
dated the date of the surrendered Notes and shall otherwise be in
substantially the forms of the Notes. In addition, the Borrower will
promptly, at its own expense, execute such amendments to the Loan
Documents and to such additional documents and cause the Guarantors to
execute amendments to the Loan Documents to which any of them is a
party, and take such other actions as the Agent or the assignee Bank
may reasonably request in order to confirm that such assignee Bank is
entitled to the full benefit of the Guaranties to the extent of such
assignment.
(g) Notwithstanding any other provision herein, any Bank
may, in connection with any assignment or participation
or proposed assignment or participation pursuant to
this Subsection 7.07, disclose to the assignee or
participant or proposed assignee or participant, any
information relating to Borrower, Guarantors, or any of
the Subsidiaries or Affiliates thereof furnished to
such Bank or the Agent by or on behalf of the Borrower,
Guarantors or Subsidiaries or Affiliates thereof;
provided, that prior to any such disclosure, each such
assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality
of any confidential information relating to the
Borrower or any of their Subsidiaries received from
such Bank on the terms of Subsection 7.08.
(h) Any Bank may at any time pledge or assign all or any portion of its
rights under this Agreement and the Notes to a Federal Reserve Bank.
7.08 Confidentiality.
----------------
The Agent and the Banks each agree to keep confidential all information
obtained from Borrower, any Guarantor, or any Subsidiary or Affiliate of either
which is nonpublic and confidential or proprietary in nature (including any
information the Borrower specifically designates as
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confidential), except as provided below, and to use such information only in
connection with their respective capacities under this Agreement and for the
purposes contemplated hereby. The Agent and the Banks shall be permitted to
disclose such information (i) to outside legal counsel, accountants and other
professional advisors who need to know such information in connection with the
administration and enforcement of this Agreement, (ii) to assignees and
participants as contemplated by Subsection 7.07, (iii) to the extent requested
by any bank regulatory authority, any external auditor, or, with notice to the
Borrower, as otherwise required by applicable Law or by any subpoena or similar
legal process, or in connection with any investigation or proceeding arising out
of the transactions contemplated by this Agreement, (iv) if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not subject to confidentiality restrictions, or (v) if
the Borrower shall have consented to such disclosure.
7.09 Counterparts; Telecopy Signatures.
----------------------------------
This Agreement may be executed by different parties hereto on any number
of separate counterparts, each of which, when so executed and delivered, shall
be an original, and all such counterparts shall together constitute one and the
same instrument. Telecopy transmission to Agent of signature pages of this
Agreement or any other Loan Document executed by any party hereto shall
constitute effective and binding execution and delivery of this Agreement or
such other Loan Document by such transmitting party.
7.10 Agent's or Bank's Consent.
--------------------------
Except as expressly otherwise set forth herein, whenever the Agent's or
any Bank's consent is required to be obtained under this Agreement or any of the
other Loan Documents as a condition to any action, inaction, condition or event,
the Agent and each Bank shall be authorized to give or withhold such consent in
its sole and absolute discretion and to condition its consent upon the giving of
additional collateral, the payment of money or any other matter.
7.11 Exceptions.
-----------
The representations, warranties and covenants contained herein shall be
independent of each other and no exception to any representation, warranty, or
covenant shall be deemed to be an exception to any other representation,
warranty, or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
7.12 Tax Withholding Clause.
-----------------------
Each Bank or assignee or participant of a Bank that is not organized under
the Laws of the United States or a state thereof (each a "non US Bank") and each
Bank or assignee or participant of a Bank that is not organized under the Laws
of the United Kingdom or a political subdivision thereof (each, a "non-UK Bank")
agrees that it will deliver to each of the
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Borrower and the Agent two (2) duly completed copies of the following: (i) for a
non-US Bank, United States Internal Revenue Service Form W-9, 4224 or 1001, or
other applicable form prescribed by the Internal Revenue Service, certifying
that such Bank, assignee, or participant is entitled to receive payments under
this Agreement and the other Loan Documents without deduction or withholding of
any United States federal income taxes, or is subject to such tax at a reduced
rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8
or other applicable form or a certificate of the Bank, assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments, and for a non-UK Bank, United Kingdom Inland Revenue Form REF FD
13, or other applicable form prescribed by Inland Revenue, certifying such Bank,
assignee, or participant is entitled to receive payments under this Agreement
and the other Loan Documents without deduction or withholding of any United
Kingdom or English income or other tax. Each Bank, assignee or participant
required to deliver to the Borrower and the Agent a form or certificate pursuant
to the preceding sentence shall deliver such form or certificate as follows: (A)
each Bank which is a party hereto on the Closing Date shall deliver such form or
certificate no later than five (5) Business Days after the Closing Date; (B)
each assignee or participant shall deliver such form or certificate at least
five (5) Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such form or certificate less than five (5)
Business Days before such date in which case it shall be due on the date
specified by the Agent). Each Bank, assignee or participant which so delivers an
Internal Revenue Service Form W-8, W-9, 4224 or 1001 or an Inland Revenue Form
REF FD 13 further undertakes to deliver to each of the Borrower and the Agent
two (2) additional copies of each such form (or a successor form) on or before
the date that such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, either certifying that such Bank,
assignee, or participant is entitled to receive payments under this Agreement
and the other Loan Documents without deduction or withholding of any United
States federal income taxes or United Kingdom or English income or other tax or
is subject to such tax at a reduced rate under an applicable tax treaty or
stating that no such exemption or reduced rate is allowable. The Agent shall be
entitled to withhold United States federal income taxes and Borrower shall be
entitled to withhold United Kingdom or English income and other taxes at the
full withholding rate unless the Bank, assignee, or participant (x) with respect
to United States federal income taxes, establishes an exemption or that it is
subject to a reduced rate as established pursuant to the above provisions or (y)
with respect to United Kingdom or English income or other tax, provides such
Inland Revenue form as set forth above; and, (z) with respect to any Bank, the
provisions of Subsections 2.16(a) and (b) shall not apply as to United Kingdom
or English law matters until such Inland Revenue form is provided as set forth
in this Subsection 7.12.
7.13 Notification.
-------------
Borrower shall promptly notify Bank in the event of:
(a) Any Event of Default;
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(b) The commencement of any material litigation by or
against or involving Borrower or any Guarantor;
(c) Any proposed sale or transfer of substantially all of
the assets of Borrower or any Guarantor; and
(d) Any change or other amendment to any organizational documents of
Borrower or any Guarantor or in the ownership of Borrower or any
Guarantor.
7.14 Bank's Duties Upon Payment in Full by Borrower.
-----------------------------------------------
Upon indefeasible payment in full of all Obligations hereunder and the
termination of each Bank's obligations, if any, to make further Term Loans to
Borrower, each Bank shall execute cancellations of all financing statements or
other documents, if any, which may have previously been filed and recorded in
public offices by or on behalf of such Bank evidencing Borrower's Obligations to
Bank and the security therefor, and shall deliver to Borrower its Term Note
marked "Paid in Full" or otherwise appropriately canceled (the cost of recording
the cancellation of financing statements and the like shall be borne by
Borrower).
7.15 Severability.
-------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, the remainder of this Agreement shall continue to
be valid and enforceable in such jurisdiction, and all of this Agreement shall
continue to be valid and enforceable in all other jurisdictions.
7.16 Governing Law.
--------------
This Agreement shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to its conflict of laws principles.
7.17 Prior Understanding.
--------------------
This Agreement, the Note, and any other documents or agreements
incorporated herein or executed or given in connection herewith, supersede all
prior understandings and agreements, whether written or oral, between the
parties hereto relating to the Term Loans, except that those portions of the
mandate letters from Agent to Borrower and DII, respectively dated as of April
12 and 17, 1995, relating to reimbursement of costs and expenses of Agent,
indemnification of Agent (and any guaranty of any such payments), and fees
payable to Agent shall survive the execution and delivery of the Loan Documents
and the making and continuation of the Term Loans and shall be Borrower
Obligations hereunder.
7.18 Duration; Survival; Failure of Closing Date.
146
<PAGE>
--------------------------------------------
All representations and warranties of Borrower made or incorporated herein
or made in connection herewith shall survive the making of Term Loans and shall
not be waived by the execution and delivery of this Agreement, any investigation
by Agent or any Bank, or payment in full of the Term Loans. All covenants and
agreements of Borrower contained or incorporated herein shall continue in full
force and effect from and after the date hereof until indefeasible payment in
full of all Term Loans. All covenants and agreements of Borrower contained or
incorporated herein relating to the payment of principal, interest, premiums,
additional compensation, expenses, or indemnification, shall survive payment in
full of the Term Loans and termination thereof. In the event that the Term Loans
are not made on or before the Borrowing Date, the Term Loan Commitments shall
expire and no Bank or Agent shall have any obligations hereunder.
7.19 Consent to Jurisdiction; Waiver of Immunities; Waiver of
Jury Trial.
--------------------------------------------------------
(a) Consent to Jurisdiction.
------------------------
Each of Borrower and each Bank hereby irrevocably submits to the
jurisdiction of any Pennsylvania State or Federal court sitting in
Pittsburgh, Pennsylvania, in any action or proceeding arising out of or
relating to this Agreement or any Note, and each of Borrower and each Bank
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Pennsylvania State or
Federal court. Each of Borrower and each Bank hereby irrevocably waives,
to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of any such action or proceeding.
Borrower hereby appoints the process agent identified below (the "Process
Agent") as its agent to receive on behalf of Borrower and its respective
property service of copies of the summons and complaint and any other
process which may be served in any action or proceeding. Such service may
be made by mailing or delivering a copy of such process to Borrower in
care of the Process Agent at the Process Agent's address, and Borrower
hereby authorizes and directs the Process Agent to receive such service on
its behalf. Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
(or political subdivision thereof) by suit on the judgment or in any other
manner provided by Law. Borrower further agrees that it shall, for so long
as any Obligation hereunder of Borrower to any of the Banks or Agent
remains outstanding, continue to retain Process Agent for the purposes set
forth in this Subsection 7.19(a). The Process Agent is C.T. Corporation
System with an office on the date hereof at 1633 Broadway, New York, New
York 10019 United States. Borrower shall produce to the Banks evidence of
the acceptance by Process Agent of such appointment on or
147
<PAGE>
before the Closing Date.
(b) Non-Exclusive Jurisdiction.
---------------------------
Nothing in this Section shall affect the right of Agent or any Bank
to serve legal process in any other manner permitted by Law or affect the
right of Agent or any Bank to bring any action or proceeding against
Borrower or any of their respective property in the courts of any other
jurisdiction or jurisdictions.
(c) Waiver of Sovereign Immunity.
-----------------------------
To the extent that Borrower has or hereafter may acquire any immunity
from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid
of execution, execution, or otherwise) with respect to itself or its
property, Borrower hereby irrevocably waives such immunity in respect of
its Obligations under this Agreement and each Note and any other document
or agreement executed or given in connection herewith, and Borrower agrees
that it will not raise or claim any such immunity at or in respect of any
such action or proceeding.
(d) Waiver of Jury Trial.
---------------------
EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT AND ANY OF THE OTHER DOCUMENTS OR TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal as of the day and year first above written.
ATTEST: DENTSPLY LIMITED
By:
Title:
[Seal]
Address for Notices:
Hamm Moor Lane, Addlestone
Weybridge, Surrey KT15 2SE
ENGLAND
Telecopier No. ( ) -
--- ---- ------
Attention: Edward D. Yates
Telephone No. ( ) -
--- ---- ------
148
<PAGE>
With a copy to:
DENTSPLY INTERNATIONAL INC.
570 West College Avenue
P.O. Box 872
York, PA 17405-0872
Telecopier No. (717) 846-0256
Attention: Paul Wannemacher
Telephone No. (717) 849-4262
149
<PAGE>
ABN AMRO BANK N.V., individually and as Agent
By:
Title:
By:
Title:
Address for Notices:
335 Madison Avenue
14th Floor
New York, New York 10017
Telecopier No. (212) ____-_______
Attention: Linda Boardman/Maxine Cordero
Telephone No. (212) 370-8509
With copy to:
One PPG Place - Suite 2950
Pittsburgh, PA 15222-5400
Telecopier No. (412) 566-2266
Attention: Roy D. Hasbrook
Telephone No. (412) 566-2263
150
<PAGE>
MULTI-CURRENCY TERM LOAN AGREEMENT
AMONG
DENTSPLY LIMITED,
THE BANKS NAMED HEREIN,
AND
ABN AMRO BANK N.V.,
AS AGENT
TABLE OF CONTENTS
- -----------------
Page
----
SECTION 1 DEFINITIONS 1
1.01 Terms Defined in Syndicated Agreement; Listed
Definitions 1
1.02 Miscellaneous Definitions, Usage, and Meanings 6
SECTION 2 TERM LOANS 7
2.01 Term Loan Commitments 7
2.02 Nature of Banks' Obligations with Respect to
Term Loans 7
2.03 Term Loan Facility Fee 7
2.04 Term Loan Notes; Principal Repayment Date 7
2.05 Use of Proceeds 7
2.06 Interest Rate, Borrowing Tranches, Currency 7
2.07 Interest Periods 8
2.08 Selection of Interest Periods 9
2.09 Payments 9
2.10 Pro Rata Treatment of Banks 9
2.11 Interest Payment Dates 9
2.12 Voluntary Prepayments 10
2.13 Mandatory Payment and Prepayment 11
2.14 LIBOR Rate Unascertainable 11
2.15 Additional Compensation in Certain
Circumstances 12
2.16 Taxes 14
2.17 Judgment Currency 15
2.18 London Interbank Market, Presumption 15
SECTION 3 CONDITIONS OF LENDING 15
3.01 Conditions Precedent to Closing 15
3.02 Conditions Precedent to Banks Making Term Loans 16
3.03 Interest Period Requests 17
SECTION 4 REPRESENTATIONS, WARRANTIES, COVENANTS;
INCORPORATION OF TERMS 17
4.01 Incorporation 17
4.02 Representations, Compliance 18
4.03 Amendments 18
4.04 Party to Syndicated Agreement 18
4.05 Notices 18
4.06 The Acquisition 18
4.07 Assignees 19
SECTION 5 DEFAULT 19
5.01 Events of Default 19
5.02 Consequences of Event of Default 20
151
<PAGE>
SECTION 6 THE AGENT 21
6.01 Appointment 21
6.02 Delegation of Duties 21
6.03 Nature of Duties; Independent Credit
Investigation 21
6.04 Actions in Discretion of Agent; Instructions
from the Banks 21
6.05 Reimbursement and Indemnification of Agent
by the Borrower 22
6.06 Exculpatory Provisions 22
6.07 Reimbursement and Indemnification of Agent
by Banks 23
6.08 Reliance by Agent 23
6.09 Notice of Default 23
6.10 Notices 23
6.11 Banks in Their Individual Capacities 23
6.12 Holders of Notes 24
6.13 Equalization of Banks 24
6.14 Successor Agent 24
6.15 Availability of Funds 24
6.16 Calculations 25
6.17 Beneficiaries 25
SECTION 7 MISCELLANEOUS 25
7.01 Modifications, Amendments or Waivers 25
7.02 No Implied Waivers; Cumulative Remedies;
Writing Required 26
7.03 Reimbursement and Indemnification of Banks
by the Borrower; Taxes 26
7.04 Holidays 26
7.05 Funding by Branch, Subsidiary or Affiliate 27
7.06 Notices 27
7.07 Successors and Assigns; Participations;
Assignments 27
7.08 Confidentiality 30
7.09 Counterparts; Telecopy Signatures 30
7.10 Agent's or Bank's Consent 30
7.11 Exceptions 30
7.12 Tax Withholding Clause 30
7.13 Notification 31
7.14 Bank's Duties Upon Payment in Full by Borrower 31
7.15 Severability 32
7.16 Governing Law 32
7.17 Prior Understanding 32
7.18 Duration; Survival; Failure of Closing Date 32
7.19 Consent to Jurisdiction; Waiver of
Immunities; Waiver of Jury Trial 32
152
<PAGE>
DENTSPLY INTERNATIONAL INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
1995 1994 1993
-------- -------- --------
(in thousands, except per share data)
Weighted average common
shares outstanding 27,012 27,776 24,598
-------- -------- --------
Income from continuing
operations $ 53,963 $ 54,144 $ 25,145
Income from the operation of
of discontinued Medical
business - 1,311 2,925
Gain on disposal of Medical
business - 6,543 -
-------- -------- --------
Income before extraordinary
item 53,963 61,998 28,070
Extraordinary item - - 14,018
-------- -------- --------
Net income $ 53,963 $ 61,998 $ 14,052
======== ======== ========
Earnings per common share:
Income from continuing
operations $2.00 $1.95 $1.02
Income from the operation
of discontinued Medical
business - .05 .12
Gain on disposal of
Medical business - .23 -
----- ----- -----
Income before extraordinary
item 2.00 2.23 1.14
Extraordinary item - - (.57)
----- ----- -----
Net Income $2.00 $2.23 $ .57
===== ===== =====
153
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company
I. Direct Subsidiaries of the Company
A. Ceramco Inc. (Delaware)
B. Ceramco Manufacturing Co. (Delaware)
C. Dentsply Industria e Comercio Ltda. (Brazil)
D. DeTrey do Brazil Industria e Comercio Ltda. (Brazil)
E. Dentsply Argentina S.A.C. e I. (Argentina)
F. Dentsply Japan K.K. (Japan)
G. Dentsply Research & Development Corp. ("Dentsply R&D")
(Delaware)
H. Dentsply Thailand Ltd. (Thailand)
I. Midwest Dental Products Corporation (Delaware)
J. GENDEX Dental Systems S.r.l. (Italy)
K. Eureka X-Ray Tube Corp. (Delaware)
L. DENTSPLY Export Sales Corp. (Barbados)
M. DENTSPLY India Limited (India)
N. Dentsply (Phils.) Inc. (Philippines)
II. Indirect Subsidiaries of the Company
A. Subsidiaries of Dentsply R&D
(1) The International Tooth Co. Limited (United Kingdom)
(2) Dentsply (Aust.) Pty. Ltd. (Australia (Victoria))
(3) Dentsply Canada Ltd. (Canada (Federal))
(4) Dentsply de Mexico S.A. de C.V. (Mexico)
(5) Ceramco Europe Ltd. (Cayman Islands)
(a) Cermaco U.K. Limited (U.K.)
(6) Dentsply A.G. (Switzerland)
(7) Tulsa Dental Products Inc. (Delaware)
(8) Dentsply DeTrey GmbH (Germany)
154
<PAGE>
(a) Dentsply Holdings Unlimited (England)
(b) Dentsply Limited (Cayman Islands)
(i) DeTrey Dentsply Italia S.r.l. (Italy)
(ii) DeTrey Dentsply S.A. (France)
(iii) A D Engineering Company Limited
(England)
(iv) Amalco Holdings Ltd. (England)
(v) Keith Wilson Limited (England)
(vi) Oral Topics Limited (England)
(vii) Maillefer Instruments S.A. (Switzerland)
(aa) Manuplast S.A. (Switzerland)
(bb) Societe Immobiliere du Champ des
Echelles S.A. (Switzerland)
155
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
DENTSPLY International Inc.
We consent to incorporation by reference in the registration statements (Nos.
33-61780, 33-52616, 33-41775, 33-71972, 33-79094 and 33-89786) on Form S-8 of
DENTSPLY International Inc. of our report dated January 26, 1996, relating to
the consolidated balance sheets of DENTSPLY International Inc. and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements of
income, stockholders' equity, and cash flows and related schedule for each of
the years in the three year period ended December 31,1995, which report appears
in the December 31, 1995 annual report on Form 10-K of DENTSPLY International
Inc.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
March 30, 1996
156
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE AUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DENTSPLY
INTERNATIONAL, INC. AT DECEMBER 31, 1995 AND FOR THE FISCAL YEAR THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3974
<SECURITIES> 0
<RECEIVABLES> 95569
<ALLOWANCES> 2254
<INVENTORY> 125704
<CURRENT-ASSETS> 252226
<PP&E> 182754
<DEPRECIATION> 42653
<TOTAL-ASSETS> 597725
<CURRENT-LIABILITIES> 123650
<BONDS> 68675
0
0
<COMMON> 271
<OTHER-SE> 315651
<TOTAL-LIABILITY-AND-EQUITY> 597725
<SALES> 572028
<TOTAL-REVENUES> 572028
<CGS> 291176
<TOTAL-COSTS> 291176
<OTHER-EXPENSES> 179602
<LOSS-PROVISION> 515
<INTEREST-EXPENSE> 9144
<INCOME-PRETAX> 90017
<INCOME-TAX> 36054
<INCOME-CONTINUING> 53963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53963
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 2.00
</TABLE>
