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
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
- ------------------- -----------------------------------------
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 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.
As of February 29, 2000, 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 $1,340,150,140
(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 February 29, 2000 was 52,156,355.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of DENTSPLY
International Inc. to be used in connection with the 2000 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 dental
prosthetics, endodontic instruments and materials, impression materials,
restorative materials, crown and bridge materials, prophylaxis paste, dental
sealants, cutting instruments, dental needles, dental anesthetics, and
orthodontic appliances. Dental equipment includes dental x-ray systems,
intraoral cameras, computer imaging systems and related software, handpieces,
ultrasonic scalers and polishers, and air abrasion systems. The Company also
develops and markets practice management software for managing the dental
office and software for maintaining a database of information generated in
the dental operatory's clinical environment.
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 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,
Japan, and Australia 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
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customized crowns, bridges, orthodontic appliances, bone grafting
materials, 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 countries
of the former Soviet Union, 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 its recognized brand names, high
quality and innovative products, technical support services and strong
international distribution capabilities position it well to take advantage of
any opportunities for growth in all of the markets that it serves.
The following trends support the Company's confidence in its industry
growth outlook:
Increasing worldwide population - Population growth continues
throughout the world.
Growth of the population 65 or older - The percentage of the U.S.
and European population over the age 65 is expected to double by
the year 2030. In addition to having significant needs for
dental care, the elderly are well positioned to pay for the
required procedures since they control sizable amounts of
discretionary income.
Natural teeth are being retained longer - According to the
Princeton Dental Resource Center's study on Oral Health and
Aging, "Individuals with natural teeth are over four times as
likely to visit a dentist in a given year than those without any
natural teeth remaining."
The changing dental practice in the United States - Dentistry in
North America has been transformed from a profession primarily
dealing with pain, infections and tooth decay to one with
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increased emphasis on preventive care and cosmetic dentistry.
DENTSPLY's product lines are well positioned to provide the new
sophisticated solutions that these advanced procedures require.
Continuing European governmental support - Europe continues to be
a significant dental market. In addition, European governments
are changing dental behaviors by increasing dental reimbursement
levels for preventive care.
Per capita and discretionary incomes are increasing in emerging
nations - As personal incomes continue to rise in the emerging
nations of the Pacific Rim and Latin America, healthcare
including dental services are a growing priority.
Products
DENTSPLY's two principal dental product lines are consumable and
laboratory products, and equipment. These products are 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 trademarks in the industry, including CAULK(R), CAVITRON(R),
CERAMCO(R), DENTSPLY(R), DETREY(R), GENDEX(R), MIDWEST(R), R&R(R), RINN(R),
TRUBYTE(R), MAILLEFER(R), PROFILE(R), THERMAFIL(R), ACUCAM(R), SANI-TIP(R),
OVATION(R), ANTAEOS(R), BEUTELROCK(R) and ZIPPERER(R). Sales of the Company's
professional dental products accounted for approximately 95% of
DENTSPLY's consolidated sales for 1999, 1998 and 1997, 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 thousands of different
consumable and laboratory products marketed under more than 120 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(R) and PORTRAIT(R) IPN(R) brand names,
among others, and are produced by the Company in York,
Pennsylvania, Brazil and China 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(R), BLUEPRINT(TM), REPROSIL(R) and
AQUASIL LV Smart Wetting(TM) Impression Material are designed to
increase the rate of successful impressions without retakes and
to set quickly to minimize patient discomfort.
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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.
DENTSPLY'S SUREFIL(TM) High Density Composite Restorative is
condensable, just like amalgam and offers true amalgam-like
packability with the aesthetics of a composite or tooth-colored
filling material. These features, combined with fluoride release,
assure both the dentist and patient of strong, long lasting and
esthetically pleasing posterior restorations. In addition, its
wear rates are equal to or less than an amalgam restoration. The
Company's DYRACT(R) AP is a patented, single component restorative
material featuring simplicity in delivery combined with
excellence in restorative results. Formulated with a resin mix,
it delivers the compressive strength of a hybrid composite. Due to
its wear resistance and strength, DYRACT(R) AP is indicated for
all classes of cavities. DYRACT(R) Flow is an easy handling
flowable compomer restorative with excellent adaption to tooth
structures; sustained, rechargeable fluoride release; ideal flow
consistency for air abrasion procedures; and availability in
seven popular shades. PRIME & BOND(R) NT is a true one coat liquid
adhesive system offering the dentist reduced procedure time
coupled with excellent physical properties. DENTSPLY also markets
a number of other brand name lines of restorative amalgams; and
DELTON(R) and DELTON(R) PLUS (with fluoride release) brand dental
sealants.
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. Product offerings
include the CERAMCO(R) line, and in Europe, the DETREY(R) CARAT(R) line
of specialty crown and bridge porcelain products for use as fixed
prosthetics. FINESSE(TM) Porcelain from Ceramco, features superb
shade matching and permits the dental laboratory to fire
restorations with extraordinary aesthetics.
Endodontic Instruments and Materials: These products
are used in root canal treatment of severely damaged or
decayed teeth. Through its Maillefer, DENTSPLY Endodontics and
VDW subsidiaries, the Company has an extensive endodontic product
offering including broaches, files, and other endodontic
materials and instruments. The Company's PROFILE(R) SERIES 29(R) 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(R) .04
TAPERS(R) feature non-standard tapers constructed from super-
flexible nickel titanium for use in a controlled, slow-speed,
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high-torque rotary dental handpiece. PROFILE(R) GT Rotary Engine
Driven Nickel Titanium Endodontic Files are specifically designed
with unparalleled strength and flexibility to simplify root canal
operations, by giving dentists an automated method to achieve the
clinically necessary root canal funnel shape. They are used in
conjunction with PROFILE(R) .04 TAPERS(R) to efficiently create a
predefined taper. THERMASYSTEM(R) PLUS includes THERMASEAL(R) PLUS,
a patented root canal filling material which is fast, effective
and tissue-friendly and the THERMAPREP(R) PLUS Oven which cuts
required heating time for plastic THERMAFIL(R) PLUS Obturators from
up to seven minutes to as little as seventeen seconds.
THERMASYSTEM(R) PLUS provides a three dimensional root canal fill
in a fraction of the time it takes for traditional lateral
condensation procedures. Pro Root MTA(TM) is a root repair material
that uses water-based chemistry which allows for normal setting
in the presence of moisture. It out-performs other material in
providing a stable barrier to bacterial and fluid leakage. Pro
Root MTA(TM) is unlike any other root canal repair material, in that
in many cases where a tooth was previously considered a lost
cause, it may now be saved. GLYDE FILE PREP(TM) is a new root canal
therapy gel used to facilitate the cleaning and shaping of the
root canal. Used as a lubricant and irrigating agent, it lifts
debris coronally while it cleans and lubricates.
Protective Supplies: These products are designed to
ameliorate possible sources of patient cross-contamination
of infectious disease, and include RITE-ANGLE(R) and NUPRO(R)
Disposable Prophy Angles (disposable mechanical devices used
by dentists and hygienists to clean and polish teeth), hand
cleansers, disposable barriers, enzymatic cleansers, needle
stick prevention devices and disposable air-water syringe
tips.
Dental Cutting Instruments: The Company distributes
MIDWEST(R) carbide and specialty burs. Regular carbide burs
are the most commonly used dental cutting instruments in the
North American market. 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.
Tooth Whitener: DENTSPLY also offers a tooth whitening
system. The NUPRO(R) Gold Tooth Whitening System is a
complete, professionally administered program. Patients
receive a tooth whitening system in a convenient, easy-to-
use take home kit.
Other Consumable Products: Other products produced by the
Company for use in dental offices include NUPRO(R) prophylaxis
paste that is used in cleaning and polishing teeth along with
many others.
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Dental Equipment. DENTSPLY's dental equipment product lines include
high and low speed handpieces, intraoral lighting systems, ultrasonic
scalers and polishers, x-ray systems and related support equipment and
accessories, and air abrasion systems.
Handpieces: Under the MIDWEST(R) brand name, DENTSPLY
manufactures and distributes a line of high-speed and
low-speed air-driven handpieces and intraoral lighting
systems.
Air Abrasion Unit: The AIRTOUCH(TM) Cavity Preparation
System is an air-abrasion unit that delivers aluminum oxide
particles with pressurized air to cut tooth structure. The need
for anesthetic is absent from many procedures when using the
AIRTOUCH(TM) Cavity Preparation System and there is a lower
level of vibration, pressure and noise when compared with
traditional cavity preparation methods.
Ultrasonic Scalers and Polishers: DENTSPLY
manufactures and distributes the CAVITRON(R) SPS(TM) Ultrasonic
Scaler (which uses ultrasonic waves to remove hardened tooth
calculus which results from the interaction of plaque,
saliva and food particles). SPS(TM) stands for Sustained
Performance System, a patented technology which acts
much like an automobile's cruise control that measures tip
motion and compensates for reduction in tip motion once the
insert tip contacts the tooth surface. By doing this, SPS(TM)
provides more power for improved scaling efficiency and
permits the dentist to set the power control at a lower
level, providing a more comfortable scaling procedure for
the patient.
Dental X-Ray Systems: The Company also offers a full line
of dental x-ray equipment for intraoral, panoramic and
cephalometric procedures. 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. The ORTHORALIX(R) 9000
panoramic x-ray system comes with a mechanical drive and
advanced microprocessor control which minimizes spinal
shadow for sharp detail throughout the x-ray film. The DENOPTIX(R)
Digital Imaging System is a patented, digital x-ray imaging
product compatible with the installed base of both intraoral and
panoramic units. This system uses storage phosphor imaging
technology to create digital x-ray images on imaging plates.
These imaging plates are thin and flexible and are available
in every intraoral and panoramic size. They are reusable,
do not require chemical processing like conventional film,
and allow the dentist to reduce the amount of radiation to
the patient by as much as 90%. When placed in a laser
scanner, the information on the imaging plate is converted
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to a digital image via a computer. The DENOPTIX(R) Ceph System is
designed to produce superior digital images for cephalometric,
panoramic and intraoral x-ray systems. It will especially
benefit orthodontists and oral surgeons in planning their
treatment.
X-Ray Support Equipment: Under the RINN(R) brand name,
DENTSPLY manufactures and distributes x-ray film mounts,
film holders and related equipment and accessories.
The Company offers SOFTDENT(R) practice management software through its
InfoSoft division. This fully integrated software is used in managing both
the dental "front" office as well as in maintaining a data base of
information generated in the operatory's clinical environment. SOFTDENT(R) is
used in more than 12,000 dental offices throughout the United States. The
InfoSoft division is also one of the leading processors of electronic dental
insurance claims in the United States. InfoSoft also provides statement
preparation and mailing at a substantial savings over what dentists can do on
their own.
Markets, 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 primary marketing efforts on the dental
professionals who are the end users of its 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 is enhancing its position as the brand leader in most of the
categories in which it competes through an end user pull through marketing
approach. The Company has nearly 900 experienced, technically trained sales
personnel representing it globally. The Company conducts extensive
distributor and end-user marketing programs. DENTSPLY trains laboratory
technicians and dentists in the proper use of its products and introduces
them to the latest technological developments at its Educational Centers
located in key dental markets. The Company also maintains ongoing
relationships with various dental associations and recognized worldwide
opinion leaders.
DENTSPLY distributes its dental products primarily through
approximately 350 domestic and over 2,500 foreign distributors, dealers and
importers. While the overwhelming majority of DENTSPLY's products are
distributed through dental distributors and dealers, certain highly
technical products such as the Company's CERAMCO(R) line
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of crown and bridge porcelain products, DENTSPLY Endodontics'
instruments and materials, GAC's orthodontic appliances and CeraMed's bone
substitute/grafting materials are sold directly to the dental laboratory or
dentist.
The Company operates in one operating segment within the meaning of SFAS
131. See Note 4 of the Notes to the Company's Consolidated Financial
Statements - "Segment and Geographic Information".
Product Development
Technological innovation is critical to strengthening the Company's
prominent position in worldwide dental markets. DENTSPLY spends more on
research and development and has brought more innovative products to the
dental office and dental laboratory than any other manufacturer in its
industry. While many of these innovations represent sequential improvements
of existing products, DENTSPLY also continues to successfully launch products
that represent a fundamental change. Its research centers in Europe and
North America employ approximately 200 scientists/Ph.D.'s, engineers and
technicians dedicated to research and product development.
Successful product development is critical to DENTSPLY's efforts to
maintain leadership positions in product categories where it has a high
market share and to increase market share in product categories where gains
are realistic. During 1999, 1998 and 1997, approximately $18.5 million,
$18.2 million and $16.8 million, respectively, was invested by the Company in
connection with the development of new products and in the improvement of
existing products. Approximately 20 new products were successfully brought
to market during 1999, in line with the Company's annual five-year average of
20 new products. Some of these included:
PepGen P-15(TM) - The Company announced the FDA approval, on October
26, 1999 of PepGen P-15(TM) for the treatment of osseous or "bony"
defects resulting from moderate to severe periodontitis - one of
the most prevalent oral diseases affecting older adults and a
leading cause of tooth loss. PepGen P-15(TM) is the first and only
bioengineered bone replacement graft material that has
demonstrated, in multi-center clinical trials, to be 40% more
effective than the current standard of care, demineralized
freeze-dried bone allograft (DFDBA). In these same clinical
trials, the need for retreatment in patients treated with PepGen
P-15(TM) was 14% compared with 57% in those treated with DFDBA.
DENTSPLY will use its considerable resources to maximize the
potential which this exciting technology offers.
Torque Control Motors - The new Torque Control Motors allow the
user to adjust the amount of torque to the size of file being
used during endodontic procedures. When the pre-set limit is in
danger of being exceeded, the motor automatically stops and
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reverses the action of the file. The result is a reduction in
the possibility of file separation due to torsional stress.
Esthet X(TM) - New Esthet X(TM) micro matrix restorative delivers the
exceptional polish of a microfill with the resin matrix of an
advanced hybrid. Esthet X(TM) restorative's unique "Tri-
Dimensional" combination of Opaque Dentin, Regular Body and
Translucent Enamel shades allows the clinician to truly create a
restoration as close as possible to natural dentition. Esthet X(TM)
restorative is the most complete esthetic restorative system
available today, with the optimal combination of high polish,
non-sticky "sculptable" handling, and superior physical
properties.
Midwest(R) XGT(TM) handpiece - This exciting new handpiece features:
- A push-button chuck for quick, easy bur changing
- Advanced fiber optics illumination using Fusion Optics(TM)
- Exclusive ComforTouch(TM) design for better balance, greater
comfort and less hand fatigue
- Maximum flexibility in hose connections, accommodating all
5-hole and 6-pin hoses
- Anti-retraction valve virtually eliminates flow of
contaminated water back into the handpiece
- A couple-based swivel and quick-connect provides 360 degree
rotation and easy on/off handpiece connection
Cavitron(R) Select(TM) - Once again Cavitron(R) sets a new standard for
ultrasonic scaling with the Cavitron(R) Select(TM) - the first
portable Cavitron(R) unit with a self-contained water reservoir.
With the compact 25kHz Cavitron(R) Select(TM), there is no longer a
need to depend upon a dedicated water line, so scaling can be
done virtually anywhere there's a power source. What's most
amazing about this product is that it is so easy to use.
Delton(R) Sealants - The Preventive Care Division, the leader
in pit and fissure sealants, introduced 7 new products. The
biggest addition to the line is the DDS(TM) Brush Tip cartridge.
This brush cartridge will work in the current Delton(R) DDS(TM)
system. The brush tip allows easier and more precise application
of the sealant on the tooth surface. Delton(R) FS+(TM) is another new
product line that Preventive Care Division is offering. It is a
55% filled flowable sealant with fluoride. Another Delton(R)
innovation is the new syringe brush tip. This product is ideal
for use with application of etch. Other new products now
available include Delton(R) EZ Etch(TM), Delton(R) Brush Stixx(TM) and the
DDS(TM) Autoclavable applicator.
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Operating and Technical Expertise
DENTSPLY believes that its manufacturing capabilities are important 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.
DENTSPLY has completed or has in progress a number of key initiatives
around the world that are focused on helping the Company reach its 20%
operating margin objective.
1. The Company has begun a project in Europe to centralize its
warehousing and distribution. A similar project will also begin
soon in North America. These projects are focused on minimizing
both inventory levels and multiple shipments. They will also
help improve product forecasting and service to our customers.
2. The Company's two restructuring projects (moving its tooth
manufacturing from Germany to Brazil, which has a lower cost
structure, and discontinuing the majority of activities of the
New Image division's intraoral camera operation and integrating
the remaining activities into the Gendex equipment division
located in Chicago) were both completed on schedule in 1999 and
should begin to positively affect operating performance in 2000.
3. The Company continues to focus on improving its manufacturing
processes at several of its manufacturing locations, providing
improved flexibility. This will allow them to continue to reduce
inventories and improve response times to changes in customer
demand.
4. DENTSPLY has also completed the first phase of a shared service
initiative which focuses on the consolidation and centralization
of back office support functions. This program began in the
first quarter of 1999 in Financial Accounting and should be
completed in North America in 2000.
5. DENTSPLY is making significant improvements in Information
Technology as well. A new manufacturing and financial
accounting system was implemented in 1999 and provides the
Company with common software systems for nearly all of its
locations around the world.
Foreign Operations
The Company conducts its business in over 100 foreign countries,
principally through its foreign subsidiaries which operate 44 foreign
facilities (including 12 manufacturing operations). DENTSPLY has a
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long-established presence in Canada and in the European market, particularly
in Germany, Switzerland and England. The Company also has a significant
market presence in Central and South America, Australia, China (including
Hong Kong), Thailand, India, Philippines, Taiwan, Korea and Japan. DENTSPLY
has established marketing activities in Moscow, Russia to serve the countries
of the former Soviet Union. In 1996, a wholly-owned subsidiary, including a
manufacturing facility, was established in the People's Republic of China.
Manufacturing operations in India also commenced in 1996. During 1998,
wholly owned subsidiaries were established in Taiwan, Korea, Colombia and
Chile.
For 1999, 1998 and 1997, the Company's sales outside the United States,
including export sales, accounted for approximately 45%, 46% and 48%,
respectively, of consolidated net sales. For information about the Company's
United States and foreign sales and assets for 1998, 1997 and 1996, see Note
4 of the Notes to the Company's Consolidated Financial Statements - "Segment
and Geographic Information".
As a result of the Company's significant international operations,
DENTSPLY is subject to fluctuations in exchange rates of various foreign
currencies and other risks associated with foreign trade. 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 partially offset by sales in the United States of
products sourced from plants and third party suppliers located overseas,
principally in Germany and Switzerland.
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.
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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 regulations. 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 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.
13
<PAGE>
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 owns and maintains approximately one thousand domestic
and foreign patents. The Company believes its patents are important to its
business, although no aspect of its business is materially dependent on any
particular patent.
Employees
As of March 15, 2000, the Company and its subsidiaries had approximately
5,700 employees, of whom approximately 2,925 were engaged in manufacturing
operations, approximately 1,985 were engaged in sales and distribution,
approximately 580 were engaged in finance and administration, and
approximately 210 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, 2004; 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, 2000. The Company
believes that its relationship with its employees is good.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The factors described below are important risk factors. The occurrence
of any of these risks could have a material adverse effect on the Company's
business or operating results, causing actual results to differ materially
from those expressed in forward-looking statements made by the Company or its
representatives in this report or in any other written or oral reports or
presentations. These factors are intended to serve as meaningful cautionary
statements within the meaning of the Private Securities Litigation Reform Act
of 1995.
Rate of Growth
- --------------
The Company's ability to continue to increase revenues depends on
a number of factors, including the rate of growth in the market for
dental supplies and equipment, the ability of the Company to continue
to develop innovative and cost-effective new products, and the
acceptance by dental professionals of new products and technologies.
The demand for dental services can be adversely affected by economic
conditions, healthcare reform, government regulation or more stringent
14
<PAGE>
limits in expenditures by dental insurance providers. There is also a
risk that dental professionals may resist new products or technologies or
may not be able to obtain reimbursement from dental insurance providers for
the use of new procedures or equipment.
Acquisitions
- ------------
The Company's growth in recent years has depended to some extent on
acquisitions. The Company completed twelve acquisitions in 1997 and 1998,
the largest of which were GAC, Inc. and Vereinigte Dentalwerke GmbH. There
can be no assurance that the Company will be able to continue to identify and
complete acquisitions which will add materially to the Company's revenues.
Among the risks that could affect the Company's ability to complete such
acquisitions are competition for appropriate acquisition candidates and the
relatively small size of many such candidates. Moreover, there can be no
assurance that the Company will successfully integrate into its operations
the businesses that it acquires or that any such integration will not take
longer and cost more than anticipated.
Fluctuating Operating Results
- -----------------------------
The Company's business is subject to quarterly variations in operating
results caused by seasonality and by business and industry conditions, making
operating results more difficult to predict. The timing of acquisitions, the
impact of purchase accounting adjustments and consolidations among
distributors of the Company's products may also affect the Company's
operating results in any particular period.
Currency Translation and International Business Risks
- -----------------------------------------------------
Because approximately 40% 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 Company's operating
results. The strength of the U.S. dollar relative to foreign currencies can
have a negative effect on the Company's revenues and operating results. If
the U.S. dollar strengthens in relation to other currencies, the Company's
revenues and operating results will be adversely affected. In addition,
approximately 50% of the Company's revenues result from sales in markets
outside of the United States. Europe has been an important market for the
Company, and although Asia and South America have not historically been the
source of significant revenues, the Company has made investments in Asian
and South American markets because it believes that long-term future growth
prospects in these geographic areas are good. Weakness in economic
conditions in Europe could have a material adverse effect on the Company's
sales and operating results, and continued economic turmoil in Asia and
South America could have a material adverse effect on the Company's future
rate of growth.
15
<PAGE>
Margin Improvements
- -------------------
The Company strives to increase its margins by controlling its costs and
improving manufacturing efficiencies. However, there can be no assurance
that the Company's efforts will continue to be successful. Margins can be
adversely affected by many factors, including competition, product mix and
the effect of acquisitions.
Ability to Attract and Retain Personnel
- ---------------------------------------
The Company's success is dependent upon its management and employees.
The loss of senior management employees or any failure to recruit and train
needed managerial, sales and technical personnel could have a material
adverse effect on the Company.
Year 2000
- ---------
The changeover to the year 2000 ("Y2K") has resulted in no significant
issues or problems for the Company. Worldwide operations continued without
interruption as the Company's information systems, equipment and utility
providers functioned as normal throughout the transition. In addition, to
date, the Company has not been adversely impacted by any Y2K problems
experienced by its customers or vendors. Although the Company has not
experienced any Y2K problems, it is continuing to monitor potential areas of
risk.
Competition
- ------------
The worldwide market for dental supplies and equipment is highly
competitive. There can be no assurance that the Company will successfully
identify new product opportunities and develop and market new products
successfully, or that new products and technologies introduced by competitors
will not render the Company's products obsolete or noncompetitive.
Antitakeover Provisions
- -----------------------
Certain provisions of the Company's Certificate of Incorporation and
By-Laws and of Delaware law could have the effect of making it difficult for
a third party to acquire control of the Company. Such provisions include the
division of the Board of Directors of the Company into three classes, with
the three-year term of each class expiring each year, a provision allowing
the Board of Directors to issue preferred stock having rights senior to those
of the Common Stock and certain procedural requirements which make it
difficult for stockholders to amend the Company's by-laws and which preclude
stockholders from calling special meetings of stockholders. In
16
<PAGE>
addition, members of the Company's management and participants in the
Company's Employee Stock Ownership Plan collectively own approximately 15%
of the outstanding Common Stock of the Company, which may discourage a
third party from attempting to acquire control of the Company in a
transaction that is opposed by the Company's management and employees.
Item 2. Properties
- -------------------
As of March 15, 2000, 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; corporate
headquarters
York, Pennsylvania Manufacture and distribution of Owned
dental equipment and preventive
dental products
Des Plaines, Illinois Manufacture and assembly of dental Leased
handpieces and components and
dental x-ray equipment
Franklin Park, Manufacture and distribution of Owned
Illinois needles and needle-related
products, primarily for the dental
profession
Milford, Delaware Manufacture and distribution of Owned
consumable dental products
Las Piedras, Manufacture of crown and bridge Owned
Puerto Rico materials
Elgin, Illinois Manufacture of dental x-ray film Owned
holders, film mounts and
accessories
Maumee, Ohio Manufacture and distribution of Owned
investment casting products
Lakewood, Colorado Manufacture and distribution of Leased
bone grafting materials and
Hydroxylapatite plasma-feed
coating materials
17
<PAGE>
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
Petropolis, Brazil Manufacture and distribution of Owned
dental anesthetics
Konstanz, Germany Manufacture and distribution of Owned
consumable dental products;
distribution of dental equipment
Munich, Germany Manufacture and distribution of Owned
endodontic instruments and
materials
Milan, Italy Manufacture and distribution of Leased
dental x-ray equipment
Mexico City, Mexico 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
New Delhi, India Manufacture and distribution of Leased
dental products
Tianjin, China Manufacture and distribution of Leased
dental products
18
<PAGE>
In addition, the Company maintains sales and distribution offices at
certain of its foreign and domestic manufacturing facilities, as well as at
six other United States locations and at 25 international locations in 18
foreign countries. Of the 31 United States and international sites used
exclusively for sales and distribution, two are owned by the Company and the
remaining 29 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.
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 June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte Division with respect to the
distribution of artificial teeth and related products. On January 5, 1999,
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and is seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and are pending in the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The private party
suits seek damages in an unspecified amount. It is the Company's position
that the conduct and activities of the Trubyte Division do not violate the
antitrust laws.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
19
<PAGE>
Executive Officers of the Registrant
The following table sets forth certain information regarding the
executive officers of the Company as of March 15, 2000.
Name Age Position
---- --- --------
John C. Miles II 58 Chairman of the Board and Chief
Executive Officer
Gerald K. Kunkle Jr. 53 President and Chief Operating Officer
William R. Jellison 42 Senior Vice President and Chief
Financial Officer
J. Henrik Roos 42 Senior Vice President
W. William Weston 52 Senior Vice President
Thomas L. Whiting 57 Senior Vice President
Brian M. Addison 46 Vice President, Secretary and
General Counsel
John C. Miles II was named Chairman of the Board effective May 20,
1998. Prior thereto, he was Vice Chairman of the Board since January 1,
1997. He was named Chief Executive Officer of the Company upon the
resignation of Burton C. Borgelt from that position on January 1, 1996. Prior
to that he was President and Chief Operating Officer and a director of the
Company since the Merger and of Old Dentsply commencing in January 1990.
Gerald K. Kunkle Jr. was named President and Chief Operating Officer
effective January 1, 1997. Prior thereto, Mr. Kunkle served as President of
Johnson and Johnson's Vistakon Division, a manufacturer and marketer of
contact lenses, from January 1994 and, from early 1992 until January 1994,
was President of Johnson and Johnson Orthopaedics, Inc., a manufacturer of
orthopaedic implants, fracture management products and trauma devices.
William R. Jellison was named Senior Vice President and Chief Financial
Officer of the Company effective April 20, 1998. Prior to that time, Mr.
Jellison held the position of Vice President of Finance, Treasurer and
Corporate Controller for Donnelly Corporation of Holland, Michigan since
1994. From 1991 to 1994, Mr. Jellison was Donnelly's Vice President of
Financial Operations, Treasurer and Corporate Controller. Prior to that, he
served one year as Treasurer and Corporate Controller, and in other financial
management positions for Donnelly. Mr. Jellison is a Certified Management
Accountant.
20
<PAGE>
J. Henrik Roos was named Senior Vice President of the following profit
centers effective June 1, 1999: Ceramco, CeraMed, Dentsply Argentina,
Dentsply Brazil, Dentsply Canada, Dentsply Herpo, Dentsply Mexico, DeTech,
Latin American Export, Preventive Care, Ransom & Randolph and Trubyte. Prior
to his Senior Vice President appointment, Mr. Roos served as Vice President
and General Manager of the Company's Gendex division from June 1995 to June
1999. Prior to that, he served as President of Gendex European operations in
Frankfurt, Germany since joining the Company in August 1993.
W. William Weston was named Senior Vice President of the following
profit centers effective January 1, 1999: DeDent, Dentsply Asia, Dentsply
Australia, Dentsply France, Dentsply Italy, Dentsply Japan, Dentsply Russia,
Dentsply United Kingdom, L.D. Caulk, Middle East/Africa, SIMFRA and SPAD.
Prior to his Senior Vice President appointment, 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.
Thomas L. Whiting was named Senior Vice President of the following
profit centers effective January 1, 1999: GAC, Gendex, Gendex Germany, Gendex
Italy, InfoSoft, Maillefer, Midwest, MPL, Rinn, Tulsa Dental Products, United
Dental Manufacturing (UDM), and Vereinigte Dentalwerke (VDW). Prior to his
Senior Vice President appointment, Mr. Whiting was Vice President and General
Manager of the Company's L.D. Caulk Division from March 1987 to early 1995.
Prior to that time, Mr. Whiting held management positions with Deseret
Medical and the Parker-Davis Company.
Brian M. Addison has been Vice President, Secretary and General Counsel
of the Company since January 1, 1998. Prior to that he was Assistant
Secretary and Corporate Counsel since December 1994. From August 1994 to
December 1994 he was a Partner at the Harrisburg, Pennsylvania law firm of
McNees, Wallace & Nurick. Prior to that he was Senior Counsel at Hershey
Foods Corporation.
21
<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 7A. Quantitative and Qualitative Disclosure About Market Risk
- -------------------------------------------------------------------
The table below provides information about the Company's market
sensitive financial instruments and includes "forward-looking statements"
that involve risks and uncertainties. Actual results could differ materially
from those expressed in the forward-looking statements. The Company's major
market risk exposures are changing interest rates, primarily in the United
States, and movements in foreign currency exchange rates. The Company's
policy is to manage interest rates through the use of floating rate debt and
interest rate swaps to adjust interest rate exposures when appropriate, based
upon market conditions. A portion of the Company's borrowings are
denominated in foreign currencies which exposes the Company to market risk
associated with exchange rate movements. The Company's policy generally is
to hedge major foreign currency exposures through foreign exchange forward
contracts. These contracts are entered into with major financial
institutions thereby minimizing the risk of credit loss. The Company does
not hold or issue derivative financial instruments for speculative or trading
purposes. The Company is subject to other foreign exchange market risk
exposure as a result of non-financial instrument anticipated foreign currency
cash flows which are difficult to reasonably predict, and have therefore not
been included in the table below. All items described are non-trading and
are stated in U.S. dollars.
22
<PAGE>
<TABLE>
<CAPTION>
Expected Maturity Dates December 31, 1999
----------------------------------- -------------------
There- Carrying Fair
2000 2002 2003 after Value Value
------ ------ ------ -------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Foreign Exchange Forward
Contracts:
Forward sale German mark $6,399 $ - $ - $ - $ 6,399 $ 6,472
Forward sale French franc 3,926 - - - 3,926 3,843
Forward purchase British
pound 67 - - - 67 66
Forward purchase Colombian
peso 161 - - - 161 153
Short Term Debt:
US dollar denominated 2,000 - - - 2,000 2,000
Average interest rate 6.5%
British pound denominated 1,078 - - - 1,078 1,078
Average interest rate 6.8%
Japanese yen denominated 2,420 - - - 2,420 2,420
Average interest rate 1.6%
Hong Kong dollar
denominated 4,174 - - - 4,174 4,174
Average interest rate 8.6%
German mark denominated 6,460 - - - 6,460 6,460
Average interest rate 3.9%
Italian lira denominated 1,158 - - - 1,158 1,158
Average interest rate 5.8%
Long Term Debt:
US dollar denominated - 116,000 - - 116,000 116,000
Average interest rate 7.4%
British pound denominated - 10,008 - - 10,008 10,008
Average interest rate 6.2%
Swiss franc denominated - 11,481 - - 11,481 11,481
Average interest rate 2.1%
Australian dollar
denominated - 3,922 - - 3,922 3,922
Average interest rate 5.3%
Italian lira denominated - 1,659 - - 1,659 1,659
Average interest rate 3.8%
Thai bhat denominated - 1,277 - - 1,277 1,277
Average interest rate 6.0%
Interest rate swaps - 40,000 20,000 20,000 - 2,670
Average interest rates 5.5% 5.8% 5.8%
</TABLE>
23
<PAGE>
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 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
- -----------------------------------
Previously reported.
24
<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", "Section 16(a)
Beneficial Ownership Reporting compliance" 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 subcaptions "Compensation of
Directors", "Human Resources Committee Interlocks and Insider Participation"
and "Human Resources Committee Report on Executive Compensation" in the Proxy
Statement is incorporated herein by reference to this Item 13.
25
<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 32
2. Selected Financial Data 33
3. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 34
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 LLP 41
Consolidated Statements of Income
for the years ended December 31,
1999, 1998 and 1997 42
Consolidated Balance Sheets as of
December 31, 1999 and 1998 43
Consolidated Statements of
Stockholders' Equity for the years
ended December 31, 1999, 1998 and
1997 44
Consolidated Statements of Cash
Flows for the years ended
December 31, 1999, 1998 and 1997 47
Notes to Consolidated Financial
Statements 51
26
<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 72
accounts
Financial statement schedules not
listed above have been omitted because
they are inapplicable, are not re-
quired 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.
6. 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 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended
4.1 (a) 364-Day and 5-Year Competitive Advance,
Revolving Credit and Guaranty Agreements
dated as of October 23, 1997 among the
Company, the guarantors named therein,
the banks named therein, the Chase
Manhattan Bank as Administrative Agent,
and ABN Amro Bank, N.V. as Documentation
Agent. (11)
(b) Amendment to the 364-Day Competitive
Advance, Revolving Credit and Guaranty
Agreement dated as of October 21, 1999
among the Company, the guarantors named
therein, the banks named therein, the
Chase Manhattan Bank as Administrative
Agent, and ABN Amro Bank, N.V. as
Documentation Agent
4.2 (a) Commercial Paper Issuing and Paying
Agency Agreement dated as of August 12,
1999 between the Company and the Chase
Manhattan Bank
(b) Commercial Paper Dealer Agreement dated
as of August 12, 1999 between the Company
and Goldman, Sachs & Co.
27
<PAGE>
10.1 1992 Stock Option Plan adopted May 26,
1992 (4)
10.2 1993 Stock Option Plan (2)
10.3 1998 Stock Option Plan (1)
10.4 Nonstatutory Stock Option Agreement
between the Company and Burton C.
Borgelt (3)
10.5 (a) Employee Stock Ownership Plan as amended
effective as of December 1, 1982,
restated as of January 1, 1991 (7)
(b) Second amendment to the DENTSPLY
Employee Stock Ownership Plan (10)
(c) Third Amendment to the DENTSPLY
Employee Stock Ownership Plan (12)
10.6 (a) Retainer Agreement dated December 29,
1992 between the Company and State Street
Bank and Trust Company ("State Street")
(5)
(b) Trust Agreement between the Company and
State Street Bank and Trust Company dated
as of August 11, 1993 (6)
(c) Amendment to Trust Agreement between the
Company and State Street Bank and Trust
Company effective August 11, 1993 (6)
10.7 Employment Agreement dated January 1,
1996 between the Company and Burton C.
Borgelt (9)*
10.8 (a) Employment Agreement dated as of
December 31, 1987 between the Company
and John C. Miles II (5)*
(b) Amendment to Employment Agreement between
the Company and John C. Miles II dated
February 16, 1996, effective January 1,
1996 (9)*
10.9 Employment Agreement dated as of December
31, 1987, as amended as of February 8,
1990, between the Company and Leslie A.
Jones (5)*
10.10 Employment Agreement dated as of December
10, 1992 between the Company and Michael
R. Crane (5)*
10.11 Employment Agreement dated as of December
10, 1992 between the Company and Edward
D. Yates (5)*
10.12 Employment Agreement dated January 1,
1996 between the Company and W. William
Weston (9)*
10.13 Employment Agreement dated January 1,
1996 between the Company and Thomas L.
Whiting (9)*
28
<PAGE>
10.14 Employment Agreement dated October 11,
1996 between the Company and Gerald K.
Kunkle Jr. (10)*
10.15 Employment Agreement dated April 20,
1998 between the Company and William R.
Jellison (12)*
10.16 Employment Agreement dated September 10,
1998 between the Company and Brian M.
Addison (12)*
10.17 Employment Agreement dated June 1, 1999
between the Company and J. Henrik Roos *
10.18 Midwest Dental Products Corporation
Pension Plan as amended and restated
effective January 1, 1989 (7)*
10.19 Revised Ransom & Randolph Pension Plan,
as amended effective as of September 1,
1985, restated as of January 1, 1989 (7)*
10.20 DENTSPLY International Inc. Directors'
Deferred Compensation Plan effective
January 1, 1997 (10)*
10.21 (a) Asset Purchase and Sale Agreement, dated
January 10, 1996, between Tulsa Dental
Products, L.L.C. and DENTSPLY
International Inc. (8)
(b) Amendment to Asset Purchase and Sale
Agreement between Tulsa Dental Products,
L.L.C. and DENTSPLY, dated January 1,
1999
10.22 Supplemental Executive Retirement Plan
effective January 1, 1999 (12)*
10.23 Written Description of Year 1999
Incentive Compensation Plan
21.1 Subsidiaries of the Company
23.1 Consent of KPMG LLP
27 Financial Data Schedule
- -------------------
* Management contract or compensatory plan.
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 333-56093).
(2) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-79094).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
29
<PAGE>
(5) 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.
(6) 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.
(7) 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.
(8) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, 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, 1997, 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
ended December 31, 1998, 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 Grid Note dated November 4, 1996 executed in favor of
The Chase Manhattan Bank in connection with a line of credit
up to $20,000,000 between the Company and The Chase
Manhattan Bank.
(2) Agreement dated December 19, 1997 between Midland Bank PLC
and Dentsply Limited for $2,500,000.
30
<PAGE>
(3) Promissory Note dated August 14, 1998 in the principal amount of
$6,000,000 of the Company in favor of First Union National Bank.
(4) Credit Agreement dated September 14, 1998 between Dentsply
Canada Limited ("DCL") and Bank of Montreal for C$3,500,000.
(5) Promissory Note dated December 1, 1995 in connection with a
line of credit up to $20,000,000 between the Company and
Mellon Bank.
(6) Form of "comfort letters" to various foreign commercial
lending institutions having a lending relationship with one
or more of the Company's international subsidiaries.
7) Unsecured Note dated June 26, 1998 between the Company and Harris
Trust and Savings Bank in the principal amount of $500,000.
(b) Reports on Form 8-K
-------------------
The Company did not file any Reports on Form 8-K
during the quarter ended December 31, 1999.
* * * * * *
31
<PAGE>
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 high and low sale
prices of the Company's common stock for the periods indicated as reported on
the NASDAQ National Market (after giving effect to the two-for-one stock
split effective on October 29, 1997):
Market Range of Common Stock Cash
---------------------------- Dividend
1999 High Low Declared
- ---- -------- -------- --------
First Quarter $27.50 $21.44 $.05625
Second Quarter 29.13 21.31 .05625
Third Quarter 29.31 20.50 .05625
Fourth Quarter 24.75 20.94 .06250
1998
- ----
First Quarter $35.25 $26.25 $.05125
Second Quarter 34.75 23.25 .05125
Third Quarter 26.75 21.25 .05125
Fourth Quarter 28.00 20.00 .05625
1997
- ----
First Quarter $27.50 $23.38 $.04625
Second Quarter 26.19 22.31 .04625
Third Quarter 28.94 24.31 .05125
Fourth Quarter 31.75 26.13 .05125
The Company estimates, based on information supplied by its transfer
agent, that there are approximately 20,152 holders of common stock, including
514 holders of record.
32
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year Ended December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Statement of Income Data: (dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $830,864 $795,122 $720,760 $656,557 $572,028
Gross profit 431,977 416,423 368,726 324,670 280,852
Restructuring and other costs --- 71,500 --- --- ---
Operating income 149,617 69,852 132,456 119,464 100,735
Income before income taxes 138,019 55,101 122,006 110,960 90,017
Net income $ 89,863 $ 34,825(1) $ 74,554 $ 67,222 $ 53,963(1)
Earnings per Common Share:
Net income-basic $ 1.70 $ .65(1) $ 1.38 $ 1.25 $ 1.00(1)
Net income-diluted 1.70 .65(1) 1.37 1.25 .99(1)
Cash dividends declared per common share .23125 .21 .195 .17 .154
Weighted Average Common Shares Outstanding:
Basic 52,754 53,330 53,937 53,840 54,024
Diluted 52,911 53,597 54,229 53,994 54,255
Balance Sheet Data:
Working capital $138,448 $128,076 $107,678 $113,547 $122,706
Total assets 859,588 895,322 774,376 667,662 582,383
Total debt 165,467 233,761 129,510 101,820 76,291
Stockholders' equity 468,872 413,801 423,933 365,590 315,922
Return on average stockholders' equity 20.4% 19.2%(2) 18.9% 19.9% 17.9%
Long-term debt to total capitalization 23.7% 34.4% 19.9% 17.0% 17.9%
Other Data:
Depreciation and amortization $ 39,624 $ 37,474 $ 32,405 $ 28,108 $ 21,488
Capital expenditures 33,386 31,430 27,660 20,804 17,421
Interest expense, net 14,640 14,168 11,006 10,071 7,879
Property, plant and equipment, net 180,536 158,998 147,130 141,458 140,101
Goodwill and other intangibles, net 349,421 346,073 336,905 256,199 188,409
Cash flows from operating activities 121,269(3) 93,742(3) 94,288 83,189 67,516
Income tax rate 34.9% 36.8% 38.9% 39.4% 40.1%
<FN>
(1) Includes restructuring and other costs of $45.4 million or $.85 per common share in 1998 and unusual or
non-recurring charges of $1.8 million or $.04 per common share in 1995.
(2) Excludes income statement effect of restructuring and other costs.
(3) Includes negative cash flows associated with the two 1998 restructurings of $13.1 million in 1999 and
$2.6 million in 1998.
</FN>
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements made by the Company, including without limitation,
statements containing the words "plans", "anticipates", "believes",
"expects", or words of similar import may be deemed to be forward-looking
statements and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements involve risks and uncertainties which may
materially affect the Company's business and prospects, and should be read in
conjunction with the risk factors set forth in the section "Factors That May
Affect Future Results" in Item I, Part I of this Annual Report on Form 10-K.
Results of Operations, 1999 Compared to 1998
- --------------------------------------------
Net sales increased $35.8 million, or 4.5%, to $830.9 million, up from
$795.1 million in 1998. Base business accounted for 3.5% of the sales growth
in 1999 while 2.8% of the sales improvement was due to acquisitions, net of
divestitures. Currency translation negatively impacted net sales by 1.8%,
mainly due to the devaluation of the Brazilian Real and the strengthening of
the U.S. dollar against the major European currencies. Sales in the United
States grew 6.1%; 4.9% from base business and 1.2% from acquisitions. There
was strong base business growth in the United States from endodontic,
orthodontic and other consumable product lines. European sales decreased
1.4%; 2.1% from base business and 3.2% from currency translation offset by
3.9% growth from acquisitions. Sales for the year in Europe were negatively
impacted by a soft dental market, especially in Germany, distributor
consolidations in the United Kingdom, and the poor economy in the
Commonwealth of Independent States (C.I.S.). There was improvement in the
fourth quarter of 1999 in Europe as consumable product sell-out rates in
Germany grew modestly. Equipment sales in Europe, however, remained
sluggish. The economy in the Pacific Rim continued to improve, resulting in a
5.9% increase in base business sales despite $1.4 million of inventory
returns from dealers in India. After excluding acquisitions and exchange,
sales in Latin America grew 9.7%. Reported sales for Latin America decreased
6.8% mainly due to the devaluation of the Brazilian Real. Sales in the rest
of the world were up 14.9%; 7.2% from base business, 6.1% from acquisitions
and 1.6% from exchange. The increase was mainly due to increases in Canada,
the Middle East and Africa.
Gross profit increased $15.6 million, or 3.7%, to $432.0 million from
$416.4 million in 1998. As a percentage of sales, gross profit decreased
from 52.4% in 1998 to 52.0% in 1999. Costs associated with moving the
remaining manufacturing operations for New Image and Germany's tooth
manufacturing facility negatively impacted performance in the first half of
1999. In addition, purchase price accounting adjustments related to the
acquisition of Vereinigte Dentalwerke GmbH (VDW) in December 1998 and a
strong Japanese Yen affecting orthodontic component purchases also negatively
impacted the gross profit percentage.
Selling, general and administrative ("SG&A") expense increased $7.3
million or 2.6%. As a percentage of sales, expenses decreased from 34.6% in
1998 to 34.0% in 1999. This percentage decrease included a $3.1 million
reduction in bad debt expense (due mainly to a bad debt reserve of $2.5
million in the third quarter of 1998 to cover softness in the C.I.S. and
34
<PAGE>
Asian economies) and a $1.1 million benefit from the curtailment of the
Dreieich Pension Plan in Germany resulting from the restructuring in 1998.
These decreases were offset by an increase of $1.3 million in legal costs,
net of settlements. Legal costs during 1999 increased $4.7 million primarily
for litigation with the Justice Department, defense of endodontic patents and
litigation related to the disposable air/water syringe tip. This increase
was partially offset by a $3.4 million expense recovery from an arbitration
award associated with our former implant business.
Restructuring and other costs of $29.0 million were recorded in the
second quarter of 1998 to rationalize and restructure the Company's worldwide
laboratory business. In the fourth quarter of 1998, the Company took a
restructuring charge of $42.5 million primarily for the write-off of
intangibles, including goodwill, and closing costs associated with the
discontinuance of the New Image division in Carlsbad, California.
Net interest expense increased $.5 million during 1999 due to increased
interest expense on higher debt incurred during the first half of 1999 to
finance the acquisition of VDW in December 1998 and the stock repurchase
program in the second half of 1998.
Other income increased $3.6 million in 1999 including $1.6 million of
lower transaction exchange losses as the U.S. dollar strengthened against the
major European currencies and $1.3 million of other income related to the
1995 divestiture of the CMW business unit.
Income before income taxes increased $82.9 million, including $71.5
million of restructuring and other costs recorded in the second and fourth
quarters of 1998. Without these costs, income before income taxes increased
$11.4 million, or 9.0%. The effective tax rate for operations was lowered to
34.9% in 1999 compared to 36.8% in 1998 reflecting savings from federal,
state and foreign tax planning activities. Net income increased $55.0
million including the after-tax impact of $45.4 million for restructuring and
other costs. Without these costs, net income increased $9.6 million, or
12.0% in 1999 compared to 1998 due to higher sales, lower expenses as a
percentage of sales, higher other income, and a lower provision for income
taxes offset somewhat by a lower gross profit percentage in 1999.
Basic and diluted earnings per common share were $1.70 in 1999 compared
to $.65 per share in 1998. Earnings per common share in 1998 included $.85
for restructuring and other costs. Without these costs, basic and diluted
earnings per common share increased from $1.50 in 1998 to $1.70 in 1999 or
13.3%.
Results of Operations, 1998 Compared to 1997
- --------------------------------------------
Net sales increased $74.4 million, or 10.3%, from $720.8 million in 1997
to $795.1 million in 1998. Acquisitions, net of divestitures, accounted for
7.0% of the sales growth for the year. Base business sales were up 4.3% due
to sales increases of 7.7% in the United States and 2.1% in Europe, offset by
a decline of 6.5% in the Pacific Rim and Latin America. The European base
business sales increase included a decline in sales to the C.I.S. and a
decline in the German laboratory business sales. Sales in the Pacific Rim
and Latin America were adversely impacted by the downturn in the Asian and
Latin American economies and the termination of distributors in Taiwan,
35
<PAGE>
Korea, Colombia and Chile which were replaced by newly established local
DENTSPLY subsidiaries in 1998. The translation impact of exchange rate
fluctuations in Europe, Asia and Latin America had a negligible impact on
sales in 1998. Base business sales growth in other territories (including
Canada, Australia and Japan) was strong but was offset by the adverse impact
of the translation effect of the strong U.S. dollar.
Gross profit increased $47.7 million, or 12.9%, due primarily to higher
net sales and an increase in the gross profit percentage in 1998. As a
percentage of net sales, gross profit increased from 51.2% in 1997 to 52.4%
in 1998. Favorable product and geographical mix, operational improvements
and discontinuing the implant product line all contributed to the improved
percentage.
SG&A expenses increased $38.8 million, or 16.4%. As a percentage of
sales, expenses increased from 32.8% in 1997 to 34.6% in 1998. The main
reasons for the percentage increase were: a higher expense to sales ratio for
businesses acquired during 1998; higher expenses for upgrading information
systems in the United States, Europe and Asia; bad debt provisions,
principally for customers in the C.I.S. and Asia; costs associated with
establishing new local DENTSPLY subsidiaries in countries where third party
distributors have been terminated; and increased research and development
expenses.
Restructuring and other costs of $29.0 million were recorded in the
second quarter of 1998. The major component of the charge includes costs of
$26.0 million to rationalize and restructure the Company's worldwide
laboratory business (primarily for the closure of the Company's German tooth
manufacturing facility).
In the fourth quarter of 1998, the Company took a restructuring charge
of $42.5 million primarily for the write-off of intangibles, including
goodwill, and closing costs associated with the discontinuance of the New
Image division in Carlsbad, California.
The increase in net interest expense of $3.2 million was mainly due to
debt resulting from $106.8 million spent for acquisitions and $42.0 million
to repurchase approximately 1.8 million shares of common stock during 1998.
Other expense was $.6 million in 1998 compared to other income of $.6 million
in 1997. The change is primarily due to exchange losses in 1998 compared to
a small gain in 1997.
Income before income taxes decreased $66.9 million from $122.0 million
in 1997 to $55.1 million in 1998 mainly due to the $71.5 million of
restructuring and other costs. Without these costs, income before income
taxes increased $4.6 million, or 3.8%.
The effective tax rate (before restructuring and other costs) of 36.8%
in 1998 compares to 38.9% in 1997. The 1998 rate reflects savings resulting
from federal, state and foreign tax planning.
Net income decreased $39.7 million due to the after-tax cost of $45.4
million for restructuring and other costs. Without these costs, net income
36
<PAGE>
increased $5.7 million, or 7.6%, in 1998 due to higher sales, an improvement
in the gross profit percentage and a lower effective tax rate for the Company
in 1998.
Basic and diluted earnings per common share were $.65 in 1998 compared
to $1.38 basic and $1.37 diluted earnings per common share in 1997. Both
basic and diluted earnings per common share in 1998 included $.85 per common
share for restructuring and other costs. Without these costs, basic earnings
per common share increased from $1.38 in 1997 to $1.50 in 1998, or 8.7% and
diluted earnings per common share increased from $1.37 to $1.50 in 1998, or
9.5%.
Foreign Currency
- ----------------
Since approximately 40% 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 partially offset by sales in the
U.S. of products sourced from plants and third party suppliers located
overseas, principally in Germany and Switzerland.
Liquidity and Capital Resources
- -------------------------------
Investment activities for 1999 included capital expenditures of $33.4
million. No acquisitions were completed in 1999.
During 1999, the Company repurchased .2 million shares of its common
stock for $3.9 million. In December 1999, the Board of Directors authorized
the repurchase of up to 1.0 million additional shares of common stock on the
open market or in negotiated transactions in 2000. The timing and amounts of
any additional purchases will depend upon many factors, including market
conditions and the Company's business and financial condition.
At December 31, 1999, the Company's current ratio was 1.8 with working
capital of $138.4 million. This compares with a current ratio of 1.7 and
working capital of $128.1 million at December 31, 1998.
Under its revolving credit agreements, the Company is able to borrow up
to $175 million on an unsecured basis through October 2002 and $125 million
through October 2000. The $175 million facility may be extended, subject to
certain conditions, until October 2004. The $125 million 364-day facility
terminates in October 2000, but contains a one-year term-out provision and
may be extended, subject to certain conditions, for additional periods of 364
days. The revolving credit agreements are unsecured and contain various
financial and other covenants.
Under its bank multi-currency revolving credit agreement, the Company is
able to borrow up to $25 million for foreign working capital purposes on an
unsecured basis through October 2000. The multi-currency facility contains a
one-year term-out provision and may be extended, subject to certain
conditions, for additional periods of 364 days.
37
<PAGE>
The Company established a $200 million commercial paper facility in
September 1999. The rating agencies have assigned a rating of A-2/P-2 to the
Company's unsecured commercial paper facility. The revolving credit
facilities serve as back up to this commercial paper facility. No additional
credit has been extended.
The Company had unused lines of credit of $259.6 million at December 31,
1999.
The Company expects, on an ongoing basis, to be able to finance its cash
requirements, including capital expenditures, stock repurchases, debt service
and acquisitions from funds generated from operations and amounts available
under the Revolving Credit Agreements.
Cash flows from operating activities were $121.3 million in 1999, which
includes approximately $13.1 million of negative cash flows associated with
the two restructurings recorded in 1998, compared to $93.7 million in 1998.
The increase of $27.6 million was due primarily to increased earnings,
decreases in inventory, receivables and deferred income taxes offset by
decreases in accrued liabilities.
Derivative Instruments and Hedging Activities
- ---------------------------------------------
Statement of Financial Accounting Standards No. 133 ("FASB 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued by
the Financial Accounting Standards Board (FASB) in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either
assets or liabilities on the balance sheet and measurement of those
instruments at fair value. If certain conditions are met, a derivative may
be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment referred to as a fair value hedge, (b) a hedge of the exposure to
variability in cash flows of a forecasted transaction (a cash flow hedge), or
(c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security,
or a forecasted transaction.
This statement was originally required to be adopted effective January
1, 2000. However, in June 1999 FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133", which delays the effective date to January
1, 2001. The Company has not yet determined the effect of adopting FASB 133.
Year 2000
- ---------
The changeover to the year 2000 ("Y2K") has resulted in no significant
issues or problems for the Company. Worldwide operations continued without
interruption as the Company's information systems, equipment and utility
providers functioned as normal throughout the transition. In addition, to
date, the Company has not been adversely impacted by any Y2K problems
experienced by its customers or vendors. Although the Company has not
experienced any Y2K problems, it is continuing to monitor potential areas of
risk.
38
<PAGE>
Euro Currency Conversion
- ------------------------
On January 1, 1999, eleven of the fifteen member countries of the
European Union (the "participating countries") established fixed conversion
rates between their legacy currencies and the newly established Euro currency.
The legacy currencies will remain legal tender in the participating
countries between January 1, 1999 and January 1, 2002 (the "transition
period"). Starting January 1, 2002 the European Central Bank will issue
Euro-denominated bills and coins for use in cash transactions. On or before
July 1, 2002, the legacy currencies of participating countries will no longer
be legal tender for any transactions.
The Company's various operating units which are affected by the Euro
conversion intend to keep their books in their respective legacy currency
through a portion of the three year transition period. At this time, the
Company does not expect the reasonable foreseeable consequences of the Euro
conversion to have material adverse effects on the Company's business,
operations or financial condition.
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
preparation and integrity of the consolidated financial statements and all
other information contained in this Annual Report. The financial statements
were prepared in accordance with generally accepted accounting principles and
include amounts that are based on management's informed estimates and
judgements.
In fulfilling its responsibility for the integrity of financial
information, management has established a system of internal accounting
controls supported by written policies and procedures. This provides
reasonable assurance that assets are properly safeguarded and accounted for
and that transactions are executed in accordance with management's
authorization and recorded and reported properly.
The financial statements have been audited by our independent auditors,
KPMG LLP, whose unqualified report is presented below. The independent
auditors perform audits of the financial statements in accordance with
generally accepted auditing standards, which include a review of the system
of internal accounting controls to the extent necessary to determine the
nature, timing and extent of audit procedures to be performed.
The Audit and Information Technology Committee (Committee) of the Board
of Directors, consisting solely of outside Directors, meets with the
independent auditors with and without management to review and discuss the
major audit findings, internal control matters and quality of financial
reporting. The independent accountants also have access to the Committee to
discuss auditing and financial reporting matters with or without management
present.
John C. Miles II Gerald K. Kunkle William R. Jellison
Chairman and President and Chief Senior Vice President and
Chief Executive Officer Operating 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. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, 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, presents fairly, in all material respects, the
information set forth therein.
Philadelphia, Pennsylvania KPMG LLP
January 20, 2000
41
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1999 1998 1997
--------------------------------
(in thousands, except per share amounts)
Net sales $830,864 $795,122 $720,760
Cost of products sold 398,887 378,699 352,034
-------- -------- --------
Gross profit 431,977 416,423 368,726
Selling, general and administrative
expenses 282,360 275,071 236,270
Restructuring and other costs --- 71,500 ---
-------- -------- --------
Operating income 149,617 69,852 132,456
Other income and expenses:
Interest expense 15,758 15,367 12,660
Interest income (1,118) (1,199) (1,654)
Other (income) expense, net (3,042) 583 (556)
-------- -------- --------
Income before income taxes 138,019 55,101 122,006
Provision for income taxes 48,156 20,276 47,452
-------- -------- --------
Net income $ 89,863 $ 34,825 $ 74,554
======== ======== ========
Earnings per common share:
Basic $ 1.70 $ .65 $ 1.38
Diluted 1.70 .65 1.37
Cash dividends declared per common share $ .23125 $ .21 $ .195
Weighted average common shares outstanding:
Basic 52,754 53,330 53,937
Diluted 52,911 53,597 54,229
The accompanying Notes are an integral part of these Financial Statements.
42
<PAGE>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
1999 1998
Assets -------------------
Current assets: (in thousands)
Cash and cash equivalents $ 7,276 $ 8,690
Accounts and notes receivable - trade, net 127,911 134,218
Inventories 135,480 139,235
Prepaid expenses and other current assets 44,001 40,309
-------- --------
Total Current Assets 314,668 322,452
Property, plant and equipment 180,536 158,998
Other noncurrent assets 14,963 67,799
Identifiable intangible assets, net 80,374 80,537
Costs in excess of fair value of net assets
acquired, net 269,047 265,536
-------- --------
Total Assets $859,588 $895,322
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 20,155 $ 16,270
Accounts payable 40,467 42,654
Accrued liabilities 80,922 99,427
Income taxes payable 34,676 36,025
-------- --------
Total Current Liabilities 176,220 194,376
Long-term debt 145,312 217,491
Other liabilities 46,445 48,113
Deferred income taxes 20,240 18,803
-------- --------
Total Liabilities 388,217 478,783
-------- --------
Minority interests in consolidated subsidiaries 2,499 2,738
-------- --------
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; 54.3 million shares and 54.3 million
shares issued at December 31, 1999 and 1998,
respectively 543 543
Capital in excess of par value 151,509 152,871
Retained earnings 402,408 324,745
Accumulated other comprehensive income (loss) (43,209) (14,730)
Employee stock ownership plan reserve (6,458) (7,977)
Treasury stock, at cost, 1.5 million and 1.7 million
shares at December 31, 1999 and 1998, respectively (35,921) (41,651)
-------- --------
Total Stockholders' Equity 468,872 413,801
-------- --------
Total Liabilities and Stockholders' Equity $859,588 $895,322
======== ========
The accompanying Notes are an integral part of these Financial Statements.
43
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 271 $150,031 $237,300 $(4,278) $(11,016) $ (6,718) $365,590
Comprehensive Income:
Net income - - 74,554 - - - 74,554
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,122 tax - - - (12,442) - - (12,442)
--------
Comprehensive Income 62,112
Exercise of stock options and
warrants - (133) - - - 5,458 5,325
Tax benefit related to stock
options and warrants exercised - 840 - - - - 840
Repurchase of forty thousand
shares of common stock - - - - - (928) (928)
Cash dividends declared, $.195
per common share - - (10,525) - - - (10,525)
Two-for-one stock split effected
in the form of a stock dividend 271 - (271) - - - -
Net change in ESOP reserve - - - - 1,519 - 1,519
------- -------- -------- -------- -------- -------- ---------
Balance at December 31, 1997 $ 542 $150,738 $301,058 $(16,720) $ (9,497) $ (2,188) $423,933
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 542 $150,738 $301,058 $(16,720) $ (9,497) $ (2,188) $423,933
Comprehensive Income:
Net income - - 34,825 - - - 34,825
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,435 tax - - - 1,990 - - 1,990
--------
Comprehensive Income 36,815
Exercise of stock options and
warrants 1 1,227 - - - 2,586 3,814
Tax benefit related to stock
options and warrants exercised - 906 - - - - 906
Repurchase of 1.764 million
shares of common stock - - - - - (42,049) (42,049)
Cash dividends declared, $.21
per common share - - (11,138) - - - (11,138)
Net change in ESOP reserve - - - - 1,520 - 1,520
------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1998 $ 543 $152,871 $324,745 $(14,730) $ (7,977) $(41,651) $413,801
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 543 $152,871 $324,745 $(14,730) $ (7,977) $(41,651) $413,801
Comprehensive Income:
Net income - - 89,863 - - - 89,863
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,797 tax - - - (28,479) - - (28,479)
--------
Comprehensive Income 61,384
Exercise of stock options and
warrants - (1,823) - - - 5,998 4,175
Tax benefit related to stock
options and warrants exercised - 730 - - - - 730
Reissuance of treasury stock - (269) - - - 3,622 3,353
Repurchase of .175 million
shares of common stock - - - - - (3,890) (3,890)
Cash dividends declared, $.23125
per common share - - (12,200) - - - (12,200)
Net change in ESOP reserve - - - - 1,519 - 1,519
------- -------- -------- -------- -------- -------- ---------
Balance at December 31, 1999 $ 543 $151,509 $402,408 $(43,209) $ (6,458) $(35,921) $468,872
======= ======== ======== ======== ======== ======== =======
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from operating activities: (in thousands)
<S> <C> <C> <C>
Net income $ 89,863 $ 34,825 $ 74,554
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 19,933 17,634 15,341
Amortization 19,691 19,840 17,064
Deferred income taxes 5,885 (22,084) (1,828)
Restructuring and other costs --- 71,500 ---
Other non-cash transactions 319 (513) 263
Loss on disposal of property, plant and equipment 304 107 559
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures of
businesses, effects of exchange, and restructuring
and other costs:
Accounts and notes receivable-trade, net 2,384 (7,305) (13,080)
Inventories 4,394 (5,605) 1,694
Prepaid expenses and other current assets (2,223) (3,990) (305)
Other noncurrent assets (581) 1,167 (82)
Accounts payable (1,319) (2,932) (1,795)
Accrued liabilities (14,343) (10,171) (483)
Income taxes payable (719) 1,462 4,250
Other liabilities (2,319) (193) (1,864)
-------- -------- --------
Net cash provided by operating activities 121,269 93,742 94,288
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from investing activities: (in thousands)
<S> <C> <C> <C>
Proceeds from sale of property, plant and equipment, net 1,825 1,114 1,257
Capital expenditures (33,386) (31,430) (27,660)
Expenditures for identifiable intangible assets (3,256) (5,247) (3,382)
Acquisitions of businesses, net of cash acquired 4,327 (103,250) (78,822)
Other direct costs of acquisition and divestiture activities --- (63) (2,395)
Additional consideration for prior purchased business (5,000) (3,522) ---
Other, net --- --- (155)
-------- -------- --------
Net cash used in investing activities (35,490) (142,398) (111,157)
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from financing activities: (in thousands)
<S> <C> <C> <C>
Proceeds from exercise of stock options and warrants,
including tax benefit 4,905 4,721 6,165
Cash paid for treasury stock (3,890) (42,049) (928)
Cash dividends paid (11,859) (10,954) (10,238)
Increase (decrease) in bank overdrafts (1) 2,552 886
Proceeds from long-term borrowings, net of deferred
financing costs 99,407 159,898 218,449
Payments on long-term borrowings (177,946) (60,337) (184,524)
Increase (decrease) in short-term borrowings 4,910 (3,962) (7,605)
Decrease in employee stock ownership plan reserve 1,519 1,520 1,519
-------- -------- --------
Net cash provided by (used in) financing activities (82,955) 51,389 23,724
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents (4,238) (3,891) (2,626)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (1,414) (1,158) 4,229
Cash and cash equivalents at beginning of period 8,690 9,848 5,619
-------- -------- --------
Cash and cash equivalents at end of period $ 7,276 $ 8,690 $ 9,848
======== ======== ========
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
Supplemental disclosures of cash flow information: -------- -------- --------
information: (in thousands)
<S> <C> <C> <C>
Interest paid $ 13,863 $ 12,215 $ 9,024
Income taxes paid 34,951 40,048 43,840
Supplemental disclosures of non-cash transactions:
Issuance of treasury stock in connection with the
acquisition of certain assets 3,353 --- ---
Note receivable for fixed assets associated with
arbitration ruling terminating the Implant
Distribution Agreement --- --- 389
Assumption of debt in connection with acquisitions --- --- 4,310
</TABLE>
<TABLE>
<CAPTION>
The Company assumed liabilities in conjunction with the following acquisitions:
Fair Value Cash Paid for
of Assets Assets or Liabilities
Date Acquired Acquired Capital Stock Assumed
------------- ---------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Vereinigte Dentalwerke GmbH December 1998 $63,491 $45,780 $17,711
Herpo Productos Dentarios Ltda. May 1998 13,842 7,395 6,447
Crescent Dental Manufacturing Co. May 1998 5,783 5,214 569
GAC, Inc. April-Dec 1998 38,439 26,485 11,954
InfoSoft, Inc. March 1998 10,497 8,645 1,852
Blendax January 1998 7,556 6,893 663
MPL Technologies, Inc. November 1997 5,452 4,425 1,027
EFOS Corporation July 1997 15,032 14,988 44
SIMFRA S.A. July 1997 8,431 5,464 2,967
New Image Industries, Inc. March 1997 35,643 10,957 24,686
DW Industries, Inc. January 1997 18,956 16,253 2,703
Laboratoire SPAD, S.A. January 1997 47,054 35,992 11,062
<FN>
All amounts represent the allocation of the purchase price as of the respective year-ends based on the estimated fair values of
assets acquired and liabilities assumed. The purchase price allocation for Vereinigte Dentalwerke GmbH was completed during 1999.
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 dental prosthetics,
endodontic instruments and 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, film mounts and bone substitute/grafting
materials; and a leading United States manufacturer or distributor of
impression materials, orthodontic appliances, dental cutting instruments,
intraoral cameras and dental operatory software systems. The Company
distributes its dental products in over 100 countries under some of the most
well-established brand names in the industry. DENTSPLY is committed to the
development of innovative, high quality, cost-effective new products for the
dental market.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. Intercompany accounts and
transactions are eliminated. Minority interests in net income of
consolidated subsidiaries are not material and are 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.
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 $8.2 million and $7.9 million at
December 31, 1999 and 1998, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost or market. At December 31,
1999 and 1998, the cost of $15.5 million, or 11%, and $15.3 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.
51
<PAGE>
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 - 4 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, non-compete
agreements, licensing agreements, product manufacturing rights, computer
software development costs and customer lists 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 $53.2 million and $44.2 million at December 31, 1999 and
1998, 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 $52.5
million and $43.6 million at December 31, 1999 and 1998, respectively. Costs
in excess of fair value of net assets acquired are evaluated continually to
determine whether later events or circumstances warrant revised estimates of
useful lives.
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
Company believes the carrying amounts of cash and cash equivalents, accounts
receivable (net of allowance for doubtful accounts), prepaid expenses and
other current assets, accounts payable, accrued liabilities, income taxes
payable and notes payable and current portion of long-term debt approximate
fair value due to the short-term nature of these instruments. The Company
also believes the carrying amount of long-term debt approximates fair value
as the interest rates are variable and reflect current market rates.
Derivatives
- -----------
The Company's only involvement with derivative financial instruments is
forward contracts to hedge certain assets and liabilities denominated in
foreign currencies and interest rate swaps to convert floating rate debt to
fixed rate.
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, 1999, the
Company's significant contracts outstanding included the sale of 12.6 million
Deutsch marks (approximately $6.4 million) and the
52
<PAGE>
sale of 25 million French francs (approximately $3.9 million). As of December
31, 1998, the Company had contracts outstanding for the purchase of 7.9 million
Swiss francs (approximately $5.7 million) and the sale of 1.9 million Australian
dollars (approximately $1.2 million). The fair value of these foreign exchange
contracts approximate their carrying values. These foreign exchange contracts
generally have maturities of less than six months and counterparties to the
transactions are typically large international financial institutions.
Interest Rate Risk Management
- -----------------------------
In July 1998, the Company entered into interest rate swap agreements
with notional amounts totaling $80.0 million which converts a portion of the
Company's variable rate financing to fixed rates. The average fixed rate of
these agreements is 5.7% and fixes the rate for an average of five years.
The fair value of these swap agreements is the estimated amount the Company
would receive (pay) at the reporting date, taking into account the effective
interest rates. At December 31, 1999 and 1998, the estimated fair values
were positive $2.7 million and negative $2.4 million, respectively.
Foreign Currency Translation
- ----------------------------
The functional currency for foreign operations, except for those in
highly inflationary economies, has been determined to be the local currency.
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 losses of $.1 million in 1999, losses of $1.7
million in 1998 and gains of $.3 million in 1997 are included in other
(income) expense, net.
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 $18.5 million, $18.2 million and
$16.8 million for 1999, 1998 and 1997, respectively.
Reclassifications
- -----------------
Certain reclassifications have been made to prior years' data in order
to conform to the current year presentation.
53
<PAGE>
NOTE 2 - EARNINGS PER COMMON SHARE
- ----------------------------------
The following table sets forth the computation of basic and diluted
earnings per common share:
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(in thousands, except per share amounts)
Year Ended December 31, 1999
Basic EPS $ 89,863 52,754 $1.70
Incremental shares from assumed
exercise of dilutive options
and warrants - 157
-------- ------
Diluted EPS $ 89 863 52,911 $1.70
======== ======
Year Ended December 31, 1998
Basic EPS $ 34,825 53,330 $ .65
Incremental shares from assumed
exercise of dilutive options
and warrants - 267
-------- ------
Diluted EPS $ 34,825 53,597 $ .65
======== ======
Year Ended December 31, 1997
Basic EPS $ 74,554 53,937 $1.38
Incremental shares from assumed
exercise of dilutive options
and warrants - 292
-------- ------
Diluted EPS $ 74,554 54,229 $1.37
======== ======
NOTE 3 - BUSINESS ACQUISITIONS
- ------------------------------
No acquisitions were completed in 1999.
In December 1998, the Company purchased 100% of the capital stock of
Vereinigte Dentalwerke GmbH ("VDW") and related companies. The total amount
paid for the acquisition, net of cash acquired, was $45.8 million.
Headquartered in Munich, Germany, VDW manufactures endodontic files and
accessory products, marketed worldwide under the Antaeos, Beutelrock and
Zipperer trade names. The company's Munich, Germany production facility is a
new, ultra-modern, fully automated manufacturing facility.
In May 1998, the Company purchased 100% of the capital stock of Herpo
Productos Dentarios Ltda. ("Herpo") for $7.4 million. Herpo has a broad
product line focusing on alginate impression materials, artificial teeth and
dental anesthetics. Herpo operates a modern dental anesthetic production
plant in Bonsucesso, Brazil.
In May 1998, the Company purchased 100% of the capital stock of Crescent
Dental Manufacturing Co. ("Crescent") for $5.2 million. Crescent has a
diverse product offering and is one of the leading United States
manufacturers of prophy cups and brushes, amalgamators and other professional
dental equipment and supplies.
In April and December 1998, the Company purchased 100% of the capital
stock of GAC International Inc. ("GAC") for approximately $26.5 million.
Located in Islip, New York, GAC provides a full line of high quality
orthodontic products.
54
<PAGE>
In March 1998, the Company purchased the assets of InfoSoft Inc.
("InfoSoft") for $8.6 million. Located in Hunt Valley, Maryland, the primary
business of InfoSoft is the development and sale of full-featured, dental
practice management software. The Company believes InfoSoft is one of the
largest dental practice management claims processors in the United States.
In January 1998, the Company purchased the assets of Blendax
Professional Dental Business ("Blendax") from Procter & Gamble in a cash
transaction valued at approximately DM13 million or $6.9 million. The
Blendax product line consists of rotary cutting instruments, impression
materials, composite filling material and fluoride rinses and gels.
Each 1998 acquisition was accounted for under the purchase method of
accounting; accordingly, the results of their operations are included in the
accompanying financial statements since the respective dates of the
acquisitions. The purchase prices plus direct acquisition costs have been
allocated on the basis of estimates of the fair values of assets acquired and
liabilities assumed. During 1999, the excess of acquisition cost over net
assets acquired increased by a total of $5.3 million for Herpo, GAC, InfoSoft
and Blendax as a result of the finalization of the purchase price
allocations. The excess of acquisition cost over net assets acquired of
$15.9 million for VDW, $12.8 million for Herpo, $2.6 million for Crescent,
$18.6 million for GAC, $8.0 million for InfoSoft and $4.4 million for Blendax
is being amortized over 25 to 40 years.
In November 1997, the Company purchased certain assets of MPL
Technologies, Inc. ("MPL"), a wholly-owned subsidiary of SoloPak
Pharmaceuticals, for $4.4 million in cash. Located in Franklin Park,
Illinois, MPL is a leading manufacturer and distributor of needles and
needle-related products, primarily for the dental profession.
In July 1997, the Company purchased the dental assets of EFOS
Corporation ("EFOS") for Canadian $20.7 million in a cash transaction valued
at approximately $15.0 million. Prior to acquisition, EFOS was the developer
and manufacturer of DENTSPLY's dental curing lights and amalgamators.
Additionally, the EFOS product line includes protective eyewear products,
replacement parts and curing light repair and service.
Also in July 1997, the Company purchased the outstanding capital stock
of SIMFRA S.A. ("SIMFRA") for FF32.1 million in a cash transaction valued at
approximately $5.5 million and assumption of $1.4 million of debt. Located
in Paris, SIMFRA is the exclusive importer of Maillefer Instruments, S.A. in
France.
In March 1997, the Company purchased all of the capital stock of New
Image Industries, Inc. ("New Image") for $2.00 per share or approximately
$11.0 million and assumed $2.9 million of debt and other liabilities of $21.8
million. Subsequently, assumed liabilities were increased to $32.1 million
for recognition of liabilities associated with certain legal cases. The
primary product line for New Image is intraoral cameras exclusively for the
dental market.
In January 1997, the Company purchased the assets of DW Industries, Inc.
("DW") in a cash transaction valued at approximately $16.3 million and an
earn-out based on future sales growth of the business. No payment of earn-out
has been required to date. Through this acquisition, the Company acquired the
leading disposable air-water syringe tip for use in clinical dental office
procedures.
Also in January 1997, the Company purchased all of the outstanding
capital stock of Laboratoire SPAD, S.A. ("SPAD") for FF199.5 million or $36.0
million in cash and a deferred payment of FF 21.5 million or $3.5 million
which was paid in January 1998. SPAD is a leading French distributor of
dental anesthetic and other dental products.
55
<PAGE>
Each 1997 acquisition was accounted for under the purchase method of
accounting; accordingly, the results of their operations are included in the
accompanying financial statements since the respective dates of the
acquisitions. The purchase prices plus direct acquisition costs have been
allocated on the basis of the fair values of assets acquired and liabilities
assumed. The excess of acquisition cost over net assets acquired of $4.2
million for DW, $33.5 million for SPAD, $3.8 million for SIMFRA, $2.8 million
for EFOS and $.1 million for MPL is being amortized over 25 years. The
excess of acquisition cost over net assets acquired of New Image was
considered impaired and was written-off with the restructuring charge in
December 1998 (See Note 15).
Certain assets of Tulsa Dental Products LLC were purchased in January
1996 for $75.1 million plus $5.0 million in May 1999 related to earn-out
provisions in the purchase agreement. The Company expects to pay an
additional earn-out based on future operating performance of the Tulsa Dental
business. The seller has the option to exercise this earn-out provision for
the two-year periods ending December 31, 2000, December 31, 2001 or December
31, 2002. It is not known at this time which optional two-year period will
be chosen by the seller. The earn-out payment is estimated to be between $65
to $75 million if the option is exercised for the two-year period ending
December 31, 2000.
NOTE 4 - SEGMENT AND GEOGRAPHIC INFORMATION
- -------------------------------------------
As of January 1, 1998, the Company adopted SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 establishes
standards for reporting information about operating segments in financial
statements. Since the Company operates in one operating segment as a
designer, manufacturer and distributor of dental products, the Company
presents Enterprise-wide Disclosures. Dental products represented
approximately 95% of sales in 1999, 1998 and 1997.
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.
The following table sets forth information about the Company's
operations in different geographic areas for 1999, 1998, and 1997. Net sales
reported below represents revenues from external customers of operations
resident in the country or territory identified. Assets by geographic area
are those used in the operations in the geographic area.
United
1999 States Foreign Consolidated
- ---- -------- -------- ------------
(in thousands)
Net Sales $504,757 $326,107 $830,864
Long-lived Assets 82,768 110,386 193,154
1998
- ----
Net Sales $470,947 $324,175 $795,122
Long-lived Assets 77,668 94,696 172,364
1997
- ----
Net Sales $402,743 $318,017 $720,760
Long-lived Assets 69,127 90,917 160,044
56
<PAGE>
Long-lived assets in Germany accounted for $43.9 million, $25.2 million
and $28.8 million of the total foreign long-lived assets for the years ended
1999, 1998 and 1997, respectively.
Third party export sales from the United States are less than ten
percent of consolidated net sales. One customer accounted for 13% of
consolidated net sales in 1999 and 1998 and 12% in 1997. Another customer
accounted for 10% of consolidated net sales in 1999.
NOTE 5 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Finished goods $ 77,786 $ 75,637
Work-in-process 25,519 27,632
Raw materials and supplies 32,175 35,966
-------- --------
$135,480 $139,235
======== ========
Pre-tax income was $.7 million, $.2 million, and $.4 million lower in
1999, 1998, and 1997, respectively 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, 1999 and 1998 by $.3
million and $1.0 million, respectively.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
December 31,
--------------------
1999 1998
-------- --------
Assets, at cost: (in thousands)
Land $ 15,405 $ 12,315
Buildings and improvements 86,148 74,966
Machinery and equipment 155,735 138,644
Construction in progress 9,836 13,262
-------- --------
267,124 239,187
Less: Accumulated depreciation 86,588 80,189
-------- --------
$180,536 $158,998
======== ========
57
<PAGE>
NOTE 7 - OTHER NONCURRENT ASSETS
- --------------------------------
Other noncurrent assets consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Investment in VDW $ - $ 50,895
Noncurrent deferred tax assets 2,345 3,538
Other 12,618 13,366
-------- --------
$ 14,963 $ 67,799
======== ========
VDW was purchased in late December 1998. The allocation of the purchase
price to the fair value of assets acquired and liabilities assumed was
completed in 1999.
NOTE 8 - IDENTIFIABLE INTANGIBLE ASSETS
- ---------------------------------------
Identifiable intangible assets consist of the following:
1999 1998
-------- --------
(in thousands)
Patents $ 45,954 $ 45,330
Trademarks 29,977 26,060
Licensing agreements 29,554 28,764
Product manufacturing rights 8,039 6,829
Non-compete agreements 5,708 5,092
Computer software development costs 5,172 3,705
Customer lists 4,422 4,422
Other 4,724 4,551
-------- --------
133,550 124,753
Less: Accumulated amortization 53,176 44,216
-------- --------
$ 80,374 $ 80,537
======== ========
NOTE 9 - ACCRUED LIABILITIES
- ----------------------------
Accrued liabilities consist of the following:
December 31,
--------------------
1999 1998
-------- --------
Payroll, commissions, bonuses (in thousands)
and other cash compensation $ 17,634 $ 17,480
Employee benefits 7,915 7,015
General insurance 10,541 10,021
Restructuring and other costs 3,200 19,800
Other 41,632 45,111
-------- --------
$ 80,922 $ 99,427
======== ========
58
<PAGE>
NOTE 10 - FINANCING ARRANGEMENTS
- --------------------------------
Short-Term Borrowings
- ---------------------
Short-term bank borrowings amounted to $19.4 million and $15.4 million
at December 31, 1999 and 1998, respectively. Unused lines of credit for
short-term financing at December 31, 1999 and 1998 were $79.6 million and
$70.0 million, respectively. Substantially all unused lines of credit have
no major restrictions and are provided under demand notes between the Company
and the lending institution. Interest is charged on borrowings under these
lines of credit at various rates, generally below prime or equivalent money
rates.
<TABLE>
<CAPTION>
Long-Term Borrowings
- -------------------- December 31,
--------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
$175.0 million revolving credit agreement maturing October
2002, Swiss francs 18.4 million, Pounds sterling 6.2 million,
and $40.0 million outstanding at December 31, 1999, bearing
interest at a weighted average of 2.1% for Swiss francs
borrowings, 6.2% for Pounds sterling borrowings,
and 6.4% for dollar borrowings $ 61,489 $153,021
$125.0 million revolving credit agreement maturing October
2000, with no debt outstanding at December 31, 1999 - 50,000
$25.0 million bank multi-currency revolving credit agreement
maturing October 2000, various currencies outstanding at
December 31, 1999, bearing interest at a weighted average
of 5.1% 7,566 13,450
$200.0 million commercial paper facility rated A/2-P/2,
$76.0 million outstanding at December 31, 1999, bearing
interest at a weighted average of 7.9% (actual weighted
average cost was 5.8%) 76,000 -
Other borrowings, various currencies and rates 1,035 1,851
-------- --------
146,090 218,322
Less: Current portion (included in notes payable
and current portion of long-term debt) 778 831
-------- --------
$145,312 $217,491
</TABLE>
In July 1998, the Company entered into interest rate swap agreements
with notional amounts totaling $80.0 million which converts a portion of the
Company's variable rate financing to fixed rates. The average fixed rate of
these agreements is 5.7% and fixes the rate for an average of five years.
The revolving credit agreements contain 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 .125 percent annually on the
amount of the commitment under the $175.0 million five-year facility and .08
percent annually under the 364-day facility. Interest rates on amounts
borrowed under the facility will depend on the maturity of the borrowing, the
currency borrowed, the interest rate option selected, and, in the event of a
LIBOR borrowing, the ratio of interest expense to operating income.
The bank multi-currency revolving credit agreement contains
affirmative andnegative covenants as to the operations and
financial condition of the Company, which
59
<PAGE>
are substantially equivalent to those in the revolving credit agreements. The
Company pays a facility fee of .08 percent annually on the entire amount of the
bank multi-currency revolving credit agreement commitment.
The $ 125.0 million and $25.0 million facilities contain a one-year
term-out provision and may be extended, subject to certain conditions, for
additional periods of 364 days. The Company intends to extend the $125.0
million and $25.0 million facilities each year for an additional period of
364 days. The $125.0 million and $25.0 million facilities have a utilization
premium of .10 percent annually if utilization equals or exceeds 33.3% of
available facility.
The $200.0 million commercial paper facility has utilization, dealer,
and annual appraisal fees which on average cost .11 percent per annum. The
$125.0 million and $175.0 million revolving credit facilities act as back up
credit to the commercial paper facility. No additional credit has been
extended to the Company. The short-term commercial paper borrowings are
classified as long-term reflecting the Company's intent and ability to renew
these obligations beyond 2000.
NOTE 11 - OTHER LIABILITIES
- ---------------------------
Other liabilities consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Pension $ 29,028 $ 33,648
Medical and other postretirement benefits 9,908 10,102
Other 7,509 4,363
-------- --------
$ 46,445 $ 48,113
======== ========
NOTE 12 - STOCKHOLDERS' EQUITY
- ------------------------------
The Board of Directors authorized the repurchase of .5 million, 2.5
million and .5 million shares of common stock for the years ended December
31, 1999, 1998 and 1997, respectively, on the open market or in negotiated
transactions. Each of these authorizations to repurchase shares expired on
December 31 of those years. The Company repurchased .2 million shares for
$3.9 million, 1.8 million shares for $42.0 million and forty thousand shares
for $.9 million in 1999, 1998 and 1997, respectively. Additionally, the
Board of Directors in December 1999 authorized the repurchase of 1.0 million
shares of common stock in 2000.
A former Chairman of the Board holds options to purchase 30,000 shares
of common stock at an exercise price of $22.25, which was equal to the market
price on the date of grant. The options are exercisable at any time through
January 2004.
The Company issued 360,000 stock purchase warrants in August 1990, in
connection with an acquisition, to the principals of an investment banking
firm, one of whom is a former director of the Company. The warrants are
exercisable at any time through August 28, 2000 at an exercise price of $3.06
per share (market price at date issued). Prior to 1999, 326,000 warrants
were exercised and, during 1999, the remaining 34,000 warrants were exercised.
The Company has four stock option plans (1987 Plan, 1992 Plan, 1993
Plan and 1998 Plan). Under the 1987, 1992 and 1993 Plans, a committee
appointed by the Board of Directors granted to key employees and
directors of the Company options to purchase 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
60
<PAGE>
ten years and one month or ten years and one day after date of grant under
the 1987 Plan and 1992 Plan, respectively. Options generally expire ten
years after the date of grant under the 1993 Plan. For the 1987 Plan, 1992
Plan and 1993 Plan, grants 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 1998 Plan authorized that 4.3 million shares of common stock, plus
shares not granted under the 1993 Plan, may be granted under the plan,
subject to adjustment as follows: each January, if 7% of the outstanding
common shares of the Company exceed 4.3 million, the excess becomes available
for grant under the plan. No further grants can be made under the 1993
Plan. The 1998 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 "non-discretionary
stock options" ("NSOs") which do not constitute ISOs to key employees and
non-employee directors of the Company. Each non-employee director receives
automatic NSOs to purchase 6,000 shares of common stock on the date he or she
becomes a non-employee director and an additional 6,000 options 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
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 not less than 110% of
fair market value and expire five years from the date of grant.
The following is a summary of the status of the Plans as of December 31,
1999, 1998 and 1997 and changes during the years ending on those dates:
----Outstanding---- ----Exercisable----
Weighted Weighted Available
Average Average for
Exercise Exercise Grant
Shares Price Shares Price Shares
--------- -------- --------- -------- ---------
December 31, 1996 1,917,988 $19.66 805,848 $18.64 1,552,500
Authorized/(Lapsed) --- (5,586)
Granted 489,300 28.00 (489,300)
Exercised (288,235) 18.26 ---
Expired/Canceled (82,456) 19.60 82,456
--------- ---------
December 31, 1997 2,036,597 21.87 1,090,921 19.71 1,140,070
Authorized/(Lapsed) --- 3,140,466
Granted 699,900 25.81 (699,900)
Exercised (201,522) 18.66 ---
Expired/Canceled (73,264) 23.87 73,264
--------- ---------
December 31, 1998 2,461,711 23.19 1,360,967 20.83 3,653,900
Authorized/(Lapsed) --- 427,544
Granted 1,226,000 23.79 (1,226,000)
Exercised (206,966) 19.47 ---
Expired/Canceled (102,500) 25.17 102,500
--------- ---------
December 31, 1999 3,378,245 $23.57 1,601,015 $22.43 2,957,944
========= =========
61
<PAGE>
The following table summarizes information about stock options
outstanding under the Plans at December 31, 1999:
-------Options Outstanding-------- -Options Exercisable-
Weighted
Number Average Number
Outstanding Remaining Weighted Exercisable Weighted
at Contractual Average at Average
Range of December 31, Life Exercise December 31, Exercise
Exercise Prices 1999 (in years) Price 1999 Price
- --------------- ----------- ----------- -------- ----------- --------
$ 2.60 - $10.00 28,000 1.8 $ 7.66 28,000 $ 7.66
10.01 - 18.00 156,165 5.4 17.48 156,165 17.48
18.01 - 20.00 360,740 5.5 19.02 360,740 19.01
20.01 - 22.50 363,442 4.7 22.03 354,309 22.04
22.51 - 25.00 1,825,398 9.0 23.65 440,088 24.17
25.01 - 29.50 571,100 8.2 28.45 237,238 28.89
29.51 - 33.70 73,400 8.3 32.95 24,475 32.95
--------- ---------
3,378,245 7.8 $23.57 1,601,015 $22.43
========= =========
The per share weighted average fair value of stock options granted
during 1999, 1998 and 1997 was $9.24, $9.41 and $10.43, respectively, on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions: 1999-expected dividend yield 1.04%, risk-free
interest rate 6.16%, expected volatility 29%, and an expected life of 6.5
years; 1998-expected dividend yield .8%, risk-free interest rate 4.7%,
expected volatility 29%, and an expected life of 6.5 years; and 1997-expected
dividend yield .8%, risk-free interest rate 6.0%, expected volatility 26%,
and an expected life of 6.5 years. The Black-Scholes option pricing model
was developed for tradable options with short exercise periods and is
therefore not necessarily an accurate measure of the fair value of
compensatory stock options.
The Company applies APB 25 in accounting for the Plans and, accordingly,
no compensation cost has been recognized for stock options in the financial
statements. Had the Company determined compensation cost based on the fair
value of stock options at the grant date under SFAS 123, the Company's net
income and earnings per common share would have been reduced as indicated
below:
Year Ended December 31,
1999 1998 1997
-------- -------- --------
(in thousands, except per share amounts)
Net income
As reported $ 89,863 $ 34,825 $ 74,554
Pro forma under SFAS 123 86,703 32,244 72,851
Basic earnings per common share
As reported 1.70 .65 1.38
Pro forma under SFAS 123 1.64 .60 1.35
Diluted earnings per common share
As reported 1.70 .65 1.37
Pro forma under SFAS 123 1.64 .60 1.34
Pro forma net income reflects only options granted since January 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period
of 3 years and compensation cost for options granted prior to January 1, 1995
is not considered.
62
<PAGE>
NOTE 13 - INCOME TAXES
- ----------------------
The components of income before income taxes are as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
United States $111,038 $ 47,416 $ 77,398
Foreign 26,981 7,685 44,608
-------- -------- --------
$138,019 $ 55,101 $122,006
======== ======== ========
The components of the provision for income taxes are as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Current: (in thousands)
U.S. federal $ 33,813 $ 29,225 $ 27,407
U.S. state 1,497 589 4,350
Foreign 11,252 10,906 17,523
-------- -------- --------
Total 46,562 40,720 49,280
-------- -------- --------
Deferred:
U.S. federal (1,943) (14,401) (1,671)
U.S. state (274) (924) (191)
Foreign 3,811 (5,119) 34
-------- -------- --------
Total 1,594 (20,444) (1,828)
-------- -------- --------
$ 48,156 $ 20,276 $ 47,452
======== ======== ========
The reconciliation of the U.S. federal statutory tax rate to the actual
rate is as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Effect of:
State income taxes, net of
federal benefit 0.6 0.7 2.3
Nondeductible amortization
of goodwill 1.4 3.4 1.3
Foreign earnings at various rates 1.5 1.6 1.9
Foreign tax credit (5.0) (3.5) (1.9)
Foreign losses with no tax benefit 0.9 1.7 1.2
Foreign sales corporation (1.0) (2.4) (0.2)
Other 1.5 0.3 (0.7)
-------- -------- --------
Actual income tax rate 34.9% 36.8% 38.9%
======== ======== ========
63
<PAGE>
The tax effect of temporary differences giving rise to deferred tax
assets and liabilities are as follows:
December 31, 1999 December 31, 1998
----------------------- -----------------------
Current Noncurrent Current Noncurrent
Asset Asset Asset Asset
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
(in thousands)
Employee benefit accruals $ 1,306 $ 2,319 $ 1,075 $ 5,988
Product warranty accruals 1,481 --- 1,204 ---
Facility relocation accruals 385 128 261 128
Insurance premium accruals 3,795 --- 3,060 ---
Restructuring charges 5,192 14,420 7,269 14,164
Differences in financial
reporting and tax basis for:
Inventory 372 --- (286) ---
Property, plant and equipment --- (22,894) --- (25,283)
Identifiable intangible assets --- (10,694) --- (10,377)
Other 6,457 (1,174) 5,255 115
Tax loss carryforwards in
foreign jurisdictions --- 2,148 --- 7,834
Valuation allowance for
tax loss carryforwards --- (2,148) --- (7,834)
-------- -------- -------- --------
$ 18,988 $(17,895) $ 17,838 $(15,265)
======== ======== ======== ========
Current and noncurrent deferred tax assets and liabilities are included
in the following balance sheet captions:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Prepaid expenses and other current assets $ 20,771 $ 19,697
Income taxes payable (1,783) (1,859)
Other noncurrent assets 2,345 3,538
Deferred income taxes (20,240) (18,803)
The provision for income taxes was reduced due to utilization of tax
loss carryforwards by $.3 million in 1999. Certain foreign subsidiaries of
the Company have tax loss carryforwards of $18.5 million at December 31,
1999, of which $6.4 million expire through 2007 and $12.1 million may be
carried forward indefinitely. The tax benefit of these tax loss
carryforwards has been offset by a valuation allowance.
Income taxes have not been provided on $74.0 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.
64
<PAGE>
NOTE 14 - BENEFIT PLANS
- -----------------------
Defined Contribution Plans
Substantially all of the employees of the Company and its subsidiaries
are covered by government or Company-sponsored benefit plans. Total costs
for Company-sponsored defined benefit, defined contribution and employee
stock ownership plans amounted to $5.3 million in 1999, $7.6 million in 1998
and $7.1 million in 1997.
The DENTSPLY Employee Stock Ownership Plan ("ESOP") is a
non-contributory defined contribution plan that covers substantially all of
the United States based non-union employees of the Company. Contributions to
the ESOP for 1999, 1998 and 1997 were $2.1 million, $2.1 million and $2.1
million, respectively. 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 agreed to make
additional cash contributions totaling at least $2.2 million over the next
four years following the refinancing date. 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, 1999,
the ESOP held 6.8 million shares, of which 5.9 million were allocated to plan
participants and 0.9 million shares were unallocated and pledged as
collateral for the ESOP debt. Unallocated shares were acquired prior to
December 31, 1992 and are accounted for in accordance with Statement of
Position 76-3. Accordingly, all shares held by the ESOP are considered
outstanding and are included in the earnings per common share computations.
The ESOP reserve consists of a loan receivable from the ESOP bearing interest
at 3.06%, payable in equal quarterly installments through March 31, 2004.
The Company sponsors an employee 401(k) savings plan for its United
States workforce to which enrolled participants may contribute up to 15% of
their compensation, subject to IRS defined limits.
Defined Benefit Plans
The Company maintains a number of separate contributory and
non-contributory qualified defined benefit pension plans and other
postretirement healthcare plans for certain represented and salaried employee
groups in the United States. Pension benefits for salaried plans are based
on salary and years of service; hourly plans are based on negotiated benefits
and years of service. Annual contributions to the pension plans are
sufficient to satisfy legal funding requirements. Pension plan assets are
held in trust and consist mainly of common stock and fixed income
investments.
The Company maintains pension plans for its employees in Germany and
Switzerland. These plans provide benefits based upon age, years of service
and remuneration. The German plans are unfunded book reserve plans. Other
foreign plans are not significant individually or in the aggregate. Most
employees and retirees outside the United States are covered by government
health plans.
Postretirement Healthcare
The plans for postretirement healthcare have no plan assets. The
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.
65
<PAGE>
<TABLE>
<CAPTION>
Reconciliations of changes in the above plans' benefit obligations, fair
value of assets, and statement of funded status are as follows:
Pension Benefits Other Benefits
-------------------- -------------------
December 31, December 31,
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Benefit obligation at beginning of
year $ 58,939 $ 54,074 $ 6,790 $ 6,875
Service cost 2,430 2,423 160 124
Interest cost 3,170 3,229 488 478
Employer contributions 982 1,047 - -
Participant contributions 855 837 - -
Actuarial (gains) losses (2,952) (2,614) 52 (4)
Acquisitions (divestitures) 2,461 - - -
Effects of exchange rate changes (7,297) 2,852 - -
Benefits paid (3,020) (2,909) (734) (683)
-------- -------- -------- --------
Benefit obligations at end of year $ 55,568 $ 58,939 $ 6,756 $ 6,790
======== ======== ======== ========
Reconciliation of Plan Assets
Fair value of plan assets at beginning
of year $ 40,148 $ 33,958 $ - $ -
Actual return on assets 3,446 4,817 - -
Acquisitions (divestitures) 582 - - -
Foreign currency exchange rate changes (4,194) 1,058 - -
Employer contributions 1,085 1,120 734 683
Participant contributions 855 837 - -
Benefits paid (1,718) (1,642) (734) (683)
-------- -------- -------- --------
Fair value of plan assets at end of
year $ 40,204 $ 40,148 $ - $ -
======== ======== ======== ========
Reconciliation of Funded Status
Actuarial present value of projected
benefit obligations $ 55,568 $ 58,939 $ 6,756 $ 6,790
Plan assets at fair value 40,204 40,148 - -
-------- -------- -------- --------
Funded status (15,364) (18,791) (6,756) (6,790)
Unrecognized prior service cost 814 1,773 - -
Unrecognized net actuarial (gain)loss (9,634) (11,229) (3,152) (3,312)
-------- -------- -------- --------
Prepaid (accrued) benefit cost $(24,184) $(28,247) $ (9,908) $(10,102)
======== ======== ======== ========
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
The amounts recognized in the accompanying Consolidated Balance Sheets
are as follows:
Pension Benefits Other Benefits
-------------------- -------------------
December 31, December 31,
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Accrued benefit liability $(29,683) $(32,580) $ (9,908) $(10,102)
Prepaid benefit cost 5,499 4,333 - -
-------- -------- -------- --------
Benefit obligations at end of year $(24,184) $(28,247) $ (9,908) $(10,102)
======== ======== ======== ========
</TABLE>
The aggregate benefit obligation for those plans where the accumulated
benefit obligation exceeded the fair value of plan assets was $28.3 million
and $29.5 million at December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Components of the net periodic benefit cost for the plans are as follows:
Pension Benefits Other Benefits
------------------------- -------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,430 $ 2,423 $ 2,115 $ 160 $ 124 $ 160
Interest cost 3,170 3,229 3,067 488 478 605
Expected return on plan assets (2,435) (2,650) (2,297) - - -
Net amortization and deferral (1,300) (517) 20 (108) (124) (131)
------- ------- ------- ------- ------- -------
Net periodic benefit cost $ 1,865 $ 2,485 $ 2,905 $ 540 $ 478 $ 634
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
The weighted average assumptions used in accounting for the Company's
plans are as follows:
Pension Benefits Other Benefits
------------------------- -------------------------
December 31, December 31,
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 5.6% 5.8% 5.8% 7.5% 7.3% 7.3%
Expected return on plan assets 5.0% 5.5% 5.5% - - -
Rate of compensation increase 3.0% 3.0% 3.0% - - -
Health care cost trend - - - 7.0% 7.0% 7.0%
</TABLE>
Assumed health care cost trend rates have an impact on the amounts
reported for postretirement benefits. A one percentage point change in
assumed healthcare cost trend rates would have the following effects for the
year ended December 31, 1999:
Other Benefits
-------------------
1% Increase 1% Decrease
----------- -----------
(in thousands)
Effect on total of service and interest cost
components $ 68 $ (55)
Effect on postretirement benefit obligation 524 (445)
67
<PAGE>
NOTE 15 - RESTRUCTURING AND OTHER COSTS
- ---------------------------------------
In the second quarter of 1998, the Company recorded a pre-tax charge of
$29.0 million for restructuring and other costs. The charge included costs
of $26.0 million to rationalize and restructure the Company's worldwide
laboratory business, primarily for the closure of the Company's German tooth
manufacturing facility. The remaining $3.0 million of the charge was
recorded to cover termination costs associated with its former implant
products. Included in the $26.0 million restructuring charge were costs to
cover severance, the write-down of property, plant and equipment, and tooth
product rationalization. The principal actions involved the closure of the
Company's Dreieich, Germany tooth facility and rationalization of certain
tooth products in Europe, North America and Australia. The restructuring
resulted in the elimination of approximately 275 administrative and
manufacturing positions, mostly in Germany.
In fiscal 1998, the Company paid approximately $3.5 million for legal
and professional service fees and employee related costs for the German
workforce. The Company also paid approximately $.2 million for implant
termination costs. During this period, the reserve was reduced by
approximately $2.8 million for non-cash implant termination costs and
approximately $6.0 million for a non-cash write-down of property, plant and
equipment.
In fiscal 1999, the Company paid severance and incurred other costs
relating to the restructuring of the Company's worldwide laboratory business
of $11.6 million and $2.4 million, respectively. The Company also made an
additional $1.2 million write-down of plant, property and equipment and
recovered $.6 million in implant termination costs. Certain categories of
reserves and provisions were revised from the original estimates. These
revisions include an increase in the estimated loss on the sale of property
and plant located in Dreieich, Germany, of $1.2 million. Additionally,
severance, implant termination costs and other costs were reduced by $.1
million, $.1 million and $1.0 million, respectively.
Except for the disposition of the property and plant located in
Dreieich, Germany, all major aspects of the plan were completed in 1999.
Remaining provisions at December 31, 1999, total $1.9 million. These
provisions include $1.0 million in other costs related largely to the sale of
the property and plant located in Dreieich, Germany, $.5 million related to
outstanding implant termination matters and $.4 million for remaining
severance.
<TABLE>
<CAPTION>
The major components of the charge and remaining accruals follow:
Amounts Amounts Change Balance
Applied Applied in December 31,
Provision 1998 1999 Estimate 1999
(in thousands)
<S> <C> <C> <C> <C> <C>
Severance $ 13,400 $ (1,300) $(11,600) $ (100) $ 400
Write-down of property,
plant, and equipment 6,000 (6,000) (1,200) 1,200 ---
Implant termination costs 3,000 (3,000) 600 (100) 500
Other costs 6,600 (2,200) (2,400) (1,000) 1,000
-------- -------- -------- ------- -------
$ 29,000 $(12,500) $(14,600) $ --- $ 1,900
======== ======== ======== ======= =======
</TABLE>
In the fourth quarter of 1998, the Company recorded a pre-tax
restructuring charge of $42.5 million related to the discontinuance of
the intra-oral camera business at the Company's New Image division
located in Carlsbad, California. The charge included the write-off of
intangibles, including goodwill associated with the business, write-off of
discontinued products, write-down of fixed assets and other assets,
and severance and other costs associated with the discontinuance of the New
68
<PAGE>
Image division and closure of its facility. The restructuring plan included
the elimination of approximately 115 administrative and manufacturing
positions in California.
In fiscal 1998, the Company reduced the restructuring reserve for
write-downs of intangible assets and discontinued products of $33.2 million
and $3.8 million, respectively. In addition, the Company recorded write-downs
of property, plant and equipment and other assets of $1.5 and $.7 million,
respectively.
In fiscal 1999, the Company paid severance and incurred other costs
totaling $2.4 million and recorded additional write-downs of discontinued
products of $.3 million. The Company also recovered a total of $.7 million
for previously written-down plant, property and equipment and other assets.
Certain categories of reserves and provisions were revised from the original
estimates. These revisions include increases in write-offs and provisions
relating to discontinued products of $.8 million and increases in severance
of $.1 million. Additionally, fixed asset write-downs were reduced by $.5
million and other asset write-downs and other costs were reduced by $.2
million and $.2 million, respectively.
All major aspects of the plan were completed in 1999. Remaining
provisions at December 31, 1999, total $1.3 million. These provisions include
$.5 million related to expected returns of discontinued products, $.3 million
for settlement of terminated purchase orders and $.5 million related to
future lease payments and facility closure costs for the vacated Carlsbad
location.
<TABLE>
<CAPTION>
The major components of the charge and remaining accruals follow:
Amounts Amounts Change Balance
Applied Applied in December 31,
Provision 1998 1999 Estimate 1999
(in thousands)
<S> <C> <C> <C> <C> <C>
Write-off of intangibles
including goodwill $ 33,200 $ (33,200) $ --- $ --- $ ---
Discontinued products 3,800 (3,800) (300) 800 500
Write-down of property,
plant, and equipment 1,500 (1,500) 500 (500) ---
Severance 1,000 --- (1,100) 100 ---
Write-down of other assets 700 (700) 200 (200) ---
Other costs 2,300 --- (1,300) (200) 800
------- -------- ------- ------- -------
$42,500 $(39,200) $(2,000) $ --- $ 1,300
======= ======== ======= ======= =======
</TABLE>
NOTE 16 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company leases automobiles and certain office, warehouse, machinery
and equipment and manufacturing facilities under non-cancelable 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 $10.3 million for 1999, $10.0
million for 1998 and $8.8 million for 1997.
69
<PAGE>
Rental commitments, principally for real estate (exclusive of taxes,
insurance and maintenance), automobiles and office equipment amount to: $8.5
million for 2000, $5.7 million for 2001, $3.5 million for 2002, $2.1 million
for 2003, $1.8 million for 2004, and $6.8 million thereafter.
The Company has no material non-cancelable purchase commitments.
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 $6.5 million at December 31, 1999.
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.
In June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte division with respect to the
distribution of artificial teeth and related products. On January 5, 1999,
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and is seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and are pending in the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The private party
suits seek damages in an unspecified amount. It is the Company's position
that the conduct and activities of the Trubyte division do not violate the
antitrust laws.
70
<PAGE>
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- -----------------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- -------
1999 (in thousands, except per share amounts)
- ----
<S> <C> <C> <C> <C> <C>
Net sales $196,589 $209,125 $203,552 $221,598 $830,864
Gross profit 101,629 109,416 106,310 114,622 431,977
Operating income 34,309 36,396 34,654 44,258 149,617
Net income 19,527 21,190 20,686 28,460 89,863
Earnings per common
share-basic $ .37 $ .40 $ .39 $ .54 $ 1.70
Earnings per common
share-diluted .37 .40 .39 .54 1.70
Cash dividends declared per
common share .05625 .05625 .05625 .06250 .23125
1998
- ----
Net sales $180,706 $197,126 $196,995 $220,295 $795,122
Gross profit 95,337 103,851 103,111 114,124 416,423
Operating income 31,552 6,321(1) 31,949 30(2) 69,852(1)(2)
Net income (loss) 18,997 584(1) 17,627 (2,383)(2) 34,825(1)(2)
Earnings (loss) per common
share-basic $ .35 $ .01(1) $ .33 $ (.04)(2) $ .65(1)(2)
Earnings (loss) per common
share-diluted .35 .01(1) .33 (.04)(2) .65(1)(2)
Cash dividends declared per
common share .05125 .05125 .05125 .05625 .21
<FN>
(1) Includes restructuring and other costs of $29.0 million ($18.8 million
after-tax or $.35 per basic and diluted common share).
(2) Includes a restructuring charge of $42.5 million ($26.6 million
after-tax or
$.50 per basic and diluted common share).
</FN>
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Schedule II DENTSPLY INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31,1999
Additions
--------------------------
Charged
Balance at (Credited) Charged to Write-offs Balance
Beginning To Costs Other Net of Translation at End
Description of Period And Expenses Accounts Recoveries Adjustment of Period
- ----------- ---------- ------------ ----------- ---------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
For Year Ended December 31,
1997 $ 2,475 $ 590 $ 2,496 (a) $ (746) $ (178) $ 4,637
1998 4,637 4,484 454 (b) (1,773) 89 7,891
1999 7,891 1,418 541 (e) (1,294) (404) 8,152
Allowance for trade discounts:
For Year Ended December 31,
1997 507 2,904 - (1,214) (71) 2,126
1998 2,126 2,297 - (2,556) 87 1,954
1999 1,954 2,061 - (1,538) (183) 2,294
Inventory valuation reserves:
For Year Ended December 31,
1997 16,818 (2,178) 2,282 (c) (1,679) (1,169) 14,074
1998 14,074 1,421 5,125 (d) (8,496) 191 12,315
1999 12,315 2,116 2,679 (f) (1,209) (537) 15,364
- ------------------
<FN>
(a) Includes $2,498 from acquisitions of MPL, New Image, SIMFRA and SPAD.
(b) Includes $454 from acquisitions of Crescent and GAC.
(c) Includes $2,128 from acquisitions of MPL, New Image, SIMFRA and SPAD.
(d) Includes $680 from acquisitions of Crescent and GAC and $4,445 for
restructuring.
(e) Includes $62 from acquisition of VDW and $479 for the New Image
restructuring.
(f) Includes $2,679 from acquisition of VDW and Herpo.
</FN>
</TABLE>
72
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange 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.
By:/s/ John C. Miles II
-----------------------
John C. Miles II
Chairman of the Board
and Chief Executive Officer
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/ John C. Miles II Chairman of the March 28, 2000
- ------------------------- Board and Chief Executive
John C. Miles II Officer and a Director
(Principal Executive Officer)
/s/ Gerald K. Kunkle President and Chief March 28, 2000
- ------------------------- Operating Officer
Gerald K. Kunkle
/s/ William R. Jellison Senior Vice President March 28, 2000
- ------------------------- and Chief Financial
William R. Jellison Officer (Principal
Financial and Accounting
Officer)
/s/ Burton C. Borgelt Director March 28, 2000
- -------------------------
Burton C. Borgelt
/s/ Douglas K. Chapman Director March 28, 2000
- -------------------------
Douglas K. Chapman
/s/ Michael J. Coleman Director March 28, 2000
- -------------------------
Michael J. Coleman
/s/ Cynthia P. Danaher Director March 28, 2000
- -------------------------
Cynthia P. Danaher
73
<PAGE>
/s/ Arthur A. Dugoni Director March 28, 2000
- -------------------------
Arthur A. Dugoni, D.D.S., M.S.D.
/s/ C. Frederick Fetterolf Director March 28, 2000
- --------------------------
C. Frederick Fetterolf
/s/ Leslie A. Jones Director March 28, 2000
- -------------------------
Leslie A. Jones
/s/Edgar H. Schollmaier Director March 28, 2000
- -------------------------
Edgar H. Schollmaier
/s/ W. Keith Smith Director March 28, 2000
- -------------------------
W. Keith Smith
74
<PAGE>
EXHIBIT INDEX
--------------
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended 78
4.1 (a) 364-Day and 5-Year Competitive Advance,
Revolving Credit and Guaranty Agreements
dated as of October 23, 1997 among the
Company, the guarantors named therein,
the banks named therein, the Chase
Manhattan Bank as Administrative Agent,
and ABN Amro Bank, N.V. as Documentation
Agent. (11)
(b) Amendment to the 364-Day Competitive
Advance, Revolving Credit and Guaranty
Agreement dated as of October 21, 1999
among the Company, the guarantors named
therein, the banks named therein, the
Chase Manhattan Bank as Administrative
Agent, and ABN Amro Bank, N.V. as
Documentation Agent 91
4.2 (a) Commercial Paper Issuing and Paying
Agency Agreement dated as of August 12,
1999 between the Company and the Chase
Manhattan Bank 112
(b) Commercial Paper Dealer Agreement dated
as of August 12, 1999 between the Company
and Goldman, Sachs & Co. 120
10.1 1992 Stock Option Plan adopted May 26, 1992 (4)
10.2 1993 Stock Option Plan (2)
10.3 1998 Stock Option Plan (1)
10.4 Nonstatutory Stock Option Agreement
between the Company and Burton C.
Borgelt (3)
10.5 (a) Employee Stock Ownership Plan as amended
effective as of December 1, 1982,
restated as of January 1, 1991 (7)
(b) Second amendment to the DENTSPLY
Employee Stock Ownership Plan (10)
(c) Third Amendment to the DENTSPLY
Employee Stock Ownership Plan (12)
10.6 (a) Retainer Agreement dated December 29,
1992 between the Company and State Street
Bank and Trust Company ("State Street") (5)
(b) Trust Agreement between the Company and
State Street Bank and Trust Company dated
as of August 11, 1993 (6)
(c) Amendment to Trust Agreement between the
Company and State Street Bank and Trust
Company effective August 11, 1993 (6)
10.7 Employment Agreement dated January 1,
1996 between the Company and Burton C.
Borgelt (9)
75
<PAGE>
10.8 (a) Employment Agreement dated as of
December 31, 1987 between the Company
and John C. Miles II (5)
(b) Amendment to Employment Agreement between
the Company and John C. Miles II dated
February 16, 1996, effective January 1, 1996 (9)
10.9 Employment Agreement dated as of December
31, 1987, as amended as of February 8,
1990, between the Company and Leslie A.
Jones (5)
10.10 Employment Agreement dated as of December
10, 1992 between the Company and Michael
R. Crane (5)
10.11 Employment Agreement dated as of December
10, 1992 between the Company and Edward
D. Yates (5)
10.12 Employment Agreement dated January 1,
1996 between the Company and W. William
Weston (9)
10.13 Employment Agreement dated January 1,
1996 between the Company and Thomas L.
Whiting (9)
10.14 Employment Agreement dated October 11,
1996 between the Company and Gerald K.
Kunkle Jr. (10)
10.15 Employment Agreement dated April 20,
1998 between the Company and William R.
Jellison (12)
10.16 Employment Agreement dated September 10,
1998 between the Company and Brian M.
Addison (12)
10.17 Employment Agreement dated June 1, 1999
between the Company and J. Henrik Roos 135
10.18 Midwest Dental Products Corporation
Pension Plan as amended and restated
effective January 1, 1989 (7)
10.19 Revised Ransom & Randolph Pension Plan,
as amended effective as of September 1,
1985, restated as of January 1, 1989 (7)
10.20 DENTSPLY International Inc. Directors'
Deferred Compensation Plan effective
January 1, 1997 (10)
10.21(a) Asset Purchase and Sale Agreement, dated
January 10, 1996, between Tulsa Dental
Products, L.L.C. and DENTSPLY
International Inc. (8)
(b) Amendment to Asset Purchase and Sale
Agreement between Tulsa Dental Products,
L.L.C. and DENTSPLY, dated January 1,
1999 142
10.22 Supplemental Executive Retirement Plan
effective January 1, 1999 (12)
10.23 Written Description of Year 1999
Incentive Compensation Plan 144
21.1 Subsidiaries of the Company 145
76
<PAGE>
23.1 Consent of KPMG LLP 148
27 Financial Data Schedule 149
- -------------------
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 333-56093).
(2) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-79094).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
(5) 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.
(6) 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.
(7) 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.
(8) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, 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, 1997, 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
ended December 31, 1998, File No. 0-16211.
77
BY-LAWS
OF
DENTSPLY INTERNATIONAL INC.
(Formerly GENDEX Corporation)
ARTICLE I. STOCKHOLDERS' MEETINGS
SECTION 1. Annual Meetings. The Board of Directors shall, within
seventy-five (75) days following the close of the corporation's fiscal year,
establish a date, time and place for the annual meeting of the stockholders,
for the purpose of electing directors and for the transaction of such other
business as may properly come before the meeting.
SECTION 2. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any class or series of capital stock
having a preference over the common stock as to dividends or upon
liquidation, special meetings of stockholders of the corporation may be
called only by the Chairman of the Board, the Chief Executive Officer or the
President pursuant to a resolution adopted by the Board of Directors.
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of
meeting for any annual meeting, or for any special meeting called pursuant to
Article I, Section 2, above. A waiver of notice signed by all stockholders
entitled to vote at a meeting may designate any place, either within or
without the State of Delaware, as the place for the holding of such meeting.
If no designation is made, or if a special meeting shall be otherwise called,
the place of meeting shall be the principal office of the corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the date of the meeting either
personally or by mail, by or at the discretion of the Chief Executive
Officer, the President or the officer or persons calling the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the stockholder at his address as it appears
on the stock record books of the corporation, with postage thereon prepaid.
78
<PAGE>
SECTION 5. Fixing of Record Date.
(a) For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors of the corporation may fix, in advance,
a date as the record date for any such determination of stockholders,
such date in any case to be not more than sixty (60) nor less than ten
(10) days prior to the date of any proposed meeting of stockholders.
In no event shall the stock transfer books be closed. When a
determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such
determination shall be applied to any adjournment thereof.
(b) For the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of
any rights, or in order to make a determination of stockholders for any
other lawful purpose, the Board of Directors of the corporation may fix
a date as the record date for any such determination of stockholders,
which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. In no event shall the
stock transfer books be closed.
SECTION 6. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. Provided that a meeting
has been duly convened in accordance herewith, a majority of the shares
represented at the meeting at the time of adjournment, even if such shares
constitute at such time less than a majority of the outstanding shares
entitled to vote, may adjourn the meeting from time to time without further
notice. At any adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. Any meeting (a) at which all of the
outstanding shares are present in person or represented by proxy and at which
none of such shares attend for the purpose of objecting, at the beginning of
the meeting, to the transaction of any business thereat because the meeting
was not lawfully called or convened, or (b) at which all of the outstanding
stock has waived notice, or (c) for which notice shall have been duly given
as provided herein, shall be deemed a properly constituted meeting of the
stockholders.
SECTION 7. Proxies. At all meetings of stockholders, a stockholder
entitled to vote may vote by proxy appointed in writing by the stockholder or
by his duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. An
instrument appointing a proxy shall, unless the contrary is stated thereon,
be valid only at the meeting for which it has been given or any adjournment
thereof.
79
<PAGE>
SECTION 8. Voting of Shares. At each meeting of stockholders, every
stockholder entitled to vote thereat shall be entitled to vote in person or
by a duly authorized proxy, which proxy may be appointed by an instrument in
writing executed by such stockholder or his duly authorized attorney or
through electronic means, if applicable, such as the internet. Subject to
the provisions of applicable law and the Company's Certificate of
Incorporation, each holder of common stock shall be entitled to one (1) vote
for each share of stock standing registered in his name at the close of
business on the day fixed by the Board of Directors as the record date for
the determination of the stockholders entitled to notice of and vote at such
meeting. Shares standing in the name of another corporation may be voted by
any officer of such corporation or any proxy appointed by any officer of such
corporation in the absence of express notice of such corporation given in
writing to the Secretary of this corporation in connection with the
particular meeting, that such officer has no authority to vote such shares.
SECTION 9. List of Stockholders. A complete list of the stockholders
entitled to vote at the ensuing meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary, or other
officer of the corporation having charge of said stock ledger. Such list
shall be open to the examination of any stockholder during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where said meeting is to be held, and the list shall be produced and kept at
the time and place of the meeting during the whole time thereof, and shall be
subject to the inspection of any stockholder who may be present.
SECTION 10. Waiver of Notice by Stockholders. Whenever any notice
whatever is required to be given to any stockholder of the corporation under
the provisions of these By-Laws or under the provisions of the Certificate of
Incorporation or under the provisions of any statute, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the stockholder entitled to such notice, shall be deemed equivalent to the
giving of such notice.
SECTION 11. Advance Notice of Stockholder-Proposed Business at Annual
Meetings. At an annual meeting of stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting
by or at the direction of the Board, or (c) otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable
requirements for business to be properly brought before an annual meeting by
a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation, not less than sixty (60) days prior to the date
that the materials regarding the prior years annual meeting
80
<PAGE>
were mailed to stockholders. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of the stockholder proposing
such business, (iii) the class and number of shares of the corporation which
are beneficially owned by the stockholder, and (iv) any material interest of
the stockholder in such business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 11.
The chairman of an annual meeting shall, if the facts warrant,
determine that business was not properly brought before the meeting in
accordance with the provisions of this Section 11, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
SECTION 12. Procedure for Nomination of Directors. Only persons
nominated in accordance with the following procedures shall be eligible for
election as directors, except as may otherwise be provided by the terms of
the corporation's Certificate of Incorporation with respect to the rights of
holders of any class or series of preferred stock to elect directors under
specified circumstances. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders by or
at the direction of the Board of Directors, by any nominating committee or
person appointed by the Board, or by any stockholder of the corporation
entitled to vote for election of directors at the meeting who complies with
the notice procedures set forth in this Section 12. Nominations other than
those made by or at the direction of the Board of Directors or any nominating
committee or person appointed by the Board shall be made pursuant to timely
notice in proper written form to the Secretary of the corporation. To be
timely, a stockholder's request to nominate a person for director, together
with the written consent of such person to serve as a director, must be
received by the Secretary of the corporation not less than sixty (60) days
prior to the date fixed for the meeting. To be in proper written form, such
stockholder's notice shall set forth in writing: (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a
director (i) the name, age, business address and residence address for such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of stock of the corporation which are beneficially
owned by such person and (iv) such other information relating to such person
as is required to be disclosed in solicitations of proxies for election of
directors, or as otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the class and number of
shares of stock of the corporation which are beneficially owned by such
stockholder. The corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee
81
<PAGE>
to serve as a director of the corporation. No persons shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth herein and in the corporation's Certificate of
Incorporation. The chairman of any meeting shall, if the facts so warrant,
determine that a nomination was not made in accordance with the procedures
prescribed by the corporation's Certificate of Incorporation and By-Laws, and
if he should so determine, he shall so declare to the meeting and the
defective nomination(s) shall be disregarded.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors. The Board of Directors may
adopt, amend or repeal by-laws adopted by the Board or by the stockholders.
SECTION 2. Number of Directors, Tenure and Qualifications. The number
of members of the Board of Directors shall be not less than three (3) nor
more than eleven (11), as determined from time to time by the Board of
Directors. The directors need not be stockholders of the corporation. The
directors shall be divided into three (3) classes, designated Class I, Class
II and Class III. Each class shall consist, as nearly as may be possible, of
one-third (1/3) of the total number of directors constituting the entire
Board of Directors. Effective immediately upon the filing of the Certificate
of Incorporation of the corporation dated June 11, 1993, Class I directors
shall be elected for a term ending upon the next succeeding annual meeting of
stockholders, Class II directors for a term ending upon the second succeeding
annual meeting of stockholders and Class III directors for a term ending upon
the third succeeding annual meeting of stockholders. At each succeeding
annual meeting of stockholders beginning with the annual meeting immediately
succeeding the filing of the Certificate of Incorporation, successors to the
class of directors whose term expires at such annual meeting shall be elected
for a three-year term. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. A director
shall hold office until the annual meeting for the year in which his or her
term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, incapacitation or
removal from office, and except as otherwise required by law. In the event
such election is not held at the annual meeting of stockholders, it shall be
held at any adjournment thereof or a special meeting.
SECTION 3. Regular Meetings. Regular meetings of the Board of
Directors shall be held without any other notice than this By-Law immediately
after, and at the same place as, the annual meeting of stockholders, and each
adjourned session thereof. The Board of Directors may designate the time and
place, either within or without the State of Delaware, for the holding of
additional regular meetings without other notice than such designation.
82
<PAGE>
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
the Chief Executive Officer, the President or by members of the Board of
Directors constituting no less than three-fourths (3/4) of the total number
of directors then in office. The person or persons authorized to call
special meetings of the Board of Directors may fix any place either within or
without the State of Delaware, as the place for holding any special meeting
of the Board of Directors called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least five (5) days previously thereto by written notice delivered or mailed
to each director at his last known address, or at least forty-eight (48)
hours previously thereto by personal delivery or by facsimile to a telephone
number provided to the corporation. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice is given by facsimile, such notice shall
be deemed to be delivered when transmitted with receipt confirmed. Whenever
any notice whatever is required to be given to any director of the
corporation under the provisions of these By-Laws or under the provisions of
the Certificate of Incorporation or under the provisions of any statute, a
waiver thereof in writing, signed at any time, whether before or after the
time of meeting, by the director entitled to such notice, shall be deemed
equivalent to the giving of such notice. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting except where a
director attends a meeting and objects thereat to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 6. Quorum. Two-Thirds (2/3) of the directors shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors.
SECTION 7. Manner of Acting. The act of the majority of the directors
then in office shall be the act of the Board of Directors, Unless the act of
a greater number is required by these By-laws or by law.
SECTION 8. Vacancies. Except as otherwise required by law, any
vacancy on the Board of Directors that results from an increase in the number
of directors shall be filled only by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other vacancy
occurring on the Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as
that of his or her predecessor. The resignation of a director shall be
effective upon receipt by the corporation, unless some subsequent time is
fixed in the resignation, and then from that time. Acceptance of such
resignation by the corporation shall not be required.
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SECTION 9. Compensation. The Board of Directors, by affirmative vote
of a majority of the directors, and irrespective of any personal interest of
any of its members, may establish reasonable compensation of all directors
for services to the corporation as directors, officers or otherwise, or may
delegate such authority to an appropriate committee.
SECTION 10. Presumption of Assent. A director of the corporation who
is present at a meeting of the Board of Directors or a committee thereof at
which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof. Such right to dissent shall not apply to a director who
voted in favor of such action.
SECTION 11. Committees. The Board of Directors by resolution may
designate one (1) or more committees, each committee to consist of one (1) or
more directors elected by the Board of Directors, which to the extent
provided in such resolution, as initially adopted, and as thereafter
supplemented or amended by further resolution adopted by a like vote, shall
have and may exercise, when the Board of Directors is not in session, the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, except action with respect to amendment of the
Certificate of Incorporation or By-Laws, adoption of an agreement of merger
or consolidation (other than the adoption of a Certificate of Ownership and
Merger in accordance with Section 253 of the General Corporation Law of the
State of Delaware, as such law may be amended or supplemented),
recommendation to the stockholders of the sale, lease or exchange of all or
substantially all of the Corporation's property or assets, recommendation to
the stockholders of the dissolution or the revocation of a dissolution of the
Corporation, election of officers or the filling of vacancies on the Board of
Directors or on committees created pursuant to this Section or declaration of
dividends. The Board of Directors may elect one (1) or more of its members
as alternate members of any such committee who may take the place of any
absent or disqualified member or members at any meeting of such committee,
upon request by the Chairman of the Board, the Chief Executive Officer or the
President or upon request by the chairman of such meeting. Each such
committee may fix its own rules governing the conduct of its activities and
shall make such reports to the Board of Directors of its activities as the
Board of Directors may request.
SECTION 12. Removal of Directors. Exclusive of directors, if any,
elected by the holders of one (1) or more classes of preferred stock, no
director of the corporation may be removed from office, except for cause and
by the affirmative vote of two-thirds (2/3) of the outstanding shares of
capital stock of the corporation entitled to vote at a meeting of the
stockholders duly called for such purpose. As used in this Article II, the
meaning of "cause" shall be limited to malfeasance arising from the
performance of a director's duty which has a materially adverse effect on the
business of the corporation.
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SECTION 13. Informal Action. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may
be taken at any meeting of the Board of Directors or any committee thereof if
prior to such action a written consent thereto is signed by all members of
the Board or of the committee, as the case may be, and such written consent
is filed with the minutes of the proceedings of the Board or the committee.
SECTION 14. Conferences. Members of the Board of Directors or any
committee designated by the Board may participate in a meeting of such Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section14 shall
constitute presence in person at such meeting.
ARTICLE III. OFFICERS
SECTION 1. Number. The officers of the corporation shall consist of a
Chairman of the Board and a Chief Executive Officer. The Board of Directors
may appoint as officers a Vice Chairman of the Board, President, such number
of Senior Vice Presidents and Vice Presidents, a Secretary, a Treasurer, one
(1) or more Assistant Treasurers, one (1) or more Assistant Secretaries, and
such other officers as are created by the Board from time to time. The same
person may hold two (2) or more of such offices.
SECTION 2. Election and Term of Office. The Chairman of the Board and
the Vice Chairman of the Board shall be elected by the directors from among
their own number; other officers need not be directors. In addition to the
powers conferred upon them by these By-Laws, all officers elected or
appointed by the Board of Directors shall have such authority and shall
perform such duties as from time to time may be prescribed by the Board of
Directors by resolution.
SECTION 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors, whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment shall not of itself create
contract rights.
SECTION 4. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and meetings of the
stockholders. He shall also perform such other duties as from time to time
may be assigned to him by the Board of Directors.
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SECTION 5. Vice Chairman of the Board. In the absence of the Chairman
of the Board because of death or physical disability which prevents the
Chairman of the Board from performing his duties, or in the event of his
inability or refusal to act, the Vice Chairman of the Board shall perform the
duties of the Chairman of the Board and, when so acting, have the powers of
and be subject to all of the restrictions upon the Chairman of the Board.
SECTION 6. Chief Executive Officer. The Chief Executive Officer shall
be the principal executive officer of the corporation and shall have the
general charge of and control over the business, affairs and personnel of the
corporation, subject to the authority of the Board of Directors. The Chief
Executive Officer may, together with the Secretary, sign all certificates for
shares of the capital stock of the corporation and shall perform such other
duties as shall be delegated to him by the Board of Directors. Except as may
be specified by the Board of Directors, the Chief Executive Officer shall
have the power to enter into contracts and make commitments on behalf of the
corporation and shall have the right to execute deeds, mortgages, bonds,
contracts and other instruments necessary or proper to be executed in
connection with the corporation's regular business and may authorize the
President, and any other officer of the corporation, to sign, execute and
acknowledge such documents and instruments in his place and stead.
SECTION 7. President. The President shall be the chief operating
officer of the corporation, and shall report to the Chief Executive Officer.
The President may, together with the Secretary, sign all certificates for
shares of the capital stock of the corporation and may, together with the
Secretary, execute on behalf of the corporation any contract, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or the Chief Executive Officer to some other officer or
agent, and shall perform such duties as are assigned to him by the Board of
Directors or the Chief Executive Officer.
SECTION 8. Senior Vice President and Vice Presidents. Each Senior
Vice President or Vice President shall perform such duties and have such
authority as from time to time may be assigned to him by the Board of
Directors, the Chief Executive Officer or the President.
SECTION 9. Secretary and Assistant Secretaries. The Secretary shall
have custody of the seal of the corporation and of all books, records and
papers of the corporation, except such as shall be in the charge of the
Treasurer or some other person authorized to have custody and be in
possession thereof by resolution of the Board of Directors. The Secretary
shall record the proceedings of the meetings of the stockholders and of the
Board of Directors in books kept by him for that purpose and may, at the
direction of the Board of Directors, give any notice required by statute or
by these By-Laws of all such meetings. The Secretary shall, together with
the Chief Executive Officer or the President, sign certificates for shares of
the capital stock of the corporation. Any Assistant Secretaries elected by
the Board of Directors, in order of their seniority, shall, in the absence or
disability of the Secretary, perform the duties and exercise the
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powers of the Secretary as aforesaid. The Secretary or any Assistant
Secretary may, together with the Chief Executive Officer, the President or
any other authorized officer, execute on behalf of the corporation any
contract which has been approved by the Board of Directors, and shall perform
such other duties as the Board of Directors, the Chief Executive Officer or
the President shall prescribe.
SECTION 10. Treasurer and Assistant Treasurer. The Treasurer shall
keep accounts of all moneys of the corporation received and disbursed, and
shall deposit all monies and valuables of the corporation in its name and to
its credit in such banks and depositories as the Board of Directors shall
designate. Any Assistant Treasurers elected by the Board of Directors, in
order of their seniority, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall perform such other duties as the Board of Directors, the Chief
Executive Officer or the President shall prescribe.
SECTION 11. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director
of the corporation.
SECTION 12. Representation in Other Companies. Unless otherwise
ordered by the Board of Directors, the Chief Executive Officer, the President
or a Vice President designated by the President shall have full power and
authority on behalf of the corporation to attend and to act and to vote at
any meetings of security holders of corporations in which the corporation may
hold securities, and at such meetings shall possess and may exercise any and
all rights and powers incident to the ownership of such securities, and which
as the owner thereof the corporation might have possessed and exercised, if
present. The Board of Directors by resolution from time to time may confer
like powers upon any other person or persons.
ARTICLE IV. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares
of the corporation shall be in such form as shall be determined by the Board
of Directors. Such certificates shall be signed by the Chief Executive
Officer or the President and by the Secretary. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
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SECTION 2. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may treat
the registered owner of such shares as the person exclusively entitled to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. Where a certificate for shares is presented to the
corporation with a request to register for transfer, the corporation shall
not be liable to the owner or any other person suffering loss as a result of
such registration of transfer if (a) there were on or with the certificate
the necessary endorsements, and (b) the corporation had no duty to inquire
into adverse claims or has discharged any such duty. The corporation may
require reasonable assurance that said endorsements are genuine and effective
and in compliance with such other regulations as may be prescribed under the
authority of the Board of Directors.
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
SECTION 1. Indemnification Generally. The corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, or is alleged to have violated the Employee Retirement Income
Security Act of 1974, as amended, against expenses (including attorneys'
fees), judgments, fines, penalties, and amounts paid in settlement actually
and reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon plea of nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
SECTION 2. Indemnification in Actions By or In the Right Of the
Corporation. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by
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him or her in connection with the defense and settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court
of Chancery or such other court shall deem proper.
SECTION 3. Success on the Merits; Indemnification Against Expenses.
To the extent that a director, officer, employee or agent of the corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in Section 1 or Section 2 of this Article V, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him or her in connection therewith.
SECTION 4. Determination that Indemnification is Proper. Any
indemnification under Section 1 or Section 2 of this Article V, unless
ordered by a court, shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances under the standard
of conduct set forth in such Section 1 or Section 2 of this Article V, as the
case may be. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding;
(b) If such a quorum is not obtainable, or, even if obtainable
if a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(c) By the stockholders.
SECTION 5. Insurance; Indemnification Agreements. The corporation
may, but shall not be required to, supplement the right of indemnification
under this Article V by any lawful means, including, without limitation by
reason of enumeration, (i) the purchase and maintenance of insurance on
behalf of any one or more of such indemnities, whether or not the corporation
would be obligated to indemnify such person under this Article V or
otherwise, and (ii) individual or group indemnification agreements with any
one or more of such indemnities.
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SECTION 6. Advancement of Expenses. Expenses (including attorneys'
fees) incurred by an indemnitee in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
the corporation in advance of the final disposition of such action; suit or
proceeding upon receipt of an undertaking by or on behalf of the indemnitee
to repay such amount if it shall ultimately be determined that he or she is
not entitled to be indemnified by the corporation as to such amounts.
SECTION 7. Rights Not Exclusive. The indemnification provided by this
Article V shall be not deemed exclusive of any other right to which an
indemnified person may be entitled under Section 145 of the General
Corporation Law of the State of Delaware (or any successor provision) or
otherwise under applicable law, or under any agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 8. Severability. To the extent that any court of competent
jurisdiction shall determine that the indemnification provided under this
Article V shall be invalid as applied to a particular claim, issue or matter,
the provisions hereof shall be deemed amended to allow indemnification to the
maximum extent permitted by law.
SECTION 9. Modification. This Article V shall be deemed to be a
contract between the corporation and each previous, current or future
director, officer, employee or agent. The provisions of this Article V shall
be applicable to all actions, claims, suits or proceedings, commenced after
the adoption hereof, whether arising from any action taken or failure to act
before or after such adoption. No amendment, modification or repeal of this
Article V shall diminish the rights provided hereby or diminish the right to
indemnification with respect to any claim, issue or matter in any then
pending or subsequent proceeding which is based in any material respect from
any alleged action or failure to act prior to such amendment, modification or
repeal.
90
EXECUTION COPY
AMENDED AND RESTATED 364-DAY COMPETITIVE
ADVANCE, REVOLVING CREDIT AND GUARANTY AGREEMENT
dated as of October 21, 1999 (the "1999 Amendment and
Restatement"), among DENTSPLY INTERNATIONAL INC., a
Delaware corporation (the "Borrower"), the Guarantors
named herein, the banks named herein (individually a
"Bank" and collectively the "Banks"), THE CHASE
MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Banks (in such capacity,
the "Administrative Agent") and ABN AMRO BANK N.V.,
as documentation agent for the Banks (in such
capacity, the "Documentation Agent").
WHEREAS, on October 23, 1997, the Borrower, the Guarantors,
The Chase Manhattan Bank, as administrative agent, certain of the Banks
and ABN AMRO Bank N.V., as documentation agent, entered into a
364-Day Competitive Advance, Revolving Credit and Guaranty Agreement
(as previously amended, the "Credit Agreement") pursuant to which the
Banks agreed to make available to the Borrower Loans in an aggregate
principal amount not to exceed $125,000,000 at any time outstanding;
WHEREAS, the parties hereto desire to amend the Credit
Agreement as set forth herein and to restate the Credit Agreement in
its entirety giving effect to such amendment; and
WHEREAS, the Borrower, the Guarantors and the Banks have
agreed to amend and restate, on the terms and subject to the conditions
set forth herein, the Credit Agreement, to provide for the foregoing.
NOW, THEREFORE, for and in consideration of the premises
and the mutual covenants herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Guarantors, the Banks, the
Administrative Agent and the Documentation Agent hereby agree as
follows:
SECTION 1. All capitalized terms which are defined in the
Credit Agreement and not otherwise defined herein or in the recitals
hereto shall have the same meanings herein as in the Credit Agreement.
SECTION 2. All references to Section numbers in this 1999
Amendment and Restatement shall, except as the context requires, be
references to the corresponding Sections of the Credit Agreement.
SECTION 3. On and after the 1999 Restatement Effective
Date (as hereinafter defined), each reference in the Credit Agreement
to "this Agreement", "hereunder", "herein", or words of like import
shall mean and be a reference to the Credit Agreement, as amended and
restated hereby.
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SECTION 4. The Credit Agreement is hereby amended by
deleting the heading in its entirety and substituting in lieu thereof
the following:
AMENDED AND RESTATED 364-DAY COMPETITIVE ADVANCE,
REVOLVING CREDIT AND GUARANTY AGREEMENT dated as of October
21, 1999, among DENTSPLY INTERNATIONAL INC., a Delaware
corporation (the "Borrower"), the guarantors named herein
(the "Guarantors"), the banks named herein (individually a
"Bank" and collectively the "Banks"), THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative
agent for the Banks (in such capacity, the "Administrative
Agent") and ABN AMRO BANK N.V., as documentation agent for
the Banks (in such capacity, the "Documentation Agent").
SECTION 5. The fourth sentence of the introductory
statement of the Credit Agreement is hereby amended by deleting such
sentence in its entirety and substituting therefor the following
sentence:
The proceeds of all such borrowings are to be used
for working capital and general corporate purposes, including
acquisitions in the health care products industry.
SECTION 6. Article 1 of the Credit Agreement is hereby
amended by:
(a) Deleting the definition of "Applicable Percentage" in
its entirety and substituting in lieu thereof the following:
"Applicable Percentage" shall mean .3200% per annum.
(b) Adding in the appropriate alphabetical order the
definition of "CP Rating" which shall read in its entirety as follows:
"CP Rating" shall mean the ratings of S&P and
Moody's, respectively, applicable to commercial paper (with an
original maturity not exceeding one year) of the Borrower that is
not guaranteed by any other Person or subject to any other credit
enhancement.
(c) Adding in the appropriate alphabetical order the
definition of "Index Debt" which shall read in its entirety as follows:
"Index Debt" shall mean senior, unsecured, long-term
indebtedness for borrowed money of the Borrower that is not
guaranteed by any other Person or subject to any other credit
enhancement.
(d) Adding in the appropriate alphabetical order the
definition of "Moody's" which shall read in its entirety as follows:
"Moody's" shall mean Moody's Investors Services, Inc.
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(e) Adding in the appropriate alphabetical order the
definition of "S&P" which shall read in its entirety as follows:
"S&P" shall mean Standard & Poor's.
(f) Deleting the reference to "October 22, 1998" in the
definition of "Termination Date" and substituting in lieu thereof
"October 19, 2000".
(g) Deleting the definition of "Term-Out Applicable
Percentage" in its entirety and substituting in lieu therefor the
following:
"Term-Out Applicable Percentage" shall mean on any
date, with respect to (a) the Facility Fee, (b) any Loans
comprising any LIBOR Revolving Credit Borrowing or (c) the
Utilization Fee, the applicable percentage set forth in the table
below based upon the ratings by S&P and Moody's, respectively,
applicable on such date to the Index Debt:
-------------------------------------------------------------------
Ratings Applicable to Applicable Applicable Applicable
Index Debt Percentage Percentage Percentage
(S&P/Moody's) Facility Fee LIBOR Utilization
Borrowing Fee
-------------------------------------------------------------------
-------------------------------------------------------------------
Category 1 .070% .280% .100%
A/A2 or higher
-------------------------------------------------------------------
-------------------------------------------------------------------
Category 2 .080% .320% .100%
A-/A3
-------------------------------------------------------------------
-------------------------------------------------------------------
Category 3 .100% .525% .125%
BBB+/Baa1
-------------------------------------------------------------------
-------------------------------------------------------------------
Category 4 .125% .625% .250%
BBB/Baa2
-------------------------------------------------------------------
-------------------------------------------------------------------
Category 5 .150% .850% .250%
lower than or equal to
BBB-/Baa3
-------------------------------------------------------------------
For purposes of the foregoing, (i) if either S&P or
Moody's shall not have
in effect a rating for
the Index Debt, then
the Term-Out
Applicable Percentage
shall be based on the
other rating agency's
rating; (ii) if both
S&P and Moody's shall
not have in
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effect a
rating for the Index
Debt (other than by
reason of the
circumstances referred
to in the last
sentence of this
definition) and (I)
the CP Rating is A2/P2
or higher, then the
Term-Out Applicable
Percentage shall be
based on the lower of
Category 3 and the
Category corresponding
to the rating for
Index Debt most
recently available,
(II) the CP Rating is
A3/P3, then the
Term-Out Applicable
Percentage shall be
based on Category 5
or (III) if (x) S&P
has a CP Rating of B
or below, (y) Moody's
has a CP Rating of Not
Prime, or (z) either
S&P or Moody's shall
not have in effect a
CP Rating, then the
Term-Out Applicable
Percentage shall be
based on Category 5;
(iii) if the ratings
established by S&P and
Moody's for the Index
Debt shall fall within
different Categories,
then (A) if both such
ratings fall within
adjacent Categories,
the Term-Out
Applicable Percentage
shall be based on the
higher of the two
ratings and (B) if
both such ratings fall
within non-adjacent
Categories, the
Term-Out Applicable
Percentage shall be
based on the Category
immediately above the
lower of the two
ratings; and (iv) if
the ratings
established by S&P and
Moody's for the Index
Debt shall be changed
(other than as a
result of a
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change in
the rating system of
S&P or Moody's), such
change shall be
effective as of the
date on which it is
first announced by the
applicable rating
agency. Each change
in the Term-Out
Applicable Percentage
shall apply during the
period commencing on
the effective date of
such change and ending
on the date
immediately preceding
the effective date of
the next such change.
If the rating system
of S&P or Moody's
shall change, or if
either such rating
agency shall cease to
be in the business of
rating corporate debt
obligations, the
Borrower and the Banks
shall negotiate in
good faith to amend
this definition to
reflect such changed
rating system or the
unavailability of
ratings from such
rating agency and,
pending the
effectiveness of any
such amendment, the
Term-Out Applicable
Percentage shall be
determined by
reference to the
rating most recently
in effect prior to
such change or
cessation. For
purposes of this
definition, a
reference to the
"lower" of two
Categories shall mean
the Category
designated by the
highest integer
(Category 5 being the
lowest Category).
(h) Adding in the appropriate alphabetical order the
definition of "Utilization Fee" which shall read in its entirety as
follows:
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"Utilization Fee" shall have the meaning assigned to
such term in Section 2.07(b).
SECTION 7. Article 2 of the Credit Agreement is hereby
amended as follows:
(a) Section 2.07(c) shall become Section 2.07(d).
(b) Section 2.07(b) shall become Section 2.07(c) and the
reference therein to "September 17, 1997" is deleted and substituted in
lieu thereof shall be a reference to "September 28, 1999".
(c) A new Section 2.07(b) shall be inserted after Section
2.07(a) and shall read as follows:
(b) The Borrower agrees to pay to each Bank,
through the Administrative Agent, on each March 31, June 30,
September 30 and December 31 and on the Maturity Date or any
earlier date on which the Commitment of such Bank shall have
terminated and the outstanding Loans of such Bank have been
repaid in full, a utilization fee (a "Utilization Fee") at a
rate per annum equal to (i) from the date hereof through the
Termination Date, .100% on the aggregate amount of each Bank's
outstanding Loans for each day on which the outstanding
principal amount of Loans shall be greater than 33.33% of the
total Commitments and (ii) thereafter, the Term-Out Applicable
Percentage from time to time in effect (as determined in
accordance with Section 2.09(e)) on the aggregate amount of each
Bank's outstanding Loans. All Utilization Fees shall be
computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day
but excluding the last day).
(d) The text of Section 2.09(e) is deleted in its
entirety substituting in lieu thereof the following:
The Term-Out Applicable Percentage shall be
determined based upon the ratings by S&P or Moody's, or both,
applicable to the Index Debt.
(e) The proviso at the end of the third sentence in
Section 2.12(d) stating "; provided, however, that no Bank may agree to
increase its Commitment hereunder unless it shall have agreed to
ratably increase its Commitment under the Facility B Credit Agreement
(if the Facility B Credit Agreement is then in effect)" is deleted in
its entirety.
(f) A new Section 2.12(f) shall be inserted after Section
2.12(e) and shall read as follows:
(f) Notwithstanding the provisions of Section
2.12(d), during the period of October 21, 1999 to December 21,
1999, the Borrower may, by written
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<PAGE>
notice to the Administrative Agent, executed by the Borrower and one or
more banks or other financial institution (any such bank or other
financial institution referred to in this clause (e) being called a
"Prospective Bank"), which may include any Bank, cause the Commitments of
the Prospective Banks to be increased (or cause Commitments to be
extended by the Prospective Banks, as the case may be) in an amount for
each Prospective Bank set forth in such notice, provided, however, that
(a) the Total Commitment after giving effect to such increase plus the
aggregate amount of the commitments of the Banks to make loans under the
Facility B Credit Agreement (after giving effect to any outstanding
requests by the Borrower to increase such commitments) shall in no event
exceed $350,000,000, (b) the Total Commitment shall in no event exceed
$125,000,000, (c) each Prospective Bank, if not already a Bank hereunder,
shall be subject to the approval of the Administrative Agent (which
approval shall not be unreasonably withheld) and (d) each Prospective
Bank, if not already a Bank hereunder, shall become a party to this
Agreement on such date or dates as may be mutually satisfactory to such
Prospective Bank, the Borrower and the Administrative Agent, subject to
the Administrative Agent's receipt of a duly completed and executed
Accession Agreement in the form of Exhibit F hereto. Increases and new
Commitments created pursuant to this clause (e) shall become effective
(A) in the case of Prospective Banks already parties hereunder, on the
date specified in the notice delivered pursuant to this paragraph and (B)
in the case of Prospective Banks not already parties hereunder, on the
effective date of the Accession Agreement. Upon the effectiveness of any
Accession Agreement to which any Prospective Bank is a party, (i) such
Prospective Bank shall thereafter be deemed to be a party to this
Agreement and shall be entitled to all rights, benefits and privileges
accorded a Bank hereunder and subject to all obligations of a Bank
hereunder and (ii) Schedule 2.01 shall be deemed to have been amended to
reflect the Commitment of the additional Bank as provided in such
Accession Agreement. Upon the effectiveness of any increase in the
Commitment pursuant to this paragraph of a Bank already a party
hereunder, Schedule 2.01 shall be deemed to have been amended to reflect
the increased Commitment of such Bank. Notwithstanding the foregoing, no
increase in the Total Commitment (or in the Commitment of any Bank) shall
become effective under this paragraph unless, on the date of such
increase, the conditions set forth in paragraphs (b) and (c) of Section
4.01 shall be satisfied (with all references in such paragraphs to a
Borrowing being deemed to be references to such increase) and the
Administrative Agent shall have received a certificate to that effect
dated such date and executed by a Financial Officer of the Borrower.
Following any increase of a Bank's Commitment or any extension of a new
Commitment pursuant to this paragraph, any Revolving Credit Loans
outstanding prior to the effectiveness of such increase or extension
shall continue outstanding until the ends of the respective interests
periods applicable thereto, and shall then be repaid or refinanced with
new Revolving Credit Loans made pursuant to Sections 2.01 and 2.05.
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(f) A new Section 2.23 (i) shall be inserted after
Section 2.23(h) and shall read as follows:
(i) Notwithstanding anything to the contrary
contained herein, any Bank (a "Granting Bank") may grant to a
special purpose funding vehicle (an "SPC"), identified as such
in writing from time to time by the Granting Bank to the
Administrative Agent and the Borrower, the option to provide to
the Borrower all or any part of any Loan that such Granting Bank
would otherwise be obligated to make to the Borrower pursuant to
this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if
an SPC elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the Granting Bank shall be
obligated to make such Loan pursuant to the terms hereof. The
making of a Loan by an SPC hereunder shall utilize the
Commitment of the Granting Bank to the same extent, and as if,
such Loan were made by such Granting Bank. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability
for which shall remain with the Granting Bank). In furtherance
of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment
in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join
any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States or
any State thereof. In addition, notwithstanding anything to the
contrary contained in this paragraph, any SPC may (i) with
notice to, but without the prior written consent of, the
Borrower and the Administrative Agent and without paying any
processing fee therefor, assign all or a portion of its
interests in any Loans to the Granting Bank or to any financial
institution providing liquidity and/or credit support to or for
the account of such SPC to support the funding or maintenance of
Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans (A) to any rating agency,
commercial paper dealer or provider of any surety undertaking,
guarantee or credit or liquidity enhancement to such SPC that,
in each case shall have been advised of the confidentiality of
such information and the restrictions contained in Section 10.11
on its disclosure to third parties, or (B) to other Persons as
provided, and subject to the limitations set forth, in Section
10.11. The SPC shall be entitled to the benefits of Sections
2.15 and 2.22 to the same extent, and subject to the same
limitations, as if it were a Bank and had acquired its interest
by assignment pursuant to paragraph (b) of this Section. This
paragraph may not be amended without the written consent of any
SPC which shall have made a Loan hereunder for as long as such
Loan shall be outstanding.
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<PAGE>
SECTION 8. Article 3 of the Credit Agreement is hereby
amended as follows:
(a) Each of Sections 3.05(a) and 3.06 of the Credit
Agreement is amended by deleting each reference therein to (i) "1996"
and substituting in lieu thereof a reference to "1998" and (ii) "1997"
and substituting in lieu thereof a reference to "1999".
(b) A new Section 3.20 shall be inserted after Section
3.19 and shall read as follows:
SECTION 3.20. Year 2000. Any reprogramming
required to permit the proper functioning, in and following the
year 2000, of (i) the material computer systems of the Borrower
and the Subsidiaries and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others
or with which the Borrower's or such Subsidiary's systems
interface) that is material to the business of the Borrower and
the Subsidiaries, taken as a whole, and the testing of all such
systems and equipment, as so reprogrammed, has been completed.
The cost to the Borrower and each of its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Borrower and each of the
Subsidiaries (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will
not, in the aggregate, result in an Event of Default or a
material adverse change in the business, assets, condition
(financial or otherwise) or results of operations of the
Borrower and the Subsidiaries taken as a whole. The computer
and management information systems of the Borrower and each of
the Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower and each of the Subsidiaries
to conduct its business without the occurrence of any such
material adverse change.
SECTION 9. Article 4 of the Credit Agreement is hereby
amended as follows:
(a) Section 4.01 (e) shall become Section 4.01 (f).
(b) A new Section 4.01 (e) shall be inserted after Section
4.01 (d) and shall read as follows:
(e) Corporate Documents. The Administrative Agent
shall have received a certificate of the Secretary of each of
the Borrower and each Guarantor, each dated as of or before the
date of the proposed borrowing certifying as to attached
resolutions of the Board of Directors of the Borrower and the
Guarantors approving and authorizing the transactions
contemplated under, and the performance by the Borrower and the
Guarantors of, this 1999
99
<PAGE>
Amendment and Restatement and ratifying
the execution and delivery of this 1999 Amendment and
Restatement.
SECTION 10. Schedule 2.01 ("Commitments") to the Credit
Agreement shall be deleted in its entirety, and Schedule 2.01, attached
hereto, shall be substituted in lieu thereof as Schedule 2.01 to the
Credit Agreement, to the effect that the aggregate Commitments of the
Banks under the Credit Agreement, as amended hereby, shall be equal to
$125,000,000, and the Commitment of each Bank after the effectiveness
of this 1999 Amendment and Restatement shall be the amount set forth
beside such Bank's name on such Schedule 2.01 to the Credit Agreement,
as amended hereby, as such amount may be adjusted from time to time
pursuant to the terms of the Credit Agreement.
SECTION 11. A new Exhibit F ("Form of Accession
Agreement") to the Credit Agreement is hereby attached to the Credit
Agreement, and shall consist of Exhibit F attached hereto.
SECTION 12. By its execution and delivery hereof, the
Borrower and the Guarantors represent and warrant:
(a) Before and after giving effect to the amendments
provided for herein, (i) the representations and warranties contained
in Article III of the Credit Agreement, as amended by this 1999
Amendment and Restatement, are true and correct on and as of the date
hereof and the 1999 Restatement Effective Date as though made by the
Borrower and the Guarantors on and as of each such date, and (ii) no
Event of Default (or event that with the passage of time or notice or
both would become an Event of Default) has occurred and is continuing
or would result from the execution and delivery of this 1999 Amendment
and Restatement; and
(b) the Borrower and the Guarantors have all requisite
corporate power and authority to execute, deliver and perform this 1999
Amendment and Restatement; this 1999 Amendment and Restatement has been
authorized by proper corporate proceedings and constitutes the legal,
valid and binding obligation of the Borrower and the Guarantors
enforceable in accordance with its terms.
SECTION 13. This 1999 Amendment and Restatement shall
become effective as of October 21, 1999 (the "1999 Restatement
Effective Date"); provided, that, (a) the Administrative Agent shall
have received by such date:
(i) counterparts of this 1999 Amendment and Restatement
duly and validly executed by the Borrower and the Required Banks;
(ii) an Officer's Certificate in form and substance
satisfactory to the Administrative Agent and counsel to the
Administrative Agent (certifying as to attached resolutions of
the Board of Directors of the Borrower and the Guarantors
approving and authorizing the transactions contemplated under
this 1999
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<PAGE>
Amendment and Restatement and the execution, delivery
and performance by the Borrower and the Guarantors of this 1999
Amendment and Restatement);
(iii) an opinion of Borrower's counsel in form and
substance reasonably satisfactory to the Administrative Agent
and counsel to the Administrative Agent;
(iv) such other evidence of the corporate power and
authority of the Borrower and the Guarantors to execute, deliver
and perform this 1999 Amendment and Restatement as the
Administrative Agent may reasonably request; and
(v) all Facility Fees and interest accrued under the
Credit Agreement prior to the 1999 Restatement Effective Date;
and
(b) all Loans outstanding under the Credit Agreement prior
to the effectiveness of this 1999 Amendment and Restatement shall have
been repaid, together with accrued interest.
SECTION 14. On the 1999 Restatement Effective Date, the
Credit Agreement, as amended hereby, shall be deemed incorporated
herein by reference and restated in its entirety.
SECTION 15. The Borrower agrees to pay on demand all
costs and expenses of the Administrative Agent in connection with the
preparation, execution and delivery of this 1999 Amendment and
Restatement (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with
respect thereto).
SECTION 16. THIS 1999 AMENDMENT AND RESTATEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK AND SHALL BE BINDING UPON THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE BANKS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
SECTION 17. This 1999 Amendment and Restatement may be
executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. Delivery of an executed
counterpart of a signature page of this 1999 Amendment and Restatement
by telecopy shall be as effective as delivery of a manually executed
counterpart of this 1999 Amendment and Restatement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their
officers thereunto duly authorized, have executed this 1999 Amendment
and Restatement as of the day and year first above written.
DENTSPLY INTERNATIONAL INC.,
by____________________________
Name:
Title:
by____________________________
Name:
Title:
CERAMCO INC.,
by____________________________
Name:
Title:
CERAMCO MANUFACTURING CO.,
by____________________________
Name:
Title:
EUREKA X-RAY TUBE CORP.,
by____________________________
Name:
Title:
102
<PAGE>
MIDWEST DENTAL PRODUCTS
CORPORATION,
by____________________________
Name:
Title:
NEW IMAGE INDUSTRIES, INC.,
by____________________________
Name:
Title:
RANSOM & RANDOLPH COMPANY,
by____________________________
Name:
Title:
TULSA DENTAL PRODUCTS INC.,
by____________________________
Name:
Title:
DENTSPLY RESEARCH & DEVELOPMENT
CORP.,
by____________________________
Name:
Title:
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<PAGE>
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by____________________________
Name:
Title:
Address: 270 Park Avenue,
48th Floor
New York, NY 10017
Telecopier No.: 212-270-3279
ABN AMRO BANK N.V., individually
and as Documentation Agent,
by____________________________
Name:
Title:
by____________________________
Name:
Title:
Address: One PPG Place,
Suite 2950
Pittsburgh, PA 15222
Telecopier No.: 412-566-2266
104
<PAGE>
MELLON BANK, N.A.,
by____________________________
Name:
Title:
Address: 1735 Market St.,
7th Floor
Philadelphia, PA 19103
Telecopier No.: 215-553-4899
ALLFIRST BANK,
by____________________________
Name:
Title:
Address: 96 S. George St.
Box 1867
York, PA 17405
Telecopier: 717-771-4914
HARRIS TRUST AND SAVINGS BANK,
by____________________________
Name:
Title:
Address: 111 West Monroe-10W
Chicago, IL 60690
Telecopier No.: 312-461-5225
105
<PAGE>
FIRST UNION,
by____________________________
Name:
Title:
Address: 600 Penn St.
Redding, PA 19603
Telecopier No.: 610-655-1514
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY,
by____________________________
Name:
Title:
Address: 1251 Avenue of the Americas
New York, NY 10020
Telecopier No.: 212-782-6440
HSBC BANK, USA,
by____________________________
Name:
Title:
Address: 140 Broadway, 4th Floor
New York, NY 10005-1196
Telecopier No.: 212-658-5109
106
<PAGE>
WACHOVIA BANK, N.A.,
by____________________________
Name:
Title:
Address: 191 Peachtreet St., NE
Atlanta, GA 30303
Telecopier No.: 404-332-6898
107
<PAGE>
Schedule 2.01
Commitments
Facility A
- ----------------------------------------------------------------------
Name Commitment Amount
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
The Chase Manhattan Bank $ 18,800,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
ABN AMRO Bank N.V. $ 16,600,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Mellon Bank N.A. $ 14,600,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Allfirst Bank $ 14,600,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Harris Trust and Savings Bank $ 14,600,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
First Union $ 12,500,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Bank of Tokyo-Mitsubishi Trust Company $ 12,500,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
HSBC Bank, USA $ 10,400,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Wachovia Bank, N.A. $ 10,400,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
TOTAL $ 125,000,000
- ----------------------------------------------------------------------
108
<PAGE>
Exhibit F
[Form of]
ACCESSION AGREEMENT
AGREEMENT dated as of , among [NAME OF
ACCEDING BANK] (the "Acceding Bank"), DENTSPLY
INTERNATIONAL INC., a Delaware corporation (the
"Borrower"), and THE CHASE MANHATTAN BANK, a New York
banking corporation ("Chase"), as administrative agent (the
"Administrative Agent") for the Banks (as defined in the
Credit Agreement referred to below).
A. Reference is made to the Amended and Restated 364-Day
Competitive Advance, Revolving Credit and Guaranty Agreement dated as
of October 21, 1999, (as amended or modified from time to time, the
"Credit Agreement"), among the Borrower, the guarantors named therein,
the banks named therein (individually a "Bank" and collectively the
"Banks"), the Administrative Agent and ABN AMRO BANK N.V., as
Documentation Agent.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit
Agreement.
C. The Borrower has invited, and the Acceding Bank desires, to
become a party to the Credit Agreement and to assume the obligations of
a Bank thereunder. The Acceding Bank is entering into this Agreement
in accordance with the provisions of the Credit Agreement in order to
become a Bank thereunder.
Accordingly, the Acceding Bank, the Borrower and the
Administrative Agent agree as follows:
SECTION 1. Accession to the Credit Agreement. (a) The Acceding
Bank, as of the Effective Date, hereby accedes to the Credit Agreement
and shall thereafter have the rights and obligations of a Bank
thereunder with the same force and effect as if originally named
therein as a Bank.
(b) The Commitment of the Acceding Bank shall equal the amount
set forth opposite its signature hereto.
SECTION 2. Representations and Warranties, Agreements of
Acceding Bank, etc. The Acceding Bank (a) represents and warrants that
it is legally authorized to enter into this Agreement; (b) confirms
that it has received a copy of the Credit Agreement, together with
copies of the most recent financial statements delivered pursuant to
Section 5.05 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this
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<PAGE>
Agreement; (c) confirms that it will independently and without reliance
upon the Administrative Agent or any 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 the Credit Agreement;
(d) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Administrative Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; and (e) agrees that it will
perform, in accordance with the terms of the Credit Agreement, all the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Bank.
SECTION 3. Effectiveness. (a) This Agreement shall become
effective on (the "Effective Date"), subject to the
Administrative Agent's receipt of (i) counterparts of this Agreement
duly executed on behalf of the Acceding Bank and the Borrower and
(ii) if the Acceding Bank is organized under the laws of a jurisdiction
outside the United States, the forms specified in Section 2.22(a) of
the Credit Agreement duly completed and executed by the Acceding Bank.
(b) Upon the effectiveness of this Agreement, the Administrative
Agent shall (i) record the information contained herein in the
Register and (ii) give prompt notice thereof to the Banks.
SECTION 4. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but
all of which, when taken together, shall constitute but one instrument.
SECTION 5. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. Severability. In case any one or more of the
provisions contained in this Agreement should be held invalid, illegal
or unenforceable in any respect, none of the parties hereto shall be
required to comply with such provision for so long as such provision is
held to be invalid, illegal or unenforceable, but the validity,
legality and enforceability of the remaining provisions contained
herein and in the Credit Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 10.01 of the
Credit Agreement. All communications and notices hereunder to the
Acceding Bank shall be given to it at the address set forth under its
signature hereto, which information, together with the amount of the
Acceding Bank's Commitment, supplements Schedule 2.01 to the Credit
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Acceding Bank, the Borrower and the
Administrative Agent have duly executed this Agreement as of the day
and year first above written.
Commitment [NAME OF ACCEDING BANK],
$
by______________________________
Name:
Title:
Address:
DENTSPLY INTERNATIONAL INC.,
by______________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by______________________________
Name:
Title:
111
ISSUING AND PAYING AGENCY AGREEMENT
This Agreement, dated as of August 12, 1999, is by and between
DENTSPLY International Inc. (the "Issuer") and The Chase Manhattan Bank
("Chase").
1. APPOINTMENT AND ACCEPTANCE
The Issuer hereby appoints Chase as its issuing and paying agent
in connection with the issuance and payment of certain short-term
promissory notes of the Issuer (the "Notes"), as further described
herein, and Chase agrees to act as such agent upon the terms and
conditions contained in this Agreement.
2. COMMERCIAL PAPER PROGRAMS
The Issuer may establish one or more commercial paper programs
under this Agreement by delivering to Chase a completed program
schedule (the "Program Schedule"), with respect to each such program.
Chase has given the Issuer a copy of the current form of Program
Schedule and the Issuer shall complete and return its first Program
Schedule to Chase prior to or simultaneously with the execution of this
Agreement. In the event that any of the information provided in, or
attached to, a Program Schedule shall change, the Issuer shall promptly
inform Chase of such change in writing.
3. NOTES
All Notes issued by the Issuer under this Agreement shall be
short-term promissory notes, exempt from the registration requirements
of the Securities Act of 1933, as amended, as indicated on the Program
Schedules, and from applicable state securities laws. The Notes may be
placed by dealers (the "Dealers") pursuant to Section 4 hereof. Notes
shall be issued in either certificated or book-entry form.
4. AUTHORIZED REPRESENTATIVES
The Issuer shall deliver to Chase a duly adopted corporate
resolution from the Issuer's Board of Directors (or other governing
body) authorizing the issuance of Notes under each program established
pursuant to this Agreement and a certificate of incumbency, with
specimen signatures attached, of those officers, employees and agents
of the Issuer authorized to take certain actions with respect to the
Notes as provided in this Agreement (each such person is hereinafter
referred to as an "Authorized Representative"). Until Chase receives
any subsequent incumbency certificates of the Issuer, Chase shall be
entitled to rely on the last incumbency certificate delivered to it for
the purpose of determining the Authorized Representatives. The Issuer
represents and warrants that each Authorized Representative may appoint
other officers, employees and agents of the Issuer (the "Delegates"),
including without limitation any Dealers, to issue instructions to
Chase under this Agreement, and take other actions on the Issuer's
behalf hereunder, provided that notice of the appointment of each
Delegate is delivered to Chase in writing. Each such appointment shall
remain in effect unless and until revoked by the Issuer in a written
notice to Chase.
5. CERTIFICATED NOTES
If and when the Issuer intends to issue certificated notes
("Certificated Notes"), the Issuer and Chase shall agree upon the form
of such Notes. Thereafter, the Issuer shall from time to time deliver
to Chase adequate supplies of Certificated Notes which will be in
bearer
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<PAGE>
form, serially numbered, and shall be executed by the manual or
facsimile signature of an Authorized Representative. Chase will
acknowledge receipt of any supply of Certificated Notes received from
the Issuer, noting any exceptions to the shipping manifest or
transmittal letter (if any), and will hold the Certificated Notes in
safekeeping for the Issuer in accordance with Chase's customary
practices. Chase shall not have any liability to the Issuer to
determine by whom or by what means a facsimile signature may have been
affixed on Certificated Notes, or to determine whether any facsimile or
manual signature is genuine, if such facsimile or manual signature
resembles the specimen signature attached to the Issuer's certificate
of incumbency with respect to such Authorized Representative. Any
Certificated Note bearing the manual or facsimile signature of a person
who is an Authorized Representative on the date such signature was
affixed shall bind the Issuer after completion thereof by Chase,
notwithstanding that such person shall have ceased to hold his or her
office on the date such Note is countersigned or delivered by Chase.
6. BOOK-ENTRY NOTES
The Issuer's book-entry notes ("Book-Entry Notes") shall not be
issued in physical form, but their aggregate face amount shall be
represented by a master note (the "Master Note") in the form of Exhibit
A executed by the Issuer pursuant to the book-entry commercial paper
program of The Depository Trust Company ("DTC"). Chase shall maintain
the Master Note in safekeeping, in accordance with its customary
practices, on behalf of Cede & Co., the registered owner thereof and
nominee of DTC. As long as Cede & Co. is the registered owner of the
Master Note, the beneficial ownership interest therein shall be shown
on, and the transfer of ownership thereof shall be effected through,
entries on the books maintained by DTC and the books of its direct and
indirect participants. The Master Note and the Book-Entry Notes shall
be subject to DTC's rules and procedures, as amended from time to
time. Chase shall not be liable or responsible for sending transaction
statements of any kind to DTC's participants or the beneficial owners
of the Book-Entry Notes, or for maintaining, supervising or reviewing
the records of DTC or its participants with respect to such Notes. In
connection with DTC's program, the Issuer understands that as one of
the conditions of its participation therein, it shall be necessary for
the Issuer and Chase to enter into a Letter of Representations, in the
form of Exhibit B hereto, and for DTC to receive and accept such Letter
of Representations. In accordance with DTC's program, Chase shall
obtain from the CUSIP Service Bureau a written list of CUSIP numbers
for Issuer's Book-Entry Notes, and Chase shall deliver such list to
DTC. The CUSIP Service Bureau shall bill the Issuer directly for the
fee or fees payable for the list of CUSIP numbers for the Issuer's
Book-Entry Notes.
7. ISSUANCE INSTRUCTIONS TO CHASE; PURCHASE PAYMENTS
The Issuer understands that all instructions under this Agreement
are to be directed to Chase's Commercial Paper Operations Department.
Chase shall provide the Issuer, or, if applicable, the Issuer's
Dealers, with access to Chase's Money Market Issuance System or other
electronic means (collectively, the "System") in order that Chase may
receive electronic instructions for the issuance of Notes. Electronic
instructions must be transmitted in accordance with the procedures
furnished by Chase to the Issuer or its Dealers in connection with the
System. These transmissions shall be the equivalent to the giving of a
duly authorized written and signed instruction which Chase may act upon
without liability. In the event that the System is inoperable at any
time, an Authorized Representative or a Delegate may deliver written,
telephone or facsimile instructions to Chase, which instructions shall
be verified in accordance with any security procedures agreed upon by
the parties. Chase shall incur no liability to the Issuer in acting
upon instructions believed by Chase in good faith to have been given by
an Authorized Representative or a Delegate. In the event
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<PAGE>
that a discrepancy exists between a telephonic instruction and a
written confirmation, the telephonic instruction will be deemed the
controlling and proper instruction. Chase may electronically record
any conversations made pursuant to this Agreement, and the Issuer
hereby consents to such recordings. All issuance instructions
regarding the Notes must be received by 1:00 P.M. New York time in
order for the Notes to be issued or delivered on the same day.
(a) Issuance and Purchase of Book-Entry Notes.
Upon receipt of issuance instructions from the Issuer or
its Dealers with respect to Book-Entry Notes, Chase shall
transmit such instructions to DTC and direct DTC to cause
appropriate entries of the Book-Entry Notes to be made in
accordance with DTC's applicable rules, regulations and
procedures for book-entry commercial paper programs. Chase
shall assign CUSIP numbers to the Issuer's Book-Entry Notes
to identify the Issuer's aggregate principal amount of
outstanding Book-Entry Notes in DTC's system, together with
the aggregate unpaid interest (if any) on such Notes.
Promptly following DTC's established settlement time on
each issuance date, Chase shall access DTC's system to
verify whether settlement has occurred with respect to the
Issuer's Book-Entry Notes. Prior to the close of business
on such business day, Chase shall deposit immediately
available funds in the amount of the proceeds due the
Issuer (if any) to the Issuer's account at Chase and
designated in the applicable Program Schedule (the
"Account"), provided that Chase has received DTC's
confirmation that the Book-Entry Notes have settled in
accordance with DTC's applicable rules, regulations and
procedures. Chase shall have no liability to the Issuer
whatsoever if any DTC participant purchasing a Book-Entry
Note fails to settle or delays in settling its balance with
DTC or if DTC fails to perform in any respect.
(b) Issuance and Purchase of Certificated Notes. Upon
receipt of issuance instructions with respect to
Certificated Notes, Chase shall: (a) complete each
Certificated Note as to principal amount, date of issue,
maturity date, place of payment, and rate or amount of
interest (if such Note is interest bearing) in accordance
with such instructions; (b) countersign each Certificated
Note; and (c) deliver each Certificated Note in accordance
with the Issuer's instructions, except as otherwise set
forth below. Whenever Chase is instructed to deliver any
Certificated Note by mail, Chase shall strike from the
Certificated Note the word "Bearer," insert as payee the
name of the person so designated by the Issuer and effect
delivery by mail to such payee or to such other person as
is specified in such instructions to receive the
Certificated Note. The Issuer understands that, in
accordance with the custom prevailing in the commercial
paper market, delivery of Certificated Notes shall be made
before the actual receipt of payment for such Notes in
immediately available funds, even if the Issuer instructs
Chase to deliver a Certificated Note against payment.
Therefore, once Chase has delivered a Certificated Note to
the designated recipient, the Issuer shall bear the risk
that such recipient may fail to remit payment of such Note
or return such Note to Chase. Delivery of Certificated
Notes shall be subject to the rules of the New York
Clearing House in effect at the time of such delivery.
Funds received in payment of Certificated Notes shall be
credited to the Account.
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8. USE OF SALES PROCEEDS IN ADVANCE OF PAYMENT
Chase shall not be obligated to credit the Issuer's Account
unless and until payment of the purchase price of each Note is received
by Chase. From time to time, Chase, in its sole discretion, may permit
the Issuer to have use of funds payable with respect to a Note prior to
Chase's receipt of the sales proceeds of such Note. If Chase makes a
deposit, payment or transfer of funds on behalf of the Issuer before
Chase receives payment for any Note, such deposit, payment or transfer
of funds shall represent an advance by Chase to the Issuer to be repaid
promptly, and in any event on the same day as it is made, from the
proceeds of the sale of such Note, or by the Issuer if such proceeds
are not received by Chase.
9. PAYMENT OF MATURED NOTES
On any day when a Note matures or is prepaid, the Issuer shall
transmit, or cause to be transmitted, to the Account, prior to 2:30
P.M. New York time on the same day, an amount of immediately available
funds sufficient to pay the aggregate principal amount of such Note and
any applicable interest due. Chase shall pay the interest (if any) and
principal on a Book-Entry Note to DTC in immediately available funds,
which payment shall be by net settlement of Chase's account at DTC.
Chase shall pay Certificated Notes upon presentment. Chase shall have
no obligation under the Agreement to make any payment for which there
is not sufficient, available and collected funds in the Account, and
Chase may, without liability to the Issuer, refuse to pay any Note that
would result in an overdraft to the Account.
10. OVERDRAFTS
(a) Intraday overdrafts with respect to each Account
shall be subject to Chase's policies as in effect from time
to time.
(b) An overdraft will exist in an Account if Chase, in
its sole discretion, (i) permits an advance to be made
pursuant to Section 8 and, notwithstanding the provisions
of Section 8, such advance is not repaid in full on the
same day as it is made, or (ii) pays a Note pursuant to
Section 9 in excess of the available collected balance in
such Account. Overdrafts shall be subject to Chase's
established banking practices, including, without
limitation, the imposition of interest, funds usage charges
and administrative fees. The Issuer shall repay any such
overdraft, fees and charges no later than the next business
day, together with interest on the overdraft at the rate
established by Chase for the Account, computed from and
including the date of the overdraft to the date of
repayment.
11. NO PRIOR COURSE OF DEALING
No prior action or course of dealing on the part of Chase with
respect to advances of the purchase price or payments of matured Notes
shall give rise to any claim or cause of action by the Issuer against
Chase in the event that Chase refuses to pay or settle any Notes for
which the Issuer has not timely provided funds as required by this
Agreement.
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12. RETURN OF CERTIFICATED NOTES
Chase will in due course cancel any Certificated Note presented
for payment and return such Note to the Issuer. Chase shall also
cancel and return to the Issuer any spoiled or voided Certificated
Notes. Promptly upon written request of the Issuer or at the
termination of this Agreement, Chase shall destroy all blank, unissued
Certificated Notes in its possession and furnish a certificate to the
Issuer certifying such actions.
13. INFORMATION FURNISHED BY CHASE
Upon the reasonable request of the Issuer, Chase shall promptly
provide the Issuer with information with respect to any Note issued and
paid hereunder, provided, that the Issuer delivers such request in
writing and, to the extent applicable, includes the serial number or
note number, principal amount, payee, date of issue, maturity date,
amount of interest (if any) and place of payment of such Note.
14. REPRESENTATIONS AND WARRANTIES
The Issuer represents and warrants that: (i) it has the right,
capacity and authority to enter into this Agreement; and (ii) it will
comply with all of its obligations and duties under this Agreement.
The Issuer further represents and agrees that each Note issued and
distributed upon its instruction pursuant to this Agreement shall
constitute the Issuer's representation and warranty to Chase that such
Note is a legal, valid and binding obligation of the Issuer, and that
such Note is being issued in a transaction which is exempt from
registration under the Securities Act of 1933, as amended, and any
applicable state securities law.
15. DISCLAIMERS
Neither Chase nor its directors, officers, employees or agents
shall be liable for any act or omission under this Agreement except in
the case of gross negligence or willful misconduct. IN NO EVENT SHALL
CHASE BE LIABLE FOR SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE
OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOST PROFITS),
EVEN IF CHASE HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE
AND REGARDLESS OF THE FORM OF ACTION. In no event shall Chase be
considered negligent in consequence of complying with DTC's rules,
regulations and procedures. The duties and obligations of Chase, its
directors, officers, employees or agents shall be determined by the
express provisions of this Agreement and they shall not be liable
except for the performance of such duties and obligations as are
specifically set forth herein and no implied covenants shall be read
into this Agreement against them. Neither Chase nor its directors,
officers, employees or agents shall be required to ascertain whether
any issuance or sale of any Notes (or any amendment or termination of
this Agreement) has been duly authorized or is in compliance with any
other agreement to which the Issuer is a party (whether or not Chase is
also a party to such agreement).
16. INDEMNIFICATION
The Issuer agrees to indemnify and hold harmless Chase, its
directors, officers, employees and agents from and against any and all
liabilities, claims, losses, damages, penalties, costs and expenses
(including attorneys' fees and disbursements) suffered or incurred by
or asserted or assessed against Chase or any of them arising out of
Chase or any of them acting as the Issuer's agent under this Agreement,
except for such liability, claim,
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loss, damage, penalty, cost or expense resulting from the gross
negligence or willful misconduct of Chase, its directors, officers,
employees or agents. This indemnity will survive the termination of
this Agreement.
17. OPINION OF COUNSEL
The Issuer shall deliver to Chase all documents it may reasonably
request relating to the existence of the Issuer and authority of the
Issuer for this Agreement, including, without limitation, an opinion of
counsel, substantially in the form of Exhibit C hereto.
18. NOTICES
All notices, confirmations and other communications hereunder
shall (except to the extent otherwise expressly provided) be in writing
and shall be sent by first-class mail, postage prepaid, by telecopier
or by hand, addressed as follows, or to such other address as the party
receiving such notice shall have previously specified to the party
sending such notice:
If to the Issuer: DENTSPLY International Inc.
570 West College Avenue
York, Pennsylvania 17405
Attention: Treasurer
Telephone: 717-849-4262
Facsimile: 717-849-4759
If to Chase concerning the daily issuance and redemption of Notes:
Attention: Commercial Paper Operations
55 Water Street, 2nd Floor
New York NY 10041-2413
Telephone: (212) 638-0441
Facsimile: (212) 638-7881
All other: Attention: Commercial Paper Service Delivery Unit
450 West 33rd Street, 15th Floor
New York NY 10001-2697
Telephone: (212) 946-3108
Facsimile: (212) 946-8181
19. COMPENSATION
The Issuer shall pay compensation for services pursuant to this
Agreement in accordance with the pricing schedules furnished by Chase
to the Issuer from time to time and upon such payment terms as the
parties shall determine. The Issuer shall also reimburse Chase for any
fees and charges imposed by DTC with respect to services provided in
connection with the Book-Entry Notes.
20. BENEFIT OF AGREEMENT
This Agreement is solely for the benefit of the parties hereto
and no other person shall acquire or have any right under or by virtue
hereof.
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21. TERMINATION
This Agreement may be terminated at any time by either party by
written notice to the other, but such termination shall not affect the
respective liabilities of the parties hereunder arising prior to such
termination.
22. FORCE MAJEURE
In no event shall Chase be liable for any failure or delay in the
performance of its obligations hereunder because of circumstances
beyond Chase's control, including, but not limited to, acts of God,
flood, war (whether declared or undeclared), terrorism, fire, riot,
strikes or work stoppages for any reason, embargo, government action,
including any laws, ordinances, regulations or the like which restrict
or prohibit the providing of the services contemplated by this
Agreement, inability to obtain material, equipment, or communications
or computer facilities, or the failure of equipment or interruption of
communications or computer facilities, and other causes beyond Chase's
control whether or not of the same class or kind as specifically named
above.
23. ENTIRE AGREEMENT
This Agreement, together with the exhibits attached hereto,
constitutes the entire agreement between Chase and the Issuer with
respect to the subject matter hereof and supersedes in all respects all
prior proposals, negotiations, communications, discussions and
agreements between the parties concerning the subject matter of this
Agreement.
24. WAIVERS AND AMENDMENTS
No failure or delay on the part of any party in exercising any
power or right under this Agreement shall operate as a waiver, nor does
any single or partial exercise of any power or right preclude any other
or further exercise, or the exercise of any other power or right. Any
such waiver shall be effective only in the specific instance and for
the purpose for which it is given. No amendment, modification or
waiver of any provision of this Agreement shall be effective unless the
same shall be in writing and signed by the Issuer and Chase.
25. BUSINESS DAY
Whenever any payment to be made hereunder shall be due on a day
which is not a business day for Chase, then such payment shall be made
on Chase's next succeeding business day.
26. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall be deemed an original and such counterparts together shall
constitute but one instrument.
27. HEADINGS
The headings in this Agreement are for purposes of reference only
and shall not in any way limit or otherwise affect the meaning or
interpretation of any of the terms of this Agreement.
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28. GOVERNING LAW
This Agreement and the Notes shall be governed by and construed
in accordance with the internal laws of the State of New York, without
regard to the conflict of laws provisions thereof.
29. JURISDICTION AND VENUE
Each party hereby irrevocably and unconditionally submits to the
jurisdiction of the United States District Court for the Southern
District of New York and any New York State court located in the
Borough of Manhattan in New York City and of any appellate court from
any thereof for the purposes of any legal suit, action or proceeding
arising out of or relating to this Agreement (a "Proceeding"). Each
party hereby irrevocably agrees that all claims in respect of any
Proceeding may be heard and determined in such Federal or New York
State court and irrevocably waives, to the fullest extent it may
effectively do so, any objection it may now or hereafter have to the
laying of venue of any Proceeding in any of the aforementioned courts
and the defense of an inconvenient forum to the maintenance of any
Proceeding.
30. WAIVER OF TRIAL BY JURY
EACH PARTY HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
31. ACCOUNT CONDITIONS
Each Account shall be subject to Chase's account conditions, as
in effect from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on their behalf by duly authorized officers as of the
day and year first-above written.
THE CHASE MANHATTAN BANK DENTSPLY International Inc.
[Name of Issuer]
By: By:
Name: Name:
Title: Title:
Date: Date:
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COMMERCIAL PAPER DEALER AGREEMENT
between
DENTSPLY International Inc., as Issuer
and
Goldman, Sachs & Co., as Dealer
Concerning Notes to be issued pursuant to an Issuing and
Paying Agency Agreement dated as of August 12, 1999 between
the Issuer and The Chase Manhattan Bank, as Issuing and
Paying Agent
Dated as of
August 12, 1999
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COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings between the
Issuer and the Dealer, each named on the cover page hereof, in connection with
the issuance and sale by the Issuer of its short-term promissory notes (the
"Notes") through the Dealer.
Certain terms used in this Agreement are defined in Section 6 hereof.
The Addendum to this Agreement, and any Annexes or Exhibits described in
this Agreement or such Addendum, are hereby incorporated into this Agreement and
made fully a part hereof.
Section 1. Offers, Sales and Resales of Notes.
1.1 While (i) the Issuer has and shall have no obligation to sell the Notes
to the Dealer or to permit the Dealer to arrange any sale of the Notes for the
account of the Issuer, and (ii) the Dealer has and shall have no obligation to
purchase the Notes from the Issuer or to arrange any sale of the Notes for the
account of the Issuer, the parties hereto agree that in any case where the
Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the
Issuer, such Notes will be purchased or sold by the Dealer in reliance on the
representations, warranties, covenants and agreements of the Issuer contained
herein or made pursuant hereto and on the terms and conditions and in the manner
provided herein.
1.2 So long as this Agreement shall remain in effect, and in addition to
the limitations contained in Section 1.7 hereof, the Issuer shall not, without
the consent of the Dealer, offer, solicit or accept offers to purchase, or sell,
any Notes except in transactions with one or more dealers which may from time to
time after the date hereof become dealers with respect to the Notes by executing
with the Issuer one or more agreements which contain provisions substantially
identical to those contained in Section 1 of this Agreement, of which the Issuer
hereby undertakes to provide the Dealer prompt notice. In no event shall the
Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly
on its own behalf in transactions with persons other than broker-dealers as
specifically permitted in this Section 1.2.
1.3 The Notes shall be in a minimum denomination of $250,000 or integral
multiples of $1,000 in excess thereof, will bear such interest rates, if
interest bearing, or will be sold at such discount from their face amounts, as
shall be agreed upon by the Dealer and the Issuer, shall have a maturity not
exceeding 366 days from the date of issuance (exclusive of days of grace) and
shall not contain any provision for extension, renewal or automatic "rollover."
1.4 The authentication and issuance of, and payment for, the Notes
shall be effected in accordance with the Issuing and Paying Agency
Agreement, and the Notes shall be either individual physical certificates
or book-entry notes evidenced by a Master Note registered in the
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name of DTC or its nominee, in the form or forms annexed to the Issuing and
Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the terms of the purchase
of any Note by the Dealer or the sale of any Note arranged by the Dealer
(including, but not limited to, agreement with respect to the date of issue,
purchase price, principal amount, maturity and interest rate (in the case of
interest-bearing Notes) or discount thereof (in the case of Notes issued on a
discount basis), and appropriate compensation for the Dealer's services
hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be
issued and delivered in accordance with the terms of the Issuing and Paying
Agency Agreement and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer, to the Issuing and Paying Agent,
for the account of the Issuer. Except as otherwise agreed, in the event that the
Dealer is acting as an agent and a purchaser shall either fail to accept
delivery of or make payment for a Note on the date fixed for settlement, the
Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid
the Issuer for the Note, the Issuer will promptly return such funds to the
Dealer against its return of the Note to the Issuer, in the case of a
certificated Note, and upon notice of such failure in the case of a book-entry
Note. If such failure occurred for any reason other than default by the Dealer,
the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's
loss of the use of such funds for the period such funds were credited to the
Issuer's account.
1.6 The Dealer and the Issuer hereby establish and agree to observe the
following procedures in connection with offers, sales and subsequent resales or
other transfers of the Notes:
(a) Offers and sales of the Notes by or through the Dealer shall be
made only to: (i) investors reasonably believed by the Dealer to be
Qualified Institutional Buyers ("QIBs"), Institutional Accredited Investors
or Sophisticated Individual Accredited Investors and (ii) Non-bank
fiduciaries or agents that will be purchasing Notes for one or more
accounts, each of which is reasonably believed by the Dealer to be an
Institutional Accredited Investor or Sophisticated Individual Accredited
Investor.
(b) Resales and other transfers of the Notes by the holders thereof
shall be made only in accordance with the restrictions in the legend
described in clause (e) below.
(c) No general solicitation or general advertising shall be used in
connection with the offering of the Notes. Without limiting the generality
of the foregoing, without the prior written approval of the Dealer, the
Issuer shall not issue any press release or place or publish any
"tombstone" or other advertisement relating to the Notes.
(d) No sale of Notes to any one purchaser shall be for less than
$250,000 principal or face amount, and no Note shall be issued in a smaller
principal or face amount. If the purchaser is a Non-bank fiduciary acting
on behalf of others, each person for whom such purchaser is acting must
purchase at least $250,000 principal or face amount of Notes.
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(e) Offers and sales of the Notes by the Issuer through the Dealer
acting as agent for the Issuer shall be made in accordance with Rule 506
under the Securities Act, and shall be subject to the restrictions
described in the legend appearing on Exhibit A hereto. A legend
substantially to the effect of such Exhibit A shall appear as part of the
Private Placement Memorandum used in connection with offers and sales of
Notes hereunder, as well as on each individual certificate representing a
Note and each Master Note representing book-entry Notes offered and sold
pursuant to this Agreement.
(f) The Dealer shall furnish or shall have furnished to each purchaser
of Notes for which it has acted as the Dealer a copy of the then-current
Private Placement Memorandum unless such purchaser has previously received
a copy of the Private Placement Memorandum as then in effect. The Private
Placement Memorandum shall expressly state that any person to whom Notes
are offered shall have an opportunity to ask questions of, and receive
information from, the Issuer and the Dealer and shall provide the names,
addresses and telephone numbers of the persons from whom information
regarding the Issuer may be obtained.
(g) The Issuer agrees, for the benefit of the Dealer and each of the
holders and prospective purchasers from time to time of the Notes that, if
at any time the Issuer shall not be subject to Section 13 or 15(d) of the
Exchange Act, the Issuer will furnish, upon request and at its expense, to
the Dealer and to holders and prospective purchasers of Notes information
required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by the Dealer
would be ineligible for resale under Rule 144A, the Issuer shall
immediately notify the Dealer (by telephone, confirmed in writing) of such
fact and shall promptly prepare and deliver to the Dealer an amendment or
supplement to the Private Placement Memorandum describing the Notes that
are ineligible, the reason for such ineligibility and any other relevant
information relating thereto.
(i) The Issuer represents that it is not currently issuing commercial
paper in the United States market in reliance upon, and in compliance with,
the exemption provided by Section 3(a)(3) of the Securities Act. However,
the Issuer agrees that if the Issuer were to issue such 3(a)(3) commercial
paper, (a) the proceeds from the sale of the Notes would be segregated from
the proceeds of the sale of any such commercial paper by being placed in a
separate account; (b) the Issuer would institute appropriate corporate
procedures to ensure that the offers and sales of notes issued by the
Issuer pursuant to the Section 3(a)(3) exemption would not be integrated
with offerings and sales of Notes hereunder; and (c) the Issuer would
comply with each of the requirements of Section 3(a)(3) of the Securities
Act in selling commercial paper or other short-term debt securities other
than the Notes in the United States.
(j) The Issuer hereby agrees that, not later than 15 days after the
first sale of Notes as contemplated by this Agreement, it will file with
the SEC a notice on Form D in
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accordance with Rule 503 under the Securities Act and that it will
thereafter file such amendments to such notice as Rule 503 may require.
1.7 The Issuer hereby represents and warrants to the Dealer, in connection
with offers, sales and resales of Notes, as follows:
(a) The Issuer hereby confirms to the Dealer that (except as permitted
by Section 1.6(i)) within the preceding six months neither the Issuer nor
any person other than the Dealer or the other dealers referred to in
Section 1.2 hereof acting on behalf of the Issuer has offered or sold any
Notes, or any substantially similar security of the Issuer (including,
without limitation, medium-term notes issued by the Issuer), to, or
solicited offers to buy any such security from, any person other than the
Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer
also agrees that (except as permitted by Section 1.6(i)), as long as the
Notes are being offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated hereby and until at least
six months after the offer of Notes hereunder has been terminated, neither
the Issuer nor any person other than the Dealer or the other dealers
referred to in Section 1.2 hereof (except as contemplated by Section 1.2
hereof) will offer the Notes or any substantially similar security of the
Issuer for sale to, or solicit offers to buy any such security from, any
person other than the Dealer or the other dealers referred to in Section
1.2 hereof, it being understood that such agreement is made with a view to
bringing the offer and sale of the Notes within the exemption provided by
Section 4(2) of the Securities Act and Rule 506 thereunder and shall
survive any termination of this Agreement. The Issuer hereby represents and
warrants that it has not taken or omitted to take, and will not take or
omit to take, any action that would cause the offering and sale of Notes
hereunder to be integrated with any other offering of securities, whether
such offering is made by the Issuer or some other party or parties.
(b) In the event that the Dealer purchases Notes as principal and does
not resell such Notes on the day of such purchase, to the extent necessary
to comply with Regulation T and the interpretations thereunder, the Dealer
will sell such Notes either (i) only to offerees it reasonably believes to
be QIBs or to QIBs it reasonably believes are acting for other QIBs, in
each case in accordance with Rule 144A or (ii) in a manner which would not
cause a violation of Regulation T and the interpretations thereunder.
Section 2. Representations and Warranties of Issuer.
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all the requisite power and authority to execute, deliver and perform its
obligations under the Notes, this Agreement and the Issuing and Paying Agency
Agreement.
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2.2 This Agreement and the Issuing and Paying Agency Agreement have been
duly authorized, executed and delivered by the Issuer and constitute legal,
valid and binding obligations of the Issuer enforceable against the Issuer in
accordance with their terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
2.3 The Notes have been duly authorized, and when issued as provided in the
Issuing and Paying Agency Agreement, will be duly and validly issued and will
constitute legal, valid and binding obligations of the Issuer enforceable
against the Issuer in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).
2.4 The offer and sale of Notes in the manner contemplated hereby do not
require registration of the Notes under the Securities Act, pursuant to the
exemption from registration contained in Section 4(2) thereof and Regulation D
thereunder, and no indenture in respect of the Notes is required to be qualified
under the Trust Indenture Act of 1939, as amended.
2.5 The Notes will rank at least pari passu with all other unsecured and
unsubordinated indebtedness of the Issuer.
2.6 Except as provided in Section 1.6(j), no consent or action of, or
filing or registration with, any governmental or public regulatory body or
authority, including the SEC, is required to authorize, or is otherwise required
in connection with the execution, delivery or performance of, this Agreement,
the Notes or the Issuing and Paying Agency Agreement, except as may be required
by the securities or Blue Sky laws of the various states in connection with the
offer and sale of the Notes.
2.7 Neither the execution and delivery of this Agreement and the Issuing
and Paying Agency Agreement, nor the issuance of the Notes in accordance with
the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance
with the terms and provisions hereof or thereof by the Issuer, will (i) result
in the creation or imposition of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the Issuer, or
(ii) violate or result in a breach or a default under any of the terms of the
Issuer's charter documents or by-laws, any contract or instrument to which the
Issuer is a party or by which it or its property is bound, or any law or
regulation, or any order, writ, injunction or decree of any court or government
instrumentality, to which the Issuer is subject or by which it or its property
is bound, which breach or default might have a material adverse effect on the
condition (financial or otherwise), operations or business prospects of the
Issuer or the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.
2.8 Except as disclosed in the Company Information, there is no litigation
or governmental proceeding pending, or to the knowledge of the Issuer
threatened, against or affecting the Issuer or any of its subsidiaries which
might result in a material adverse change in
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the condition (financial or otherwise), operations or business prospects of
the Issuer or the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.
2.9 The Issuer is not an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
2.10 Neither the Private Placement Memorandum nor the Company Information
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment
or supplement of the Private Placement Memorandum shall be deemed a
representation and warranty by the Issuer to the Dealer, as of the date thereof,
that, both before and after giving effect to such issuance and after giving
effect to such amendment or supplement, (i) the representations and warranties
given by the Issuer set forth above in this Section 2 remain true and correct on
and as of such date as if made on and as of such date, (ii) in the case of an
issuance of Notes, the Notes being issued on such date have been duly and
validly issued and constitute legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law) and (iii) in the case of an issuance of Notes, since the date of the
most recent Private Placement Memorandum, there has been no material adverse
change in the condition (financial or otherwise), operations or business
prospects of the Issuer which has not been disclosed to the Dealer in writing.
Section 3. Covenants and Agreements of Issuer.
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but in any event prior
to any subsequent issuance of Notes hereunder) of any amendment to, modification
of or waiver with respect to, the Notes or the Issuing and Paying Agency
Agreement, including a complete copy of any such amendment, modification or
waiver.
3.2 The Issuer shall, whenever there shall occur any change in the Issuer's
condition (financial or otherwise), operations or business prospects or any
development or occurrence in relation to the Issuer that would be material to
holders of the Notes or potential holders of the Notes (including any
downgrading or receipt of any notice of intended or potential downgrading or any
review for potential change in the rating accorded any of the Issuer's
securities by any nationally recognized statistical rating organization which
has published a rating of the Notes), promptly, and in any event prior to any
subsequent issuance of Notes hereunder, notify the Dealer (by telephone,
confirmed in writing) of such change, development or occurrence.
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3.3 The Issuer shall from time to time furnish to the Dealer such
information as the Dealer may reasonably request, including, without limitation,
any press releases or material provided by the Issuer to any national securities
exchange or rating agency, regarding (i) the Issuer's operations and financial
condition, (ii) the due authorization and execution of the Notes and (iii) the
Issuer's ability to pay the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer may reasonably
request to ensure that each offer and each sale of the Notes will comply with
any applicable state Blue Sky laws; provided, however, that the Issuer shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified or
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
3.5 The Issuer will not be in default of any of its obligations hereunder,
under the Notes or under the Issuing and Paying Agency Agreement, at any time
that any of the Notes are outstanding.
3.6 The Issuer shall not issue Notes hereunder until the Dealer shall have
received (a) an opinion of counsel to the Issuer, addressed to the Dealer,
satisfactory in form and substance to the Dealer, (b) a copy of the executed
Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions
adopted by the Board of Directors of the Issuer, satisfactory in form and
substance to the Dealer and certified by the Secretary or similar officer of the
Issuer, authorizing execution and delivery by the Issuer of this Agreement, the
Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer
of the transactions contemplated hereby and thereby, (d) prior to the issuance
of any Notes represented by a book-entry note registered in the name of DTC or
its nominee, a copy of the executed Letter of Representations among the Issuer,
the Issuing and Paying Agent and DTC and (e) such other certificates, opinions,
letters and documents as the Dealer shall have reasonably requested.
Section 4. Disclosure.
4.1 The Private Placement Memorandum and its contents (other than the
Dealer Information) shall be the sole responsibility of the Issuer. The Private
Placement Memorandum shall contain a statement expressly offering an opportunity
for each prospective purchaser to ask questions of, and receive answers from,
the Issuer concerning the offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire without unreasonable
effort or expense.
4.2 The Issuer agrees to promptly furnish the Dealer the Company Information as
it becomes available.
4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the
occurrence of any event relating to or affecting the Issuer that would cause the
Company Information then in existence to include an untrue statement of a
material fact or to omit to state a material fact
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necessary in order to make the statements contained therein, in light of
the circumstances under which they are made, not misleading.
(b) In the event that the Issuer gives the Dealer notice pursuant to
Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it
is holding in inventory, the Issuer agrees promptly to supplement or amend
the Private Placement Memorandum so that the Private Placement Memorandum,
as amended or supplemented, shall not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and the Issuer shall make such supplement or
amendment available to the Dealer.
(c) In the event that (i) the Issuer gives the Dealer notice pursuant
to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is
then holding Notes in inventory and (iii) the Issuer chooses not to
promptly amend or supplement the Private Placement Memorandum in the manner
described in clause (b) above, then all solicitations and sales of Notes
shall be suspended until such time as the Issuer has so amended or
supplemented the Private Placement Memorandum, and made such amendment or
supplement available to the Dealer.
Section 5. Indemnification and Contribution.
5.1 The Issuer will indemnify and hold harmless the Dealer, each
individual, corporation, partnership, trust, association or other entity
controlling the Dealer, any affiliate of the Dealer or any such controlling
entity and their respective directors, officers, employees, partners,
incorporators, shareholders, servants, trustees and agents (hereinafter the
"Indemnitees") against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including, without
limitation, fees and disbursements of counsel) or judgments of whatever
kind or nature (each a "Claim"), imposed upon, incurred by or asserted
against the Indemnitees arising out of or based upon (i) any allegation
that the Private Placement Memorandum, the Company Information or any
information provided by the Issuer to the Dealer included (as of any
relevant time) or includes an untrue statement of a material fact or
omitted (as of any relevant time) or omits to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading or (ii) arising out of or based
upon the breach by the Issuer of any agreement, covenant or representation
made in or pursuant to this Agreement. This indemnification shall not apply
to the extent that the Claim arises out of or is based upon Dealer
Information.
5.2 Provisions relating to claims made for indemnification under this
Section 5 are set forth on Exhibit B to this Agreement.
5.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 5 is
held to be unavailable or insufficient to hold harmless the Indemnitees,
although applicable in accordance with the terms of this Section 5, the Issuer
shall contribute to the aggregate costs incurred by the Dealer in connection
with any Claim in the proportion of the respective economic interests of the
Issuer and the Dealer; provided, however, that such contribution by the Issuer
shall be in an amount such that the aggregate costs
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incurred by the Dealer do not exceed the aggregate of the commissions and
fees earned by the Dealer hereunder with respect to the issue or issues of Notes
to which such Claim relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the Issuer of the Notes
issued hereunder and the aggregate commissions and fees earned by the Dealer
hereunder.
Section 6. Definitions.
6.1 "Claim" shall have the meaning set forth in Section 5.1.
6.2 "Company Information" at any given time shall mean the Private
Placement Memorandum together with, to the extent applicable, (i) the Issuer's
most recent report on Form 10-K filed with the SEC and each report on Form 10-Q
or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii)
the Issuer's most recent annual audited financial statements and each interim
financial statement or report prepared subsequent thereto, if not included in
item (i) above, (iii) the Issuer's and its affiliates' other publicly available
recent reports, including, but not limited to, any publicly available filings or
reports provided to their respective shareholders, (iv) any other information or
disclosure prepared pursuant to Section 4.3 hereof and (v) any information
prepared or approved by the Issuer for dissemination to investors or potential
investors in the Notes.
6.3 "Dealer Information" shall mean material concerning the Dealer provided
by the Dealer in writing expressly for inclusion in the Private Placement
Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
6.6 "Indemnitee" shall have the meaning set forth in Section 5.1.
6.7 "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501 under the
Securities Act and that has such knowledge and experience in financial and
business matters that it is capable of evaluating and bearing the economic risk
of an investment in the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity.
6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and paying
agency agreement described on the cover page of this Agreement, as such
agreement may be amended or supplemented from time to time.
6.9 "Issuing and Paying Agent" shall mean the party designated as such on
the cover page of this Agreement, as issuing and paying agent under the Issuing
and Paying Agency
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Agreement, or any successor thereto in accordance with the Issuing and
Paying Agency Agreement.
6.10 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other
than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a
savings and loan association, as defined in Section 3(a)(5)(A) of the Securities
Act.
6.11 "Private Placement Memorandum" shall mean offering materials prepared
in accordance with Section 4 (including materials referred to therein or
incorporated by reference therein) provided to purchasers and prospective
purchasers of the Notes, and shall include amendments and supplements thereto
which may be prepared from time to time in accordance with this Agreement (other
than any amendment or supplement that has been completely superseded by a later
amendment or supplement).
6.12 "Qualified Institutional Buyer" shall have the meaning assigned to
that term in Rule 144A under the Securities Act.
6.13 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under the
Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities Act.
6.15 "SEC" shall mean the U.S. Securities and Exchange Commission.
6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
6.17 "Sophisticated Individual Accredited Investor" shall mean an
individual who (a) is an accredited investor within the meaning of Regulation D
under the Securities Act and (b) based on his or her pre-existing relationship
with the Dealer, is reasonably believed by the Dealer to be a sophisticated
investor (i) possessing such knowledge and experience (or represented by a
fiduciary or agent possessing such knowledge and experience) in financial and
business matters that he or she is capable of evaluating and bearing the
economic risk of an investment in the Notes and (ii) having a net worth of at
least $5 million.
Section 7. General
7.1 Unless otherwise expressly provided herein, all notices under this
Agreement to parties hereto shall be in writing and shall be effective when
received at the address of the respective party set forth in the Addendum to
this Agreement.
7.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to its conflict of laws
provisions.
7.3 The Issuer agrees that any suit, action or proceeding brought by the
Issuer against the Dealer in connection with or arising out of this Agreement or
the Notes or the offer and sale
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of the Notes shall be brought solely in the United States federal courts
located in the Borough of Manhattan or the courts of the State of New York
located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES
ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.4 This Agreement may be terminated, at any time, by the Issuer, upon one
business day's prior notice to such effect to the Dealer, or by the Dealer upon
one business day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of the Issuer under
Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties,
agreements, covenants, rights or responsibilities of the parties made or arising
prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party hereto without the
written consent of the other party; provided, however, that the Dealer may
assign its rights and obligations under this Agreement to any affiliate of the
Dealer.
7.6 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
7.7 This Agreement is for the exclusive benefit of the parties hereto, and
their respective permitted successors and assigns hereunder, and shall not be
deemed to give any legal or equitable right, remedy or claim to any other person
whatsoever.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
DENTSPLY International Inc., as Issuer
By:_____________________
Name:
Title:
Goldman, Sachs & Co., as Dealer
By:_____________________
Authorized Signatory
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ADDENDUM
The following additional clause shall apply to the Agreement and be
deemed a part thereof.
1. The addresses of the respective parties for purposes of notices under
Section 7.1 are as follows:
For the Issuer: DENTSPLY International Inc.
Address: 570 West College Avenue
York, Pennsylvania 17405
Attention: Treasurer
Telephone number: 717-849-4262
Fax number: 717-849-4759
For the Dealer: Goldman, Sachs & Co.
Address: 85 Broad Street
New York, New York 10004
Attention: Money Markets Origination
Telephone number: 212-902-2525
Fax number: 212-902-0683
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EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND
SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPT ON FROM
THE REGISTRAT ON REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT
THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE
ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY
DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR
SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE CASE OF AN INDIVIDUAL,
(i) POSSESSES SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS
THAT HE OR SHE IS CAPABLE OF EVALUATING AND BEARING THE ECONOMIC RISK OF AN
INVESTMENT IN THE NOTES AND (ii) HAS A NET WORTH OF AT LEAST $5 MILLION (AN
"INSTITUTIONAL ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL ACCREDITED
INVESTOR", RESPECTIVELY) AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN
ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS
AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF
THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR
AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES
FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR OR SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF
POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH
PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER
("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES
FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH
RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE
PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY
RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE
DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A)
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE
ISSUER OR TO GOLDMAN, SACHS & CO. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS
A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF
WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT
AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR, SOPHISTICATED INDIVIDUAL
ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE
REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000.
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EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) The Issuer agrees to reimburse each Indemnitee for all expenses
(including reasonable fees and disbursements of internal and external counsel)
as they are incurred by it in connection with investigating or defending any
loss, claim, damage, liability or action in respect of which indemnification may
be sought under Section 5 of the Agreement (whether or not it is a party to any
such proceedings).
(b) Promptly after receipt by an Indemnitee of notice of the existence of a
Claim, such Indemnitee will, if a claim in respect thereof is to be made against
the Issuer, notify the Issuer in writing of the existence thereof; provided that
(i) the omission so to notify the Issuer will not relieve the Issuer from any
liability which it may have hereunder unless and except to the extent it did not
otherwise learn of such Claim and such failure results in the forfeiture by the
Issuer of substantial rights and defenses, and (ii) the omission so to notify
the Issuer will not relieve it from liability which it may have to an Indemnitee
otherwise than on account of this indemnity agreement. In case any such Claim is
made against any Indemnitee and it notifies the Issuer of the existence thereof,
the Issuer will be entitled to participate therein, and to the extent that it
may elect by written notice delivered to the Indemnitee, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnitee; provided that
if the defendants in any such Claim include both the Indemnitee and the Issuer,
and the Indemnitee shall have concluded that there may be legal defenses
available to it which are different from or additional to those available to the
Issuer, the Issuer shall not have the right to direct the defense of such Claim
on behalf of such Indemnitee, and the Indemnitee shall have the right to select
separate counsel to assert such legal defenses on behalf of such Indemnitee.
Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's
election so to assume the defense of such Claim and approval by the Indemnitee
of counsel, the Issuer will not be liable to such Indemnitee for expenses
incurred thereafter by the Indemnitee in connection with the defense thereof
(other than reasonable costs of investigation) unless (i) the Indemnitee shall
have employed separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to the next preceding sentence (it being
understood, however, that the Issuer shall not be liable for the expenses of
more than one separate counsel (in addition to any local counsel in the
jurisdiction in which any Claim is brought), approved by the Dealer,
representing the Indemnitee who is party to such Claim), (ii) the Issuer shall
not have employed counsel reasonably satisfactory to the Indemnitee to represent
the Indemnitee within a reasonable time after notice of existence of the Claim
or (iii) the Issuer has authorized in writing the employment of counsel for the
Indemnitee. The indemnity, reimbursement and contribution obligations of the
Issuer hereunder shall be in addition to any other liability the Issuer may
otherwise have to an Indemnitee and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior
written consent, it will not settle, compromise or consent to the entry of any
judgment in any Claim in respect of which indemnification may be sought under
the indemnification provision of the Agreement (whether or not the Dealer or any
other Indemnitee is an actual or potential party to such Claim).
134
EMPLOYMENT AGREEMENT
BETWEEN
DENTSPLY INTERNATIONAL INC.
AND
J. HENRIK ROOS
THIS AGREEMENT is entered into effective as of June 1, 1999, by and between
DENTSPLY International Inc., a Delaware corporation (the "Company") and J.
Henrik Roos, ("Employee").
WHEREAS, it is in the best interest of the Company and Employee that the
terms and conditions of Employee's 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 shall employ Employee and Employee accepts such
employment and agrees to serve as Senior Vice President of the Company,
effective as of the date stated below, 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 this position. 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, the Chief Executive Officer 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.
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. Employment as Senior Vice President shall begin
and continue from June 1, 1999 and terminate on the happening of any of the
following events:
2.1 Death The date of death of Employee;
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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 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, in accordance
with the provisions of such 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 Upon 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 termination stated
in 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 $215,000.00 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 Human Resources (or successor ) Committee of the Board , payable in
accordance with the Company's normal pay schedule.
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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. 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
termination and ending on the earlier of: (i) the second annual anniversary
of the date of such termination ; 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 in accordance with plans approved by the Board of Directors
and similar to which the Employee participated at time of termination,
using the same formula and calculations under any such plan as if
termination had not occurred. The Employee shall not be entitled to
receive any further grants of stock options under any stock option or
similar such plan subsequent to the date of termination but outstanding
stock options shall continue to vest during the Termination Period in
accordance with the applicable stock option plan.
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(c) Employee shall receive the benefits that would have been
accrued by the Employee during the Termination Period from
participation by the Employee 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, in accordance with the
terms of any such plan (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);
(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); and
(e) In the event of the death of Employee during the
Termination Period, the Company shall continue to make the payments
under Subsections 3.5(a) for the period which is the lesser of the
remainder of the Termination Period or twelve (12) months and shall pay
any bonuses under Subsection 3.5 (b) on a pro-rata basis until the date
of Employee's death, to Employee's designated beneficiary or, if no
beneficiary has been effectively designated, then to Employee's estate.
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 and shall be
pro-rated for any partial year through the date of expiration of the
Termination Period).
3.6 If at any time after a Change of Control the Period of Employment
is terminated by the Employee 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 (or its successor)
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.
138
<PAGE>
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 (e.g. conviction of
misappropriation of corporate assets or serious 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 up to 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 except
with respect to matters addressed in the offer letter dated February 24, 1999
between the parties to the extent such matters are not covered in this
Agreement. 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.
139
<PAGE>
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 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 (i) the
then outstanding shares of Common Stock of the Company or such Parent,
or (ii) the voting power of then outstanding voting securities of the
Company, or such Parent, entitled to vote generally in 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.
140
<PAGE>
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, by
recognized delivery service, or placed in a sealed, postpaid envelope
addressed to such party and mailed by registered mail, return receipt
requested to the address set forth below or the most recent address as may be
on the Company records for the Employee:
J. Henrik Roos 23163 North Providence Drive
Kildeer, IL 60047
DENTSPLY International Inc. 570 West College Avenue
York, PA 17405
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.
Attest: DENTSPLY INTERNATIONAL INC.
__________________________________ By: ________________________________
Secretary Chief Executive Officer
------------------------------------
J. Henrik Roos
141
AMENDMENT TO ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TULSA DENTAL PRODUCTS, L.L.C.
AND
DENTSPLY INTERNATIONAL INC.
DATED December 28, 1995 (the "Agreement")
For purposes of calculating EBITDA as provided for in Section 3.3 of the
Agreement the parties agree that the following items will be handled as
described:
1. DENSFIL. With 1999 and going forward we, in effect, will treat the
DENSFIL product as if it were being sold direct even though it is being
sold through dealers. The way we will do that is that we will calculate
the difference between whatever the dealer price is for the product and
$5.60 (the deemed average retail selling price for the purposes of this
arrangement). That difference will be applied to all DENSFIL product which
is sold to dealers in the U.S. and those sales dollars will be included in
the EBITDA calculation.
2. International Thermafil Sales. This will apply to all Thermafil
product produced by Tulsa Dental Products and sold internationally by
other than Tulsa Dental Product Inc. The EBITDA calculation will include
$2.75 per unit sold minus whatever the Interco charge is from Tulsa Dental
Products to the international operation making the sales.
3. International Sales of Ni-Ti Files. This will apply to international
sales of Ni-Ti files other than any sales by Tulsa Dental Products.
Included in the EBITDA calculation will be $2.00 per unit for every such
file which is sold.
4. Legal Expenses. The EBITDA will be charged 50% of any "outside" legal
costs incurred in connection with the endodontics business (this does not
include legal services or charges associated with provision of legal
services by our in-house counsel). Notwithstanding the actual charges,
however, in any calendar year EBITDA shall not be charged more than
$500,000.00 for Tulsa's share of such costs.
5. Adjustment for Profit Contribution of Maillefer. 25% of Maillefer N.A.
sales (excluding DENSFIL sales) will represent the profit contribution
from the North American sales by Maillefer. Each year that percentage
will be used to compute Maillefer North America profit and from that
result $1 million will be deducted for a management fee. The result of
this calculation will be deducted each year from the EBITDA calculation.
6. MTA Interco Sales. For all Interco sales of the MTA product from Tulsa
Dental Products to other Dentsply locations, the EBITDA will be credited
$27.00 minus the Interco price for the units sold.
142
<PAGE>
7. Maillefer Sales of Thermafil Ovens. As you know, these ovens are
purchased by Maillefer from a third party. The EBITDA will be credited
with 50% of the gross profit, i.e., the sales price minus the acquisition
cost of the ovens sold by Maillefer.
The results of the calculations above, of course, will be added to the
calculated operating profits of Tulsa Dental Products for the relevant year
in order to determine what the EBITDA should be for the Tulsa operations and
for calculation of the EBITDA earn out.
For: For:
TULSA DENTAL PRODUCTS, L.L.C. DENTSPLY International Inc.
an Oklahoma limited liability company
By ____________________________________ By: ________________________________
Wm. Ben Johnson John C. Miles II
143
Summary of 1999 Incentive Compensation Plan
At the end of 1998, the Human Resources Committee of the Board of Directors
adopted the Year 1999 Incentive Compensation Plan (the "Plan"). The Plan
established target award opportunities ranging from 23% of base salary for key
employees to 75% of base salary for the Chief Executive Officer. The bonuses
were earned based on the achievement of certain financial targets, which are
established based on the individual participant's position. For the Chief
Executive Officer and the Chief Operating Officer the bonus award for 100% of
targeted performance was set at 75% and 60% , respectively, of their base
salaries, while for the Senior Vice Presidents the bonus awards for 100% of
targeted performance were set at 55% of their respective base salaries. Messrs.
Miles, Kunkle, Whiting, Weston and Jellison received bonus awards for 1999 of
55%, 44%, 59.3%, 39.3% and 40.3%, respectively.
144
EXHIBIT 21.1
Subsidiaries of the Company
I. Direct Subsidiaries of the Company
A. Ceramco Inc. (Delaware)
B. Ceramco Europe Ltd. (Cayman Islands)
a) Ceramco U.K. Ltd. (Dormant)
C. Ceramco Manufacturing Co. (Delaware)
D. CeraMed Dental, L.L.C. (Delaware)
E. Dentsply Argentina S.A.C.e.I. (Argentina)
F. DENTSPLY ASH Inc. (formerly DENTSPLY Manufacturing Inc.)
(Delaware)
G. Dentsply Dental (Tianjin) Co. Ltd. (China)
H. DENTSPLY Equipment Inc. (Delaware)
I. DENTSPLY Finance Co. (Delaware)
a) Dentsply International, Inc. (Chile) Limitada (Chile)
J. Dentsply India Pvt. Ltd. (India)
K. Dentsply Industria e Comercio Ltda. (Brazil)
L. Dentsply International Preventive Care Division, L.P. (PA
Limited Partnership)
M. Dentsply Japan Limited, L.L.C. (Japan)
N. Dentsply Philippines, Inc. (Philippines)
O. Dentsply Research & Development Corp. ("Dentsply R&D")
(Delaware)
P. Dentsply Thailand Ltd. (Thailand)
Q. DeTrey do Brasil Industria e Comercio Ltda. (Brazil)
R. Dentsply Industria e Comercio Ltda. (Brazil)
S. GAC International Inc. (New York)
a) Old Country Road Sales Consultants, Inc.
b) Orthodental International, Inc.
c) Orthodental S.A. de C.V. (Mexico)
T. Gendex Dental Systems Sr.L. (Italy)
145
<PAGE>
U. Midwest Dental Products Corp. (Delaware)
V. Dentsply de Colombia, S.A. (Colombia)
W. United Dental Manufacturers, Inc. (Florida)
II. Indirect Subsidiaries of the Company
A. Subsidiaries of Dentsply Research & Development Corp.
1. Dentsply A.G. (Switzerland)
a) Dentsply EU, S.a.r.L (Luxembourg)
2. Dentsply Australia Pty. Ltd. (Australia (Victoria))
a) Dentsply New Zealand Ltd.
3. Dentsply Canada Ltd. (Canada (Ontario))
4. Dentsply Export Sales Corporation (Barbados)
5. Dentsply de Mexico S.A. de C.V. (Mexico)
6. The International Tooth Co. Limited (United Kingdom)
7. Ransom & Randolph Company (Delaware)
8. Tulsa Dental Products Inc. (Delaware)
a) Tulsa Fianance Co. (Delaware)
b) Tulsa Manufacturing, Inc. (Delaware)
9. Dentsply Espania, SL
B. Subsidiaries Dentsply EU, S.a.r.L.
1. VDW Holdings GmbH (Germany)
a) VDW GmbH
b) Roydent, Inc.(Michigan)
c) Dentsply DeTrey GmbH
C. Subsidiaries of Dentsply DeTrey GmbH
1. Dentsply Limited (Cayman Islands)
2. Dentsply Holdings Unlimited (U.K.)
D. Subsidiaries of Dentsply Limited
1. Dentsply Italia Sr.L.
2. Dentsply Russia Ltd.
3. Dentsply South Africa (Pty) Ltd.
146
<PAGE>
4. Maillefer Instruments Holdings, S.A.
a) Societe Immobiliere du Champs des Echelles (a/k/a
SICDE)
b) Manuplast (Switzerland)
c) Maillefer Instruments (Switzerland)
d) Maillefer Services
e) Maillefer Manufacturing
5. Dentsply DeTrey, S.A. (France)
6. Keith Wilson Limited (U.K., Dormant)
7. Amalco Holdings Ltd. (U.K., Dormant)
8. Oral Topics Limited (U.K., Dormant)
147
Consent of Independent Auditors
The Board of Directors
DENTSPLY International Inc.
We consent to incorporation by reference in the registration statements
(Nos. 333-56093, 33-61780, 33-52616, 33-41775, 33-71792, 33-79094, and
33-89786) on Form S-8 and registration statement No. 333-76089 on Form
S-3 of DENTSPLY International Inc. of our report dated January 20,
2000, relating to the consolidated balance sheets of DENTSPLY
International Inc. and subsidiaries as of December 31, 1999 and 1998,
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, 1999, which report appears in
the December 31, 1999 annual report on Form 10-K of DENTSPLY
International Inc.
KPMG LLP
Philadelphia, Pennsylvania
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF DENTSPLY INTERNATIONAL
INC. AT DECEMBER 31, 1999 AND FOR THE FISCAL YEAR THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000818479
<NAME> DENTSPLY INTERNATIONAL
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7276
<SECURITIES> 0
<RECEIVABLES> 136063
<ALLOWANCES> 8152
<INVENTORY> 135480
<CURRENT-ASSETS> 314668
<PP&E> 267124
<DEPRECIATION> 86588
<TOTAL-ASSETS> 859588
<CURRENT-LIABILITIES> 176220
<BONDS> 145312
0
0
<COMMON> 543
<OTHER-SE> 468329
<TOTAL-LIABILITY-AND-EQUITY> 859588
<SALES> 830864
<TOTAL-REVENUES> 830864
<CGS> 398887
<TOTAL-COSTS> 398887
<OTHER-EXPENSES> 280942
<LOSS-PROVISION> 1418
<INTEREST-EXPENSE> 15758
<INCOME-PRETAX> 138019
<INCOME-TAX> 48156
<INCOME-CONTINUING> 89863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89863
<EPS-BASIC> 1.70
<EPS-DILUTED> 1.70
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