SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31,
2010
Commission
File Number 0-16211
DENTSPLY International
Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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39-1434669
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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221 West Philadelphia Street, York,
PA
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17405-0872
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (717) 845-7511
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which
registered
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None
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Not
applicable
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Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $.01 per share (Title of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes x No ¨
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes ¨ No x
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 whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files).
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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large
accelerated filer x
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company ¨
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
Yes ¨ No x
The
aggregate market value of the voting common stock held by non-affiliates of the
registrant computed by reference to the closing price as of the last business
day of the registrants most recently completed second quarter June 30, 2010, was
$4,482,457,185.
The
number of shares of the registrant's Common Stock outstanding as of the close of
business on February 14, 2011 was 142,145,313.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
portions of the definitive Proxy Statement of DENTSPLY International Inc. (the
“Proxy Statement”) to be used in connection with the 2011 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K to
the extent provided herein. Except as specifically incorporated by
reference herein the Proxy Statement is not deemed to be filed as part of this
Form 10-K.
PART
I
Item
1. Business
Forward-Looking
Statements
The
nature and geographic scope of DENTSPLY International Inc.’s (“DENTSPLY” or the
“Company”) business subjects it to changing economic, competitive, regulatory
and technological risks and uncertainties. In accordance with the
“Safe Harbor” provisions of the Private Securities Litigation Reform Act of
1995, the Company provides the following cautionary remarks regarding important
factors, which, among others, could cause future results to differ materially
from the forward-looking statements, expectations and assumptions expressed or
implied herein. All forward-looking statements made by the Company are subject
to risks and uncertainties and are not guarantees of future performance. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the Company’s actual results, performance and
achievements, or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These statements are identified by the use of such
terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,”
“forecast,” “project,” “anticipate” or words of similar expression.
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 and uncertainties discussed within
Item 1A, Part I of this Form 10-K. Investors are further cautioned that the risk
factors in Item 1A, Part I of this Form 10-K may not be exhaustive and that many
of these factors are beyond the Company’s ability to control or predict.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results. The Company undertakes no duty and has no
obligation to update forward-looking statements.
History
and Overview
DENTSPLY,
a Delaware corporation which dates its history to 1899, believes it is the
world's largest designer, developer, manufacturer and marketer of a broad range
of professional dental products, with a primary focus on dental consumable
products, dental laboratory products and dental specialty
products. The Company's worldwide headquarters and executive
offices are located in York, Pennsylvania.
Consolidated
net sales, excluding precious metal content, of the Company's dental products
accounted for approximately 97% of DENTSPLY's consolidated net sales, excluding
precious metal content, for the year ended December 31, 2010. The remaining 3%
of consolidated net sales, excluding precious metal content, are related to
materials sold to the investment casting industry and various medical products.
The presentation of net sales, excluding precious metal content, is considered a
measure not calculated in accordance with generally accepted accounting
principles in the United States of America (“US GAAP”), and is therefore
considered a non-US GAAP measure. This non-US GAAP measure is discussed further
in “Management's Discussion and Analysis of Financial Condition and Results of
Operations” and a reconciliation of net sales to net sales, excluding precious
metal content, is provided.
Through
the year ended December 31, 2010, the Company conducted its business through
four operating segments, all of which were primarily engaged in the design,
manufacture and distribution of dental products in three principal categories:
1) dental consumable products, 2) dental laboratory products and 3) dental
specialty products.
In
addition to the United States (“U.S.”), the Company conducts its business in
over 120 foreign countries, principally through its foreign subsidiaries.
DENTSPLY has a long-established presence in Canada and in the European market,
particularly in Germany, Switzerland, France, Italy and the United Kingdom. The
Company also has a significant market presence in Central and South America,
South Africa and the Pacific Rim. DENTSPLY has also established marketing
activities in Moscow, Russia to serve the countries of the Commonwealth of
Independent States (“CIS”).
For 2010,
2009 and 2008, the Company's net sales, excluding precious metal content, to
customers outside the U.S., including export sales, accounted for approximately
63%, 62% and 62%, respectively, of consolidated net sales, excluding precious
metal content. Reference is made to the information about the Company's U.S. and
foreign sales by shipment origin set forth in Note 4, Segment and Geographic
Information, to the consolidated financial statements in this Form
10-K.
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Principal
Products
The
worldwide professional dental industry encompasses the diagnosis, treatment and
prevention of disease and ailments of the teeth, gums and supporting bone.
DENTSPLY's principal dental product categories are dental consumable products,
dental laboratory products and dental specialty products. These products are
produced by the Company in the U.S. and internationally and are distributed
throughout the world under some of the most well-established brand names and
trademarks in the industry, including ANKYLOS, AQUASIL, AQUASIL
ULTRA, CALIBRA, CAULK, CAVITRON, CERAMCO, CERCON, CITANEST, DELTON,
DENTSPLY, DETREY, DYRACT, ECLIPSE, ELEPHANT, ESTHET.X, FRIADENT, FRIALIT, GENIE,
GOLDEN GATE, IN-OVATION, INTERACTIVE MYSTIQUE, MAILLEFER, MIDWEST, NUPRO,
ORAQIX, PEPGEN P-15, POLOCAINE, PORTRAIT, PRIME & BOND, PROFILE,
PROTAPER, RINN, SANI-TIP, SHADEPILOT, STYLUS, SULTAN, SUREFIL, THERMAFIL,
TRUBYTE, XENO, XIVE, XYLOCAINE and ZHERMACK .
Dental Consumable
Products
Dental
consumable products consist of dental sundries and small equipment used in
dental offices for the treatment of patients. Net sales of dental consumable
products, excluding precious metal content, accounted for approximately 35%, 35%
and 34% of the Company’s consolidated net sales, excluding precious metal
content, for the years ended December 31, 2010, 2009 and 2008,
respectively.
DENTSPLY’s
dental sundry products in the dental consumable products category include dental
anesthetics, prophylaxis paste, dental sealants, impression materials,
restorative materials, tooth whiteners and topical fluoride. The Company
manufactures thousands of different dental sundry consumable products marketed
under more than one hundred brand names.
Small
equipment products in the dental consumable products category consist of various
durable goods used in dental offices for the treatment of patients. DENTSPLY’s
small equipment products include high and low speed handpieces, intraoral curing
light systems, dental diagnostic systems and ultrasonic scalers and
polishers.
Dental Laboratory
Products
Dental
laboratory products are used in the preparation of dental appliances by dental
laboratories. Net sales of dental laboratory products, excluding precious metal
content, accounted for approximately 16%, 17% and 18% of the Company’s
consolidated net sales, excluding precious metal content, for the years ended
December 31, 2010, 2009 and 2008, respectively.
DENTSPLY’s
products in the dental laboratory products category include dental prosthetics,
including artificial teeth, precious metal dental alloys, dental ceramics and
crown and bridge materials. Equipment in this category includes computer aided
machining (CAM) ceramic systems and porcelain furnaces.
Dental Specialty
Products
Dental
specialty products are specialized treatment products used within the dental
office and laboratory settings. Net sales of dental specialty products,
excluding precious metal content, accounted for approximately 46%, 45% and 45%
of the Company’s consolidated net sales, excluding precious metal content, for
the years ended December 31, 2010, 2009 and 2008, respectively. DENTSPLY’s
products in this category include endodontic (root canal) instruments and
materials, implants and related products, bone grafting materials, 3D digital
implantology and orthodontic appliances and accessories.
Markets,
Sales and Distribution
DENTSPLY
distributes approximately 55% of its dental products through domestic and
foreign distributors, dealers and importers. However, certain highly
technical products such as precious metal dental alloys, dental ceramics, crown
and bridge porcelain products, endodontic instruments and materials, orthodontic
appliances, implants, and bone substitute and grafting materials are sold
directly to the dental laboratory or dental professionals in some
markets. During 2010, 2009 and 2008, one customer, Henry Schein
Incorporated, a dental distributor, accounted for 11% of DENTSPLY’s consolidated
net sales. No other single customer represented ten percent or more
of DENTSPLY’s consolidated net sales during 2010, 2009 or 2008.
Reference
is made to the information about the Company's foreign and domestic operations
and export sales set forth in Note 4, Segment and Geographic Information, to the
consolidated financial statements in this Form 10-K.
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Although
many of its sales are made to distributors, dealers and importers, DENTSPLY
focuses its marketing efforts on the dentists, dental hygienists, dental
assistants, dental laboratories and dental schools who are the end-users of its
products. As part of this end-user “pull through” marketing approach,
DENTSPLY employs approximately 2,800 highly trained, product-specific sales and
technical staff to provide comprehensive marketing and service tailored to the
particular sales and technical support requirements of the distributors, dealers
and the end-users. The Company conducts extensive distributor, dealer
and end-user marketing programs. Additionally, the Company trains
laboratory technicians, dental hygienists, dental assistants and dentists in the
proper use of its products and introduces them to the latest technological
developments at its educational courses located throughout the
world. The Company also maintains ongoing relationships with various
dental associations and recognized worldwide opinion leaders in the dental
field, although there is no assurance that these influential dental
professionals will continue to support the Company’s products.
DENTSPLY
believes that demand in a given geographic market for dental procedures and
products vary according to the stage of social, economic and technical
development of the particular market. Geographic markets for
DENTSPLY's dental products can be categorized into the following two stages of
development:
The U.S.,
Canada, Western Europe, Japan, Australia and certain other countries are highly
developed markets that demand the most advanced dental procedures and products
and have the highest level of expenditures for dental care. In these
markets, dental care is increasingly focused upon preventive care and
specialized dentistry. In addition to basic procedures, such as
excavation of teeth and filling of cavities, tooth extraction and denture
replacement, dental professionals perform an increasing volume of preventive and
cosmetic procedures. These markets require varied and complex dental
products, utilize sophisticated diagnostic and imaging equipment and demand high
levels of attention to protect against infection and patient
cross-contamination.
In
certain countries in Central America, South America, Eastern Europe, Pacific
Rim, Middle East and Africa, most dental care is often limited to excavation of
teeth 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, custom restorative devices, basic surgical instruments,
bridgework and artificial teeth for dentures. However, there is also a portion
of the population in these markets that receive excellent dental care similar to
that received in developed countries and expect to receive the best dental care
available.
The
Company offers products and equipment for use in markets at both of these stages
of development. The Company believes that demand for more technically
advanced products will increase as each of these markets develop. 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
Company believes that the market for its products will grow over the long-term
based on the following factors:
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Increasing worldwide
population.
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Growth of the population 65 or
older – The percentage of the U.S., European, Japanese and other regions
population over age 65 is expected to nearly 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.
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Natural teeth are being retained
longer – Individuals with natural teeth are much more likely to visit a
dentist in a given year than those without any natural teeth
remaining.
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The changing dental practice in
North America and Western Europe – Dentistry in North America and Western
Europe has been transformed from a profession primarily dealing with pain,
infections and tooth decay to one with increased emphasis on preventive
care and cosmetic dentistry.
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Per capita and discretionary
incomes are increasing in emerging nations – As personal incomes continue
to rise in the emerging nations of the Pacific Rim, CIS and Latin America,
healthcare, including dental services, are a growing
priority.
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The Company’s business is less
susceptible than other industries to general downturns in the economies in
which it operates. Many of the products the Company offers
relate to dental procedures that are considered necessary by patients
regardless of the economic environment. Dental specialty
products and products that support discretionary dental procedures are the
most susceptible to recessionary
conditions.
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Product
Development
Technological
innovation and successful product development are critical to strengthening the
Company’s prominent position in worldwide dental markets, maintaining its
leadership positions in product categories where it has a high market share and
increasing market share in product categories where gains are
possible. While many of DENTSPLY’s existing products undergo
evolutionary improvements, the Company also continues to focus efforts on
successfully launching innovative products that represent fundamental
change.
New
advances in technology are also anticipated to have a significant influence on
future products in dentistry. As a result, the Company pursues research
and development initiatives to support this technological development, including
collaborations with external research institutions and dental schools.
Through its own internal research centers as well as through its collaborations
with external research institutions and dental schools, the Company directly
invested $49.4 million, $50.3 million and $48.5 million for 2010, 2009 and 2008,
respectively, in connection with the development of new products, improvement of
existing products and advances in technology. The continued development of
these areas is a critical step in meeting the Company's strategic goal as a
leader in defining the future of dentistry. The year-over-year comparisons
for 2010 versus 2009 and 2009 versus 2008 were both impacted by foreign currency
translation which decreased the reported expense variations.
In
addition to the direct investment in product development and improvement, the
Company also invests in these activities through acquisitions, by entering into
licensing agreements and by purchasing technologies developed by third
parties.
Acquisition
Activities
DENTSPLY
believes that the dental products industry continues to experience consolidation
with respect to both product manufacturing and distribution, although it
continues to be fragmented creating a number of acquisition
opportunities. In 2010, the Company purchased an initial ownership
interest of 16% of the outstanding shares in DIO Corporation (“DIO”), a Korean
manufacturer of dental implants and various other dental devices and
materials. Additionally, in 2010, the Company purchased several small
distributors of dental specialty products and a small dental equipment
manufacturer. These businesses are located in Europe and in
Asia.
The
Company continues to view acquisitions as a key part of its growth
strategy. These acquisition activities are intended to supplement the
Company's core growth and assure ongoing expansion of its business, including
new technologies, additional products, and geographic breadth.
Operating
and Technical Expertise
DENTSPLY
believes that its manufacturing capabilities are important to its
success. The manufacturing process of the Company's products requires
substantial and varied technical expertise. Complex materials
technology and processes are necessary to manufacture the Company's
products. The Company continues to automate its global manufacturing
operations in order to lower costs.
Financing
DENTSPLY’s
cash, cash equivalents and short-term investments increased by $89.7 million
during the year ended December 31, 2010 to $540.1 million. DENTSPLY's
total long-term debt, including the current portion, at December 31, 2010 and
2009 was $606.5 million and $453.7 million, respectively, and the ratios of
long-term debt, including the current portion, to total capitalization were
24.1% and 16.9%. DENTSPLY defines total capitalization as the sum of
total long-term debt, including the current portion, plus total equity. The
Company’s long-term debt, including the current portion, increased by a net of
$152.8 million during the year ended December 31, 2010. This net change included
a net increase in borrowings of $126.5 million during the year ended 2010, plus
an increase of $26.3 million due to exchange rate fluctuations on debt
denominated in foreign currencies. The Company may incur additional
debt in the future, including, but not limited to, the funding of additional
acquisitions and capital expenditures.
Additional
information about DENTSPLY's working capital, liquidity and capital resources is
provided in “Management's Discussion and Analysis of Financial Condition and
Results of Operations” in this Form 10-K.
Competition
The
Company conducts its operations, both domestic and foreign, under highly
competitive market conditions. Competition in the dental products
industry 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, its commitment to customer satisfaction and support of the
Company’s products by dental professionals.
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The size
and number of the Company's competitors vary by product line and from region to
region. There are many companies that produce some, but not all, of
the same types of products as those produced by the Company.
Regulation
The
Company's products are subject to regulation by, among other governmental
entities, the U.S. 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 U.S. are safe and effective, the FDA regulates the
introduction, manufacture, advertising, labeling, packaging, marketing and
distribution of, and record-keeping for, such products. 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. DENTSPLY believes that it is in
substantial compliance with the FDA and foreign regulatory requirements that are
applicable to its products and manufacturing operations.
Dental
devices of the types sold by DENTSPLY 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. In the
European Union, DENTSPLY's products are subject to the medical devices laws of
the various member states, which are based on a Directive of the European
Commission. Such laws generally regulate the safety of the products
in a similar way to the FDA regulations. DENTSPLY products in Europe
bear the CE mark showing that such products adhere to the European
regulations.
All
dental amalgam filling materials, including those manufactured and sold by
DENTSPLY, 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 U.S. Public Health Service have
each indicated that no direct hazard to humans from exposure to dental amalgams
has been demonstrated. In response to concerns raised by certain
consumer groups regarding dental amalgam, the FDA formed an advisory committee
in 2006 to review peer-reviewed scientific literature on the safety of dental
amalgam. In July 2009, the FDA concluded its review of dental
amalgam, confirming its use as a safe and effective restorative
material. Also, as a result of this review, the FDA classified
amalgam and its component parts, elemental mercury and powder alloy, as a Class
II medical device. Previously there was no classification for
encapsulated amalgam and dental mercury (Class I) and alloy (Class II) were
classified separately. This new regulation places encapsulated
amalgam in the same class of devices as most other restorative materials,
including composite and gold fillings. After the FDA issued this
regulation, several petitions were filed asking the FDA to reconsider its
position. Another advisory panel was established by the FDA to
consider these petitions. Hearings of the advisory panel were held in
December 2010. The FDA has taken no action, as of the filing date of
this Form 10-K, from this latest advisory panel meeting.
In
Europe, particularly in Scandinavia and Germany, the contents of mercury in
amalgam filling materials have been the subject of public
discussion. As a consequence, in 1994 the German health authorities
required suppliers of dental amalgam to amend the instructions for use for
amalgam filling materials to include a precaution against the use of amalgam for
children less than eighteen years of age and to women of childbearing
age. Additionally, some groups have asserted that the use of dental
amalgam should be prohibited because of concerns about environmental impact from
the disposition of mercury within dental amalgam, which has resulted in the sale
of mercury containing products being banned in Sweden and severely curtailed in
Norway. DENTSPLY also manufactures and sells non-amalgam dental
filling materials that do not contain mercury.
Sources
and Supply of Raw Materials and Finished Goods
The
Company manufactures the majority of the products sold by the
Company. All of the raw materials used by the Company in the
manufacture of its products are purchased from various suppliers and are
typically available from numerous sources. No single supplier
accounts for a significant percentage of DENTSPLY's raw material
requirements. In addition to those products both manufactured and
sold by the Company, some finished goods products sold by the Company are
purchased from third party suppliers. Of these finished goods
products purchased from third party suppliers, a significant portion of the
Company’s injectable anesthetic products, orthodontic products and dental
cutting instruments are purchased from a limited number of
suppliers.
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Intellectual
Property
Products
manufactured by DENTSPLY are sold primarily under its own trademarks and trade
names. DENTSPLY also owns and maintains more than 2,000 patents
throughout the world and is licensed under a small number of patents owned by
others.
DENTSPLY's
policy is to protect its products and technology through patents and trademark
registrations in the U.S. and in significant international markets for its
products. The Company carefully monitors trademark use worldwide and
promotes enforcement of its patents and trademarks in a manner that is designed
to balance the cost of such protection against obtaining the greatest value for
the Company. DENTSPLY believes its patents and trademark properties
are important and contribute to the Company's marketing position but it does not
consider its overall business to be materially dependent upon any individual
patent or trademark.
Employees
As of
December 31, 2010, the Company and its subsidiaries employed approximately 9,700
employees. A small percentage of the Company's U. S. employees are
represented by labor unions. A facility in Des Plaines, Illinois is
represented by the International Association of Machinists and Aerospace Workers
AFL-CIO, under a collective bargaining agreement that expires on May 31,
2012. Additionally, the Company’s Ransom & Randolph facility in
Maumee, Ohio is 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, 2012. In
Germany, approximately 45% of DeguDent employees, approximately 30% of Friadent
employees, approximately 23% of VDW employees and approximately 30% of DeTrey
employees are represented by labor unions. The Company provides
pension and postretirement benefits to many of its employees (see Note 13,
Benefits Plans, to the consolidated financial statements). The
Company believes that its relationship with its employees is good.
Environmental
Matters
DENTSPLY
believes that its operations comply in all material respects with applicable
environmental laws and regulations. Maintaining this level of
compliance has not had, and is not expected to have, a material effect on the
Company's capital expenditures or on its business.
Other
Factors Affecting the Business
The
Company’s business is subject to quarterly fluctuations of consolidated net
sales and net income. The Company typically implements most of its
price changes early in the fourth quarter or beginning of the
year. Price changes, other marketing and promotional programs as well
as the management of inventory levels by distributors and the implementation of
strategic initiatives, may impact sales levels in a given
period. Sales for the industry and the Company are generally
strongest in the second and fourth calendar quarters and weaker in the first and
third calendar quarters, due to the effects of the items noted above and due to
the impact of summer holidays and vacations, particularly throughout
Europe.
Securities
and Exchange Act Reports
DENTSPLY
makes available free of charge through its website at www.DENTSPLY.com its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to these reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after such materials are filed with or furnished to the
SEC.
The
public may read and copy any materials the Company files with the U. S.
Securities and Exchange Commission (“ SEC”) at its Public Reference Room at the
following address:
The
Securities and Exchange Commission
100 F
Street, NE
Washington,
D.C. 20549
The
public may obtain information on the operation of this Public Reference Room by
calling the SEC at 1-800-SEC-0330. In addition, since the Company is
an electronic filer, the public may access reports, the proxy and information
statements and other information filed or furnished by the Company at the
Internet site maintained by the SEC (http://www.sec.gov).
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Item
1A. Risk Factors
The
following are the significant risk factors that could materially impact
DENTSPLY’s business, financial condition or future results. The order
in which these factors appear should not be construed to indicate its relative
importance or priority.
Negative
changes could occur in the dental markets, the general economic environments, or
government reimbursement or regulatory programs of the regions in which the
Company operates.
The
success of the Company is largely dependent upon the continued strength of
dental markets and is also somewhat dependent upon the general economic
environments of the regions in which DENTSPLY operates. Negative
changes to these markets and economies could materially impact the Company's
results of operations and financial condition. In addition, many of
the Company's markets are affected by government reimbursement and regulatory
programs. In certain markets, particularly in the European Union,
government and regulatory programs have a more significant impact than other
markets. Changes to these programs could have a positive or negative
impact on the Company's results.
Prolonged
negative economic conditions in domestic and global markets may adversely affect
the Company’s suppliers, customers and consumers, which could harm the Company’s
financial position.
Prolonged
negative changes in domestic and global economic conditions or disruptions of
either or both of the financial and credit markets may affect the Company’s
supply chain and the customers and consumers of the Company’s products and may
have a material adverse effect on the Company’s results of operations, financial
condition and liquidity.
Due
to the Company’s international operations, the Company is exposed to the risk of
changes in interest and foreign exchange rates.
DENTSPLY,
with its significant international operations, 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 Company’s balance sheet
includes debt and net investment hedges that are sensitive to movements in
interest and foreign exchange rates. Changes in interest rates and
foreign exchange rates may have an adverse effect on the Company’s results of
operations, financial condition and liquidity.
Volatility
in the capital markets or investment vehicles could limit the Company’s ability
to access capital or could raise the cost of capital.
Although
the Company has had continued positive operating cash flow, a disruption in the
credit markets may reduce sources of liquidity available to the
Company. The Company relies on multiple financial institutions to
provide funding pursuant to existing and/or future credit agreements, and those
institutions may not be able to provide funding in a timely manner, or at all,
when required by the Company. The cost of or lack of available credit
could impact the Company’s ability to develop sufficient liquidity to maintain
or grow the Company, which in turn may adversely affect the Company’s
businesses and results of operations, financial condition and
liquidity.
The
Company also manages cash and cash equivalents and short-term investments
through various institutions. There may be a risk of loss on
investments based on the volatility of the underlying instruments that will not
allow the Company to recover the full principal of its investments.
The
Company may not be able to access or renew its precious metal consignment
facilities resulting in a liquidity constraint equal to the fair market value of
the precious metal value of inventory and would subject the Company to inventory
valuation risk as the value of the precious metal inventory fluctuates resulting
in greater volatility to reported earnings.
- 8
- -
The
Company’s quarterly operating results and market price for the Company’s common
stock may be volatile.
DENTSPLY
experiences fluctuations in quarterly sales and earnings due to a number of
factors, many of which are substantially outside of the Company’s control,
including:
|
|
·
|
The
timing of new product introductions by DENTSPLY and its
competitors;
|
|
|
·
|
Timing
of industry tradeshows;
|
|
|
·
|
Developments
in government reimbursement
policies;
|
|
|
·
|
Changes
in product mix;
|
|
|
·
|
The
Company’s ability to supply products to meet customer
demand;
|
|
|
·
|
Fluctuations
in manufacturing costs;
|
|
|
·
|
Income
tax incentives and adverse tax
consequences;
|
|
|
·
|
Fluctuations
in currency exchange rates; and
|
|
|
·
|
General
economic conditions, as well as those specific to the healthcare and
related industries.
|
As a
result, the Company may fail to meet the expectations of securities analysts and
investors, which could cause its stock price to decline. The
quarterly fluctuations generally result in net sales and operating profits
historically being higher in the second and fourth quarters. The
Company typically implements most of its price changes early in the fourth
quarter or beginning of the year. These price changes, other
marketing and promotional programs, which are offered to customers from time to
time in the ordinary course of business, the management of inventory levels by
distributors and the implementation of strategic initiatives, may impact sales
levels in a given period. Net sales and operating profits generally
have been lower in the first and third quarters, primarily due not only to
increased sales in the quarters preceding these quarters, but also due to the
impact of summer holidays and vacations, particularly throughout
Europe.
In
addition to fluctuations in quarterly earnings, a variety of other factors may
have a significant impact on the market price of DENTSPLY’s common stock causing
volatility. These factors include, but are not necessarily limited
to, the publication of earnings estimates or other research reports and
speculation in the press or investment community; changes in the Company’s
industry and competitors; the Company’s financial condition and cash flows; any
future issuances of DENTSPLY’s common stock, which may include primary offerings
for cash, stock splits, issuances in connection with business acquisitions,
restricted stock and the grant or exercise of stock options from time to time;
general market and economic conditions; and any outbreak or escalation of
hostilities in geographical areas the Company does business.
Also, the
NASDAQ National Market (“NASDAQ”) can experience extreme price and volume
fluctuations that can be unrelated or disproportionate to the operating
performance of the companies listed on the NASDAQ. Broad market and
industry factors may negatively affect the market price of the Company’s common
stock, regardless of actual operating performance. In the past,
following periods of volatility in the market price of a company’s securities,
securities class action litigation has often been instituted against
companies. This type of litigation, if instituted, could result in
substantial costs and a diversion of management’s attention and resources, which
could harm the Company’s business.
The
dental supplies market is highly competitive, and there is no guarantee that the
Company can compete successfully.
The
worldwide market for dental supplies 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. Additionally, the size
and number of the Company's competitors vary by product line and from region to
region. There are many companies that 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.
The
Company may be unable to develop innovative products or obtain regulatory
approval for new products.
The
market for DENTSPLY’s products is characterized by rapid and significant
technological change, evolving industry standards and new product
introductions. There can be no assurance that DENTSPLY’s products
will not become noncompetitive or obsolete as a result of such factors or that
we will be able to generate any economic return on the Company’s investment in
product development. If the Company’s products or technologies become
noncompetitive or obsolete, DENTSPLY’s business could be negatively
affected.
- 9
- -
DENTSPLY
has identified new products as an important part of its growth
opportunities. There can be no assurance that DENTSPLY will be able
to continue to develop innovative products and that regulatory approval of any
new products will be obtained from applicable U.S. or international government
or regulatory authorities, or that if such approvals are obtained, such products
will be favorably accepted in the marketplace. Additionally, there is
no assurance that entirely new technology or approaches to dental treatment or
competitors’ new products will not be introduced that could render the Company's
products obsolete.
The
Company may fail to comply with applicable government regulations.
The
Company must obtain certain approvals by, and marketing clearances from,
governmental authorities, including the FDA and similar health authorities in
foreign countries to market and sell its products. These regulatory
agencies regulate the marketing, manufacturing, labeling, packaging,
advertising, sale and distribution of medical devices.
The
regulatory review process which must be completed prior to marketing a new
medical device, may delay or hinder a product’s timely entry into the
marketplace. Moreover, there can be no assurance that the review or
approval process for these products by the FDA or any other applicable
governmental authority will occur in a timely fashion, if at all, or that
additional regulations will not be adopted or current regulations amended in
such a manner as will adversely affect the Company. The FDA also
oversees the content of advertising and marketing materials relating to medical
devices which have received FDA clearance. Failure to comply with the
FDA’s advertising guidelines may result in the withdrawal of products or
imposition of penalties.
DENTSPLY's
business operations are also subject to periodic review and inspection by the
FDA and other domestic government authorities and similar foreign authorities to
monitor DENTSPLY's compliance with the regulations administered by such
authorities. There can be no assurance that these authorities will
not raise compliance concerns. Failure to satisfy any such
requirements can result in governmental enforcement actions, including possible
product seizure, injunction and/or criminal or civil proceedings.
Challenges
may be asserted against the Company’s dental amalgam product.
All
dental amalgam filling materials, including those manufactured and sold by
DENTSPLY, contain mercury. Some groups have
asserted that amalgam should be discontinued because of its mercury content
and/or that disposal of mercury containing products may be harmful to the
environment. If governmental authorities elect to place restrictions
or significant regulations on the sale and/or disposal of dental amalgam, that
could have an adverse impact on the Company’s sales of dental amalgam. DENTSPLY
also manufactures and sells non-amalgam dental filling materials that do not
contain mercury.
The
Company may be unable to obtain a supply for certain finished goods purchased
from third parties.
A
significant portion of the Company’s injectable anesthetic products, orthodontic
products, dental cutting instruments and certain other products and raw
materials are purchased from a limited number of suppliers, some of which also
compete with the Company. As there are a limited number of suppliers
for these products, there can be no assurance that the Company will be able to
obtain an adequate supply of these products and raw materials in the
future. Any delays in delivery of or shortages in these products
could interrupt and delay manufacturing of the Company’s products and result in
the cancellation of orders for these products. In addition, these
suppliers could discontinue the manufacture or supply of these products at any
time. DENTSPLY may not be able to identify and integrate alternative
sources of supply in a timely fashion or at all. Any transition to
alternate suppliers may result in delays in shipment and increased expenses and
may limit the Company’s ability to deliver products to customers. If
the Company is unable to develop reasonably priced alternative sources in a
timely manner, or if the Company encounters delays or other difficulties in the
supply of such products and other materials from third parties, the Company’s
business and results of operation may be harmed.
The
Company’s expansion through acquisition involves risks and may not result in the
expected benefits.
The
Company continues to view acquisitions as a key part of its growth
strategy. The Company continues to be active in evaluating potential
acquisitions although there is no assurance that these efforts will result in
completed transactions as there are many factors that affect the success of such
activities. If the Company does succeed in acquiring a business or
product, there can be no assurance that the Company will achieve any of the
benefits that it might anticipate from such an acquisition and the attention and
effort devoted to the integration of an acquired business could divert
management’s attention from normal business operations. If the
Company makes acquisitions, it may incur debt, assume contingent liabilities or
create additional expenses, any of which might adversely affect its financial
results. Any financing that the Company might need for acquisitions
may only be available to it on terms that restrict its business or that impose
additional costs that reduce its operating results.
- 10
- -
Changes
in, or interpretations of, accounting principles could result in unfavorable
accounting charges.
The
Company prepares its consolidated financial statements in accordance with US
GAAP. These principles are subject to interpretation by the SEC and
various bodies formed to interpret and create appropriate accounting
principles. Market conditions have prompted accounting standard
setters to issue new guidance which further interprets or seeks to revise
accounting pronouncements related to financial instruments, structures or
transactions as well as to issue new standards expanding
disclosures. It is possible that future accounting standards the
Company is required to adopt could change the current accounting treatment
applied to the consolidated financial statements and that such changes could
have a material adverse effect on the Company’s business, results of operations,
financial condition and liquidity.
If
the Company’s goodwill or amortizable intangible assets become impaired, the
Company may be required to record a significant charge to earnings.
Under US
GAAP, the Company reviews its goodwill and amortizable intangible assets for
impairment when events or changes in circumstances indicate the carrying value
may not be recoverable. Additionally, goodwill is required to be
tested for impairment at least annually. The valuations used to determine the
fair values used to test goodwill or amortizable intangible assets are dependent
upon various assumptions and reflect management’s best estimates. Net
sales growth, discount rates, earnings multiples and future cash flows are
critical assumptions used to determine these fair values. Slower net
sales growth rates in the dental industry, an increase in discount
rates, unfavorable changes in earnings multiples or a decline in
future cash flows, among other factors, may cause a change in circumstances
indicating that the carrying value of the Company’s goodwill or amortizable
intangible assets may not be recoverable. The Company may be required to record
a significant charge to earnings in the financial statements during the period
in which any impairment of the Company’s goodwill or amortizable intangible
assets is determined.
Changes
in, or interpretations of, tax rules, structures, country profitability mix and
regulations may adversely affect the Company’s effective tax rates.
The
Company is a U.S. based multinational company subject to tax in multiple U.S.
and foreign tax jurisdictions. Unanticipated changes in the Company’s
tax rates could affect its future results of operations. The
Company’s future effective tax rates could be unfavorably affected by changes
in, or interpretation of, tax rules and regulations in the jurisdictions in
which the Company does business, by structural changes in the Company’s
businesses, by unanticipated decreases in the amount of revenue or earnings in
countries with low statutory tax rates, by lapses of the availability of the
U.S. research and development tax credit, or by changes in the valuation of the
Company’s deferred tax assets and liabilities.
The
Company faces the inherent risk of litigation and claims.
The
Company’s business involves a risk of product liability and other types of legal
actions or claims, including possible recall actions affecting the Company’s
products. The primary risks to which the Company is exposed are
related to those products manufactured by the Company. The Company
has insurance policies, including product liability insurance, covering these
risks in amounts that are considered adequate; however, the Company cannot
provide assurance that the maintained coverage is sufficient to cover future
claims or that the coverage will be available in adequate amounts or at a
reasonable cost. Also, other types of claims asserted against the
Company may not be covered by insurance. A successful claim brought
against the Company in excess of available insurance, or another type of claim
which is uninsured or that results in significant adverse publicity against the
Company, could harm its business and overall cash flows of the
Company.
Various
parties, including the Company, own and maintain patents and other intellectual
property rights applicable to the dental field. Although the Company
believes it operates in a manner that does not infringe upon any third party
intellectual property rights, it is possible that a party could assert that one
or more of the Company’s products infringe upon such party’s intellectual
property and force the Company to pay damages and/or discontinue the sale of
certain products.
Increasing
exposure to markets outside of the U.S. and Europe.
We
anticipate that sales outside of the U.S. and Europe will continue to account
for a significant portion of DENTSPLY’s revenue. Operating in such
locations is subject to a number of uncertainties, including, but not limited
to, the following:
|
|
·
|
Economic
and political instability;
|
|
|
·
|
Import
or export licensing requirements;
|
|
|
·
|
Trade
restrictions;
|
|
|
·
|
Product
registration requirements;
|
|
|
·
|
Longer
payment cycles;
|
|
|
·
|
Changes
in regulatory requirements and
tariffs;
|
|
|
·
|
Fluctuations
in currency exchange rates;
|
|
|
·
|
Potentially
adverse tax consequences; and
|
|
|
·
|
Potentially
weak protection of intellectual property
rights.
|
- 11
- -
The Company's success is dependent
upon its management and employees.
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.
The
Company may be unable to sustain the operational and technical expertise that is
key to its success.
DENTSPLY
believes that its manufacturing capabilities are important to its
success. 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. There can be no assurance that the Company will be able to
maintain the necessary operational and technical expertise that is key to its
success.
The
Company may not generate sufficient cash flow to service its debt, pay its
contractual obligations and operate the business.
DENTSPLY's
ability to make payments on its indebtedness and contractual obligations, and to
fund its operations depends on its future performance and financial results,
which, to a certain extent, are subject to general economic, financial,
competitive, regulatory and other factors and the interest rate environment that
are beyond its control. Although senior management believes that the
Company has and will continue to have sufficient liquidity, there can be no
assurance that DENTSPLY's business will generate sufficient cash flow from
operations in the future to service its debt, pay its contractual obligations
and operate its business.
The
Company may not be able to repay its outstanding debt in the event that cross
default provisions are triggered due to a breach of loan covenants.
DENTSPLY's
existing borrowing documentation contains a number of covenants and financial
ratios, which it is required to satisfy. The most restrictive of
these covenants pertain to asset dispositions, maintenance of certain levels of
net worth, and prescribed ratios of indebtedness to total capital and operating
income excluding depreciation and amortization of interest
expense. Any breach of any such covenants or restrictions would
result in a default under the existing borrowing documentation that would permit
the lenders to declare all borrowings under such documentation to be immediately
due and payable and, through cross default provisions, would entitle DENTSPLY's
other lenders to accelerate their loans. DENTSPLY may not be able to
meet its obligations under its outstanding indebtedness in the event that any
cross default provision is triggered.
Certain
provisions in the Company’s governing documents may discourage third party
offers to acquire DENTSPLY that might otherwise result in the Company’s
stockholders receiving a premium over the market price of their
shares.
Certain
provisions of DENTSPLY'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 DENTSPLY. Such provisions include, among others,
the division of the Board of Directors of DENTSPLY into three classes, with the
three-year term of a 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 DENTSPLY's By-laws and call special meetings of
stockholders. In addition, members of DENTSPLY's management and
participants in its Employee Stock Ownership Plan (“ESOP”) collectively own
approximately 4% of the outstanding common stock of DENTSPLY.
Issues
related to the quality and safety of the Company’s products, ingredients or
packaging could cause a product recall resulting in harm to the Company’s
reputation and negatively impacting the Company’s operating
results.
The
Company’s products generally maintain a good reputation with customers and
end-users. Issues related to quality and safety of products,
ingredients or packaging, could jeopardize the Company’s image and
reputation. Negative publicity related to these types of concerns,
whether valid or not, might negatively impact demand for the Company’s products,
or cause production and delivery disruptions. The Company may need to
recall products if they become unfit for use. In addition, the
Company could potentially be subject to litigation or government action, which
could result in payment of fines or damages. Cost associated with
these potential actions could negatively affect the Company’s operating results,
financial condition and liquidity.
|
Item 1B.
|
Unresolved Staff
Comments
|
None
- 12
- -
Item
2. Properties
The
following is a listing of DENTSPLY's principal manufacturing and distribution
locations as of December 31, 2010:
|
Location
|
Function
|
Leased
or Owned
|
||
|
United
States:
|
||||
|
Milford,
Delaware (1)
|
Manufacture
of dental consumable products
|
Owned
|
||
|
Bradenton,
Florida (3)
|
Manufacture
of orthodontic accessory products
|
Leased
|
||
|
Baldwin,
Georgia (3)
|
Manufacture
of orthodontic accessory products
|
Leased
|
||
|
Des
Plaines, Illinois (1)
|
Manufacture
and assembly of dental handpieces
|
Leased
|
||
|
Elgin,
Illinois (1)
|
Manufacture
of dental x-ray film holders, film
|
Owned/Leased
|
||
|
mounts
and accessories
|
||||
|
Bohemia,
New York (3)
|
Manufacture
and distribution of orthodontic
|
Leased
|
||
|
products
and materials
|
||||
|
Maumee,
Ohio (4)
|
Manufacture
and distribution of investment
|
Owned
|
||
|
casting
products
|
||||
|
Lancaster,
Pennsylvania (5)
|
Distribution
of dental products
|
Leased
|
||
|
York,
Pennsylvania (4)
|
Manufacture
and distribution of artificial teeth
|
Owned
|
||
|
and
other dental laboratory products
|
||||
|
York,
Pennsylvania (1)
|
Manufacture
of small dental equipment, bone grafting
|
Owned
|
||
|
products,
and preventive dental products
|
||||
|
Johnson
City, Tennessee (3)
|
Manufacture
and distribution of endodontic
|
Leased
|
||
|
instruments
and materials
|
||||
|
Foreign:
|
||||
|
Beringen,
Belgium (4)
|
Manufacture
and distribution of dental products
|
Owned/Leased
|
||
|
Leuven,
Belgium (4)
|
Manufacture
and distribution of 3D digital implantology
|
Leased
|
||
|
Catanduva,
Brazil (3)
|
Manufacture
and distribution of dental
|
Owned
|
||
|
anesthetic
products
|
||||
|
Petropolis,
Brazil (3)
|
Manufacture
and distribution of artificial teeth,
|
Owned
|
||
|
dental
consumable products and endodontic material
|
||||
|
Shanghai,
China (4)
|
Manufacture
and distribution of dental products
|
Leased
|
||
|
Tianjin,
China (2)
|
Manufacture
and distribution of dental products
|
Leased
|
||
|
Ivry
Sur-Seine, France (4)
|
Manufacture
and distribution of investment casting products
|
Leased
|
- 13
- -
|
Bohmte,
Germany (4)
|
Manufacture
and distribution of dental
|
Owned
|
||
|
laboratory
products
|
||||
|
Hanau,
Germany (4)
|
Manufacture
and distribution of precious metal dental
|
Owned
|
||
|
alloys,
dental ceramics and dental implant products
|
||||
|
Konstanz,
Germany (1)
|
Manufacture
and distribution of dental consumable
|
Owned
|
||
|
products
|
||||
|
Mannheim,
Germany (4)
|
Manufacture
and distribution of dental
|
Owned/Leased
|
||
|
implant
products
|
||||
|
Munich,
Germany (3)
|
Manufacture
and distribution of endodontic
|
Owned
|
||
|
instruments
and materials
|
||||
|
Radolfzell,
Germany (5)
|
Distribution
of dental products
|
Leased
|
||
|
Rosbach,
Germany (4)
|
Manufacture
and distribution of dental ceramics
|
Owned
|
||
|
Badia
Polesine, Italy (1)
|
Manufacture
and distribution of dental consumable
|
Owned/Leased
|
||
|
products
|
||||
|
Nasu,
Japan (2)
|
Manufacture
and distribution of precious metal dental
|
Owned
|
||
|
alloys,
dental consumable products and orthodontic
|
||||
|
products
|
||||
|
Mexicali,
Mexico (3)
|
Manufacture
and distribution of orthodontic
|
Leased
|
||
|
products
and materials
|
||||
|
Hoorn,
Netherlands (4)
|
Manufacture
and distribution of precious metal
|
Owned
|
||
|
dental
alloys and dental ceramics
|
||||
|
HA
Soest, Netherlands (3)
|
Distribution
of orthodontic products
|
Leased
|
||
|
Warsaw,
Poland (1)
|
Manufacture
and distribution of dental consumable
|
Owned
|
||
|
products
|
||||
|
Las
Piedras, Puerto Rico (4)
|
Manufacture
of crown and bridge materials
|
Owned
|
||
|
Ballaigues,
Switzerland (3)
|
Manufacture
and distribution of endodontic
|
Owned
|
||
|
instruments,
plastic components and packaging material
|
||||
|
Le
Creux, Switzerland (3)
|
Manufacture and distribution of
endodontic instruments
|
Owned
|
|
(1)
|
These
properties are included in the U. S., Germany, and Certain Other European
Regions Consumable Businesses
segment.
|
|
(2)
|
These
properties are included in the France, U.K., Italy and Certain Other
European Countries, CIS, Middle East, Africa, Pacific Rim Businesses
segment.
|
|
(3)
|
These
properties are included in the Canada/Latin
America/Endodontics/Orthodontics
segment.
|
|
(4)
|
These
properties are included in the Dental Laboratory
Business/Implants/Non-Dental
segment.
|
|
(5)
|
This
property is a distribution warehouse not managed by named
segments.
|
- 14
- -
In
addition, the Company maintains sales and distribution offices at certain of its
foreign and domestic manufacturing facilities, as well as at various other U.S.
and international locations. The Company maintains offices in
Toronto, Mexico City, Paris, Rome, Weybridge, Hong Kong and Melbourne and other
international locations. Most of these sites around the world that
are used exclusively for sales and distribution are leased.
The
Company also owns its corporate headquarters located in York,
Pennsylvania.
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
Incorporated
by reference to Part II, Item 8, Note 17, Commitments and Contingencies, to the
Consolidated Financial Statements.
Item
4. Removed and Reserved
Executive
Officers of the Registrant
The
following table sets forth certain information regarding the executive officers
of the Company as of February 18, 2011.
|
Name
|
Age
|
Position
|
||
|
Bret
W. Wise
|
50
|
Chairman
of the Board and Chief Executive Officer
|
||
|
Christopher
T. Clark
|
49
|
President and Chief Operating
Officer
|
||
|
William
R. Jellison
|
53
|
Senior Vice President and Chief
Financial Officer
|
||
|
James
G. Mosch
|
53
|
Executive Vice President
|
||
|
Robert
J. Size
|
52
|
Senior Vice President
|
||
|
Albert
J. Sterkenburg
|
47
|
Senior
Vice President
|
||
|
Brian
M. Addison
|
|
56
|
|
Vice
President, Secretary and General
Counsel
|
Bret W.
Wise has served as Chairman of the Board and Chief Executive Officer of the
Company since January 1, 2007 and also served as President in 2007 and
2008. Prior to that time, Mr. Wise served as President and Chief
Operating Officer in 2006, as Executive Vice President in 2005 and Senior Vice
President and Chief Financial Officer from December 2002 through December
2004. Prior to that time, Mr. Wise was Senior Vice President and
Chief Financial Officer with Ferro Corporation of Cleveland, OH (1999 -
2002), Vice President and Chief Financial Officer at WCI Steel, Inc.,
of Warren, OH, (1994 - 1999) and prior to that he was a partner with
KPMG LLP. Mr. Wise is a Certified Public Accountant.
Christopher
T. Clark has served as Chief Operating Officer of the Company since January 1,
2007, also serving as President since January 1, 2009 and as Executive Vice
President in 2007 and 2008. Prior to that time, Mr. Clark served as
Senior Vice President (2003 - 2005), as Vice President and General Manager of
DENTSPLY’s global imaging business (1999 - 2002), as Vice President and General
Manager of the Prosthetics Division (1996 - 1999), and as Director of Marketing
of DENTSPLY’S Prosthetics Division (1992 - 1996). Prior to
September 1992, Mr. Clark held various brand management positions with Proctor
& Gamble.
William
R. Jellison has served as Senior Vice President and Chief Financial Officer of
the Company since January 2005, a position he also held from April 1998 until
November 2002. From November 2002 until January 2005, Mr. Jellison
served as a Senior Vice President with operating
responsibilities. Prior to April 1998, Mr. Jellison held various
financial management positions including Vice President of Finance, Treasurer
and Corporate Controller for Donnelly Corporation of Holland, Michigan since
1980. Mr. Jellison is a Certified Management Accountant.
James G.
Mosch has served as Executive Vice President since January 1, 2009, and prior to
that as Senior Vice President since 2003. Prior to that, Mr. Mosch
served as Vice President and General Manager of DENTSPLY’s Professional
division, beginning in July 1994 when, he started with the
Company. Prior to 1994, Mr. Mosch served in general management and
marketing positions with Baxter International and American Hospital Supply
Corporation.
Robert J.
Size has served as Senior Vice President since January 1, 2007. Prior
to that, Mr. Size served as a Vice President (2006) and as Vice President and
General Manager of DENTSPLY’s Caulk division beginning June 2003 through
December 31, 2005. Prior to that time, he was the Chief Executive
Officer and President of Superior MicroPowders and held various cross-functional
and international leadership positions with The Cookson Group.
- 15
- -
Albert J.
Sterkenburg, D.D.S. has served as Senior Vice President since January 1,
2009. Prior to that, Dr. Sterkenburg served as Vice President (2006 -
2009), Vice President and General Manager of the DeguDent division (2003 - 2006)
and Vice President and General Manager of the VDW division beginning in
2000. Prior to that time, he served in marketing and general
management roles at Johnson & Johnson.
Brian M.
Addison has served as Vice President, Secretary and General Counsel of the
Company since January 1, 1998. Prior to that, he was Assistant
Secretary and Corporate Counsel beginning in December 1994. Prior to
that he was a Partner at the Harrisburg, Pennsylvania law firm of McNees,
Wallace & Nurick, and prior to that he was Senior Counsel at Hershey Foods
Corporation.
- 16
- -
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
The
information set forth under the caption “Supplemental Stock Information” is
filed as part of this Form 10-K.
The Board
of Directors has authorized the Company to repurchase shares under its stock
repurchase program in an amount up to 22,000,000 shares of treasury
stock. The table below contains certain information with respect to
the repurchase of shares of the Company's common stock during the quarter ended
December 31, 2010.
|
Number
of
|
||||||||||||||||
|
(in
thousands, except per share amounts)
|
Shares
that
|
|||||||||||||||
|
May
be Purchased
|
||||||||||||||||
|
Total
Number
|
Average
Price
|
Total
Cost
|
Under
the Share
|
|||||||||||||
|
of
Shares
|
Paid
Per
|
of
Shares
|
Repurchase
|
|||||||||||||
|
Period
|
Purchased
|
Share
|
Purchased
|
Program
|
||||||||||||
|
October
1-31, 2010
|
- | $ | - | $ | - | 1,328.0 | ||||||||||
|
November
1-30, 2010
|
500.0 | 30.91 | 15,457.0 | 904.1 | ||||||||||||
|
December
1-31, 2010
|
- | - | - | 959.9 | ||||||||||||
| 500.0 | $ | 30.91 | $ | 15,457.0 | ||||||||||||
- 17
- -
Performance
Graph
The
following graph compares the Company’s cumulative total stockholder return
(Common Stock price appreciation plus dividends, on a reinvested basis) over the
last five fiscal years with the NASDAQ Composite Index, the Standard &
Poor’s S&P 500 Index and the Standard & Poor’s S&P Health Care
Index.
| 12/05 | 12/06 | 12/07 | 12/08 | 12/09 | 12/10 | |||||||||||||||||||
|
DENTSPLY
International Inc.
|
100.00 | 111.73 | 169.23 | 106.73 | 133.79 | 130.78 | ||||||||||||||||||
|
NASDAQ
Composite
|
100.00 | 111.74 | 124.67 | 73.77 | 107.12 | 125.93 | ||||||||||||||||||
|
S&P
500
|
100.00 | 115.80 | 122.16 | 76.96 | 97.33 | 111.99 | ||||||||||||||||||
|
S&P
Health Care
|
100.00 | 107.53 | 115.22 | 88.94 | 106.46 | 109.55 |
- 18
- -
Item
6. Selected Financial Data
The
information set forth under the caption “Selected Financial Data” is filed as
part of this Form 10-K.
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” is filed as part of this Form
10-K.
Item
7A. Quantitative and Qualitative Disclosure about Market
Risk
The
information set forth under the caption “Quantitative and Qualitative Disclosure
about Market Risk” is filed as part of this Form 10-K.
Item
8. Financial Statements and Supplementary Data
The
information set forth under the captions “Management’s Report on Internal
Control Over Financial Reporting,” “Report of Independent Registered Public
Accounting Firm,” “Consolidated Statements of Operations,” “Consolidated Balance
Sheets,” “Consolidated Statements of Equity and Comprehensive Income,”
“Consolidated Statements of Cash Flows,” and “Notes to Consolidated Financial
Statements” is filed as part of this Form 10-K.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not
applicable.
Item
9A. Controls and Procedures
(a) Conclusion Regarding the Effectiveness
of Disclosure Controls and Procedures
The
Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the
Company’s disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
report were effective to provide reasonable assurance that the information
required to be disclosed by the Company in reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms and that it is accumulated
and communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
(b)
Management’s Report on Internal Control Over Financial Reporting
Management’s
report on the Company’s internal control over financial reporting is included
under Item 15(a)(1) of this Form 10-K.
(c)
Changes in Internal Control Over Financial Reporting
There
have been no changes in the Company’s internal control over financial reporting
that occurred during the quarter ended December 31, 2010 that have materially
affected, or are likely to materially affect, its internal control over
financial reporting.
Item
9B. Other Information
Not
applicable.
- 19
- -
PART
III
Item
10. Directors, Executive Officers and Corporate
Governance
The
information (i) set forth under the caption “Executive Officers of the
Registrant” in Part I of this Form 10-K and (ii) set forth under the captions
“Election of Directors” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in the 2011 Proxy Statement is incorporated herein by
reference.
Code
of Ethics
The
Company has adopted a Code of Business Conduct and Ethics that applies to the
Chief Executive Officer and the Chief Financial Officer and substantially all of
the Company's management level employees. A copy of the Code of
Business Conduct and Ethics is available upon request without charge by writing
to DENTSPLY International Inc., Attention: Investor Relations Suite 60, 221 West
Philadelphia Street, York, PA 17405.
Item
11. Executive Compensation
The
information set forth under the caption “Report on Executive Compensation” in
the 2011 Proxy Statement is incorporated herein by reference.
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The
information set forth under the caption “Security Ownership of Certain
Beneficial Owners and Management” and “Securities Authorized for Issuance Under
Equity Compensation Plans” in the 2011 Proxy Statement is incorporated herein by
reference.
Item
13. Certain Relationships and Related Transactions and Director
Independence
The
information required under this item number is presented in the 2011 Proxy
Statement, which is incorporated herein by reference.
Item
14. Principal Accounting Fees and Services
The
information set forth under the caption “Relationship with Independent
Registered Public Accounting Firm” in the 2011 Proxy Statement is incorporated
herein by reference.
- 20
- -
PART
IV
Item
15. Exhibits and Financial Statement Schedule
|
(a)
|
Documents
filed as part of this Report
|
|
1.
|
Financial
Statements
|
The
following consolidated financial statements of the Company are filed as part of
this Form 10-K:
Management’s
Report on Internal Control Over Financial Reporting
Report of
Independent Registered Public Accounting Firm
Consolidated
Statements of Operations - Years ended December 31, 2010, 2009 and
2008
Consolidated
Balance Sheets - December 31, 2010 and 2009
Consolidated
Statements of Equity and Comprehensive Income - Years ended December 31, 2010,
2009 and 2008
Consolidated
Statements of Cash Flows - Years ended December 31, 2010, 2009 and
2008
Notes to
Consolidated Financial Statements
|
2.
|
Financial
Statement Schedule
|
The
following financial statement schedule is filed as part of this Form 10-K and is
covered by the Report of Independent Registered Public Accounting
Firm:
Schedule
II — Valuation and Qualifying Accounts.
All other
schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are not required to be included herein
under the related instructions or are inapplicable and, therefore, have been
omitted.
|
3.
|
Exhibits
|
The
Exhibits listed below are filed or incorporated by reference as part of the
Company’s Form 10-K.
|
Exhibit
|
||
|
Number
|
Description
|
|
|
3.1
|
Restated
Certificate of Incorporation (5)
|
|
|
3.2
|
By-Laws,
as amended (Filed herewith)
|
|
|
4.1
|
(a)
|
United
States Commercial Paper Issuing and paying Agency Agreement dated as of
August 12, 1999 between the Company and the Chase Manhattan Bank
(2)
|
|
(b)
|
United
States Commercial Paper Dealer Agreement dated as of March 28, 2002
between the Company and Salomon Smith Barney Inc. (6)
|
|
|
(c)
|
Japanese
Yen Term Loan Agreement, due March 28, 2012 dated as of July 31, 2008
(9)
|
|
|
4.3
|
Revolving
Credit Agreement dated as of May 7, 2010 final maturity in May
2013, among the Company, the Initial Lenders named therein, the banks
named therein, J.P. Morgan Chase Bank, N.A. as Administrative Agent, Wells
Fargo Bank, N. A. as Syndication Agent, Citibank, N.A., The Bank of
Tokyo-Mitsubishi UFJ, Ltd. And Commerzbank AG, New York and Grand Cayman
branches as Co-Documentation Agents, and J.P. Morgan Securities Inc. and
Wells Fargo Securities, LLC as Joint Bookrunners and Joint Lead Arrangers.
(Filed herewith)
|
|
|
4.4
|
Private
Placement Note Purchase Agreement, due February 19, 2016 dated
as of October 16, 2009 (10)
|
|
|
4.5
|
Swiss
Franc Term Loan Agreement, due March 1, 2012 dated as of February 24, 2010
(Filed herewith)
|
|
|
10.1
|
1998
Stock Option Plan (1)
|
|
|
10.2
|
2002
Amended and Restated Equity Incentive Plan (8)
|
|
|
10.3
|
Restricted
Stock Unit Deferral Plan (7)
|
|
|
10.4
|
(a)
|
Trust
Agreement for the Company's Employee Stock Ownership Plan between the
Company and T. Rowe Price Trust Company dated as of November 1, 2000
(3)
|
|
(b)
|
Plan
Recordkeeping Agreement for the Company's Employee Stock Ownership Plan
between the Company and T. Rowe Price Trust Company dated as of November
1, 2000 (3)
|
|
|
10.5
|
DENTSPLY
Supplemental Saving Plan Agreement dated as of December 10, 2007
(8)
|
- 21
- -
|
10.6
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and Bret W. Wise* (8)
|
|
|
10.7
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and Christopher T. Clark* (8)
|
|
|
10.8
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and William R. Jellison* (8)
|
|
|
10.9
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and Brian M. Addison* (8)
|
|
|
10.10
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and James G. Mosch* (8)
|
|
|
10.11
|
Amended
and Restated Employment Agreement entered February 19, 2008 between the
Company and Robert J. Size* (8)
|
|
|
10.12
|
Amended
and Restated Employment Agreement entered January 1, 2009 between the
Company’s subsidiary, DeguDent GMBH and Albert Sterkenburg*
(9)
|
|
|
10.13
|
DENTSPLY
International Inc. Directors' Deferred Compensation Plan effective January
1, 2007, as amended* (9)
|
|
|
10.14
|
Board
Compensation Arrangement*(10)
|
|
|
10.15
|
Supplemental
Executive Retirement Plan effective January 1, 1999, as amended January 1,
2008* (9)
|
|
|
10.16
|
Written
Description of the Amended and Restated Incentive Compensation Plan*
(9)
|
|
|
10.17
|
AZ
Trade Marks License Agreement, dated January 18, 2001 between AstraZeneca
AB and Maillefer Instruments Holdings, S.A. (3)
|
|
|
10.18
|
(a)
|
Precious
metal inventory Purchase and Sale Agreement dated November 30, 2001, as
amended October 10, 2006 between Bank of Nova Scotia and the Company
(7)
|
|
(b)
|
Precious
metal inventory Purchase and Sale Agreement dated December 20, 2001
between JPMorgan Chase Bank and the Company (4)
|
|
|
(c)
|
Precious
metal inventory Purchase and Sale Agreement dated December 20, 2001
between Mitsui & Co., Precious Metals Inc. and the Company
(4)
|
|
|
(d)
|
Precious
metal inventory Purchase and Sale Agreement dated December 15, 2005
between ABN AMRO NV, Australian Branch and the Company
(7)
|
|
|
(e)
|
Precious
metal inventory Purchase and Sale Agreement dated January 30, 2002 between
Dresdner Bank AG, Frankfurt, and the Company (8)
|
|
|
10.19
|
Executive
Change in Control Plan for foreign executives, as amended December 31,
2008* (10)
|
|
|
10.20
|
2010
Equity Incentive Plan (Filed herewith)
|
|
|
21.1
|
Subsidiaries
of the Company (Filed herewith)
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - PricewaterhouseCoopers
LLP
|
|
|
31
|
Section
302 Certification Statements
|
|
|
32
|
Section
906 Certification Statement
|
|
|
101.INS
|
XBRL
Instance Document
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL
Extension Labels Linkbase Document
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
Document
|
|
|
*
|
Management
contract or compensatory plan.
|
|
(1)
|
Incorporated
by reference to exhibit included in the Company's Registration Statement
on Form S-8 dated June 4, 1998 (No.
333-56093).
|
|
(2)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 1999, File No.
0-16211.
|
|
(3)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 2000, File No.
0-16211.
|
|
(4)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 2001, File No.
0-16211.
|
|
(5)
|
Incorporated
by reference to exhibit included in the Company's Registration Statement
on Form S-8 dated November 27, 2002 (No.
333-101548).
|
|
(6)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 2002, File No.
0-16211.
|
|
(7)
|
Incorporated
by reference to exhibit included in the Company’s Form 10-K for the fiscal
year ended December 31, 2006, File no.
0-16211.
|
|
(8)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 2007, File No.
0-16211.
|
|
(9)
|
Incorporated
by reference to exhibit included in the Company's Form 10-K for the fiscal
year ended December 31, 2008, File No.
0-16211
|
|
(10)
|
Incorporated
by reference to exhibit included in the Company’s Form 10-K for the fiscal
year ended December 31, 2009, File no.
0-16211.
|
- 22
- -
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS
FOR THE
YEARS ENDED DECEMBER 31, 2010, 2009 and 2008
|
Additions
|
||||||||||||||||||||||||
|
(in
thousands)
|
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
|
||||||||||||||||||
|
Allowance
for doubtful accounts:
|
||||||||||||||||||||||||
|
For
Year Ended December 31,
|
||||||||||||||||||||||||
|
2008
|
$ | 18,578 | $ | 3,674 | $ | (348 | ) | $ | (1,705 | ) | $ | (1,350 | ) | $ | 18,849 | |||||||||
|
2009
|
18,849 | (3,124 | ) (a) | 17 | (4,253 | ) | 746 | 12,235 | ||||||||||||||||
|
2010
|
12,235 | (233 | ) | 111 | (2,611 | ) | (682 | ) | 8,820 | |||||||||||||||
|
Allowance
for trade discounts:
|
||||||||||||||||||||||||
|
For
Year Ended December 31,
|
||||||||||||||||||||||||
|
2008
|
$ | 307 | $ | 267 | $ | 4 | $ | - | $ | (59 | ) | $ | 519 | |||||||||||
|
2009
|
519 | 505 | - | - | 79 | 1,103 | ||||||||||||||||||
|
2010
|
1,103 | 655 | - | (970 | ) | 21 | 809 | |||||||||||||||||
|
Inventory
valuation reserves:
|
||||||||||||||||||||||||
|
For
Year Ended December 31,
|
||||||||||||||||||||||||
|
2008
|
$ | 26,190 | $ | 3,261 | $ | 1,938 | $ | (1,981 | ) | $ | (1,019 | ) | $ | 28,389 | ||||||||||
|
2009
|
28,389 | 5,883 | 80 | (3,610 | ) | 1,190 | 31,932 | |||||||||||||||||
|
2010
|
31,932 | 6,590 | 760 | (3,652 | ) | (161 | ) | 35,469 | ||||||||||||||||
|
Deferred
tax asset valuation allowance:
|
||||||||||||||||||||||||
|
For
Year Ended December 31,
|
||||||||||||||||||||||||
|
2008
|
$ | 50,250 | $ | 603 | $ | - | $ | (13,203 | ) (b) | $ | (909 | ) | $ | 36,741 | ||||||||||
|
2009
|
36,741 | 13,419 | - | - | 1,649 | 51,809 | ||||||||||||||||||
|
2010
|
51,809 | 29,642 | - | - | (6,059 | ) | 75,392 | |||||||||||||||||
|
(a)
|
See
Note 1, Significant Accounting Policies, to the consolidated financial
statements, for further discussion.
|
|
(b)
|
The
write-offs during 2008 are the result of a global tax restructuring
project, tax audit closures, and expired tax
losses.
|
- 23
- -
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED
FINANCIAL DATA
(in
thousands, except per share amounts)
|
Year
ended December 31,
|
||||||||||||||||||||
|
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
|
Statement
of Operations Data:
|
||||||||||||||||||||
|
Net
sales
|
$ | 2,221,014 | $ | 2,159,378 | $ | 2,191,465 | $ | 2,009,833 | $ | 1,810,496 | ||||||||||
|
Net
sales, excluding precious metal content
|
2,031,757 | 1,990,666 | 1,991,542 | 1,819,899 | 1,623,074 | |||||||||||||||
|
Gross
profit
|
1,130,158 | 1,106,363 | 1,147,900 | 1,040,783 | 929,011 | |||||||||||||||
|
Restructuring
and other costs
|
10,984 | 6,890 | 32,355 | 10,527 | 7,807 | |||||||||||||||
|
Operating
income
|
380,273 | 381,243 | 380,461 | 354,891 | 314,794 | |||||||||||||||
|
Income
before income taxes
|
357,656 | 363,356 | 354,873 | 358,192 | 314,837 | |||||||||||||||
|
Net
Income
|
267,335 | 274,412 | 283,270 | 259,654 | 223,718 | |||||||||||||||
|
Net
income attributable to DENTSPLY International
|
$ | 265,708 | $ | 274,258 | $ | 283,869 | $ | 259,654 | $ | 223,718 | ||||||||||
|
Earnings
per common share:
|
||||||||||||||||||||
|
Basic
|
$ | 1.85 | $ | 1.85 | $ | 1.90 | $ | 1.71 | $ | 1.44 | ||||||||||
|
Diluted
|
$ | 1.82 | $ | 1.83 | $ | 1.87 | $ | 1.68 | $ | 1.41 | ||||||||||
|
Cash
dividends declared per common share
|
$ | 0.200 | $ | 0.200 | $ | 0.185 | $ | 0.165 | $ | 0.145 | ||||||||||
|
Weighted
Average Common Shares Outstanding:
|
||||||||||||||||||||
|
Basic
|
143,980 | 148,319 | 149,069 | 151,707 | 155,229 | |||||||||||||||
|
Diluted
|
145,985 | 150,102 | 151,679 | 154,721 | 158,271 | |||||||||||||||
|
Balance
Sheet Data:
|
||||||||||||||||||||
|
Cash
and cash equivalents
|
$ | 540,038 | $ | 450,348 | $ | 204,249 | $ | 316,323 | $ | 65,143 | ||||||||||
|
Property,
plant and equipment, net
|
423,105 | 439,619 | 432,276 | 371,409 | 329,616 | |||||||||||||||
|
Goodwill
and other intangibles, net
|
1,381,798 | 1,401,682 | 1,380,744 | 1,203,587 | 1,063,030 | |||||||||||||||
|
Total
assets
|
3,257,951 | 3,087,932 | 2,830,400 | 2,675,569 | 2,181,350 | |||||||||||||||
|
Total
debt and notes payable
|
611,769 | 469,325 | 449,474 | 483,307 | 370,156 | |||||||||||||||
|
Equity
|
1,909,912 | 1,906,958 | 1,659,413 | 1,516,106 | 1,273,835 | |||||||||||||||
|
Return
on average equity
|
13.9 | % | 15.4 | % | 17.9 | % | 18.6 | % | 17.8 | % | ||||||||||
|
Long-term
debt to total capitalization
|
24.1 | % | 16.9 | % | 20.3 | % | 24.1 | % | 22.4 | % | ||||||||||
|
Other
Data:
|
||||||||||||||||||||
|
Depreciation
and amortization
|
$ | 66,340 | $ | 65,175 | $ | 56,929 | $ | 50,289 | $ | 47,434 | ||||||||||
|
Cash
flows from operating activities
|
362,324 | 362,489 | 335,981 | 387,697 | 271,855 | |||||||||||||||
|
Capital
expenditures
|
44,236 | 56,481 | 76,440 | 64,163 | 50,616 | |||||||||||||||
|
Interest
expense (income), net
|
20,835 | 16,864 | 15,438 | (2,645 | ) | (1,683 | ) | |||||||||||||
|
Inventory
days
|
100 | 99 | 103 | 92 | 94 | |||||||||||||||
|
Receivable
days
|
54 | 55 | 54 | 51 | 57 | |||||||||||||||
|
Effective
tax rate
|
25.0 | % | 24.5 | % | 20.2 | % | 27.5 | % | 28.9 | % | ||||||||||
- 24
- -
Item
7.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The
following Management’s Discussion and Analysis of Financial Conditions and
Results of Operations (“MD&A”) is intended to help the reader understand the
Company’s operations and present business environment. MD&A is
provided as a supplement to, and should be read in conjunction with, the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
contained in Item 8 of this Form 10-K. The following discussion
includes forward-looking statements that involve certain risks and
uncertainties. See “Forward-Looking Statements” in Item 1 of this
Form 10-K. This overview summarizes the MD&A, which includes the
following sections:
|
|
·
|
Business
– a general description of DENTSPLY’s business and how performance is
measured;
|
|
|
·
|
Results
of Operations – an analysis of the Company’s consolidated results of
operations for the three years presented in the consolidated financial
statements;
|
|
|
·
|
Critical
Accounting Estimates – a discussion of accounting policies that require
critical judgments and estimates;
and
|
|
|
·
|
Liquidity
and Capital Resources – an analysis of cash flows; debt and other
obligations; and aggregate contractual
obligations.
|
BUSINESS
DENTSPLY
International Inc. believes it is the world's largest designer, developer,
manufacturer and marketer of professional dental products. The
Company is headquartered in the United States and operates in more than 120
other countries, principally through its foreign subsidiaries. The
Company also has strategically located distribution centers to enable it to
better serve its customers and increase its operating
efficiency. While the United States and Europe are the Company's
largest markets, the Company serves all of the major professional dental markets
worldwide.
Principal
Measurements
The
principal measurements used by the Company in evaluating its business are: (1)
internal growth by geographic region; (2) constant currency growth by geographic
region; (3) operating margins of each reportable segment including product
pricing and cost controls; (4) the development, introduction and contribution of
innovative new products; and (5) growth through acquisition.
The
Company defines “internal growth” as the increase or decrease in net sales from
period to period, excluding (1) precious metal content; (2) the impact of
changes in currency exchange rates; and (3) net acquisition
growth. The Company defines “net acquisition growth” as the net
sales, excluding precious metal content, for a period of twelve months following
the transaction date of businesses that have been acquired, less the net sales,
excluding precious metal content, for a period of twelve months prior to the
transaction date of businesses that have been divested. The Company
defines “constant currency growth” as internal growth plus net acquisition
growth.
Management
believes that an average internal growth rate of 4% to 6% is a long-term
targeted rate for the Company. The internal growth rate may vary outside of this
range based on weaker or stronger economic conditions. Management expects
the Company to operate below this range in 2011 due to the current economic
conditions. Historical trends show that growth in the dental industry
generally performs better than the overall economy; however, it typically lags
the economic trend going into and coming out of slower growth or recessionary
periods. There can be no assurance that the Company’s assumptions
concerning the growth rates in its markets or the general dental market will
continue in the future. If such rates are less than expected, the
Company’s projected growth rates and results of operations may be adversely
affected.
Price
changes, other marketing and promotional programs offered to customers from time
to time, the management of inventory levels by distributors and the
implementation of strategic initiatives may impact sales and inventory levels in
a given period.
The
Company has always maintained a focus on minimizing costs and achieving
operational efficiencies. Management continues to evaluate the
consolidation of operations or functions to reduce the cost. In
addition, the Company remains focused on enhancing efficiency through expanded
use of technology and process improvement initiatives. The Company believes that
the benefits from these initiatives will improve the cost structure and help
offset areas of rising costs such as energy, employee benefits and regulatory
oversight and compliance.
- 25
- -
Product
innovation is a key component of the Company's overall growth
strategy. New advances in technology are anticipated to have a
significant influence on future products in dentistry. As a result,
the Company continues to pursue research and development initiatives to support
technological development, including collaborations with various research
institutions and dental schools. In addition, the Company licenses
and purchases technologies developed by third parties. Although the
Company believes these activities will lead to new innovative dental products,
they involve new technologies and there can be no assurance that commercialized
products will be developed.
Although
the professional dental market in which the Company operates has experienced
consolidation, it is still a fragmented industry. The Company
continues to focus on opportunities to expand the Company’s product offerings
through acquisitions. Management believes that there will continue to
be adequate opportunities to participate as a consolidator in the industry for
the foreseeable future.
Impact
of Foreign Currencies
Due to
the international nature of DENTSPLY’s business, movements in foreign exchange
rates may impact the consolidated statements of operations. With over
60% of the Company’s sales located in regions outside the U.S., the Company’s
consolidated net sales are impacted negatively by the strengthening or
positively by the weakening of the U.S. dollar. Additionally,
movements in certain foreign exchange rates may unfavorably or favorably impact
the Company’s gross profit, certain operating expenses, interest expense,
interest income, other expense and other income, as well as the assets and
liabilities.
Reclassification
of Prior Year Amounts
Certain
reclassifications have been made to prior years' data in order to conform to
current year presentation.
RESULTS
OF OPERATIONS
2010
Compared to 2009
Net
Sales
The
discussion below summarizes the Company’s sales growth, excluding precious metal
content, into the following components: (1) constant currency, which includes
internal growth and acquisition growth, and (2) foreign currency
translation. These disclosures of net sales growth provide the reader
with sales results on a comparable basis between periods.
Management
believes that the presentation of net sales, excluding precious metal content,
provides useful information to investors because a significant portion of
DENTSPLY’s net sales is comprised of sales of precious metals generated through
sales of the Company’s precious metal dental alloy products, which are used by
third parties to construct crown and bridge materials. Due to the
fluctuations of precious metal prices and because the precious metal content of
the Company’s sales is largely a pass-through to customers and has minimal
effect on earnings, DENTSPLY reports net sales both with and without precious
metal content to show the Company’s performance independent of precious metal
price volatility and to enhance comparability of performance between
periods. The Company uses its cost of precious metal purchased as a
proxy for the precious metal content of sales, as the precious metal content of
sales is not separately tracked and invoiced to customers. The
Company believes that it is reasonable to use the cost of precious metal content
purchased in this manner since precious metal dental alloy sale prices are
typically adjusted when the prices of underlying precious metals
change.
The
presentation of net sales, excluding precious metal content, is considered a
measure not calculated in accordance with US GAAP, and is therefore considered a
non-US GAAP measure. The Company provides the following
reconciliation of net sales to net sales, excluding precious metal
content. The Company’s definitions and calculations of net sales,
excluding precious metal content, and other operating measures derived using net
sales, excluding precious metal content, may not necessarily be the same as
those used by other companies.
|
Year
Ended December 31,
|
||||||||||||||||
|
(in
millions)
|
2010
|
2009
|
$ Change
|
% Change
|
||||||||||||
|
Net
sales
|
$ | 2,221.0 | $ | 2,159.4 | $ | 61.6 | 2.9 | % | ||||||||
|
Less:
Precious metal content of sales
|
189.2 | 168.7 | 20.5 | 12.2 | % | |||||||||||
|
Net
sales, excluding precious metal content
|
$ | 2,031.8 | $ | 1,990.7 | $ | 41.1 | 2.1 | % | ||||||||
- 26
- -
The 2.1%
increase in net sales, excluding precious metal content, included constant
currency growth of 2.6%, offset by currency translation, which reduced net
sales, excluding precious metal content, by 0.5%. The constant
currency sales growth was comprised of internal growth of 2.1% and acquisition
growth of 0.5%.
Constant
Currency Sales Growth
The
following table includes growth rates for net sales, excluding precious metal
content.
|
Year Ended December 31, 2010
|
||||||||||||||||
|
United
States
|
Europe
|
All Other
Regions
|
Worldwide
|
|||||||||||||
|
Internal
sales growth
|
0.1 | % | 2.9 | % | 4.1 | % | 2.1 | % | ||||||||
|
Acquisition
sales growth
|
- | 0.8 | % | 0.6 | % | 0.5 | % | |||||||||
|
Constant
currency sales growth
|
0.1 | % | 3.7 | % | 4.7 | % | 2.6 | % | ||||||||
|
Year Ended December 31, 2009
|
||||||||||||||||
|
United
States
|
Europe
|
All Other
Regions
|
Worldwide
|
|||||||||||||
|
Internal
sales growth
|
(1.7 | )% | (3.8 | )% | 0.3 | % | (2.1 | )% | ||||||||
|
Acquisition
sales growth
|
1.0 | % | 7.8 | % | 4.3 | % | 4.4 | % | ||||||||
|
Constant
currency sales growth
|
(0.7 | )% | 4.0 | % | 4.6 | % | 2.3 | % | ||||||||
United
States
During
2010, net sales, excluding precious metal content, were slightly positive, at
0.1% in the U. S. on a constant currency and internal growth
basis. Growth in dental specialty and dental consumable sundry
products, along with a strong recovery in non-dental sales were offset by lower
sales in dental laboratory and dental consumable small equipment
products.
Europe
During
2010, net sales, excluding precious metal content, increased 3.7% in Europe on a
constant currency basis, including 2.9% internal growth and acquisition growth
of 0.8%. Internal sales growth was primarily driven by growth in the
dental consumables, dental specialty and non-dental products and a business
recovery in the CIS markets, which experienced customer liquidity constraints
during 2009. These gains were partially offset by lower sales in the
dental laboratory products.
All Other
Regions
During
2010, net sales, excluding precious metal content, increased 4.7% across all
other regions on a constant currency basis, including 4.1% internal growth and
acquisition growth of 0.6%. Internal sales growth was driven
primarily by growth in dental specialty products, as well as increases for
dental consumable and non-dental products.
Gross
Profit
|
Year
Ended December 31,
|
||||||||||||||||
|
(in
millions)
|
2010
|
2009
|
$ Change
|
% Change
|
||||||||||||
|
Gross
profit
|
$ | 1,130.2 | $ | 1,106.4 | $ | 23.8 | 2.2 | % | ||||||||
|
Gross
profit as a percentage of net sales, including precious metal
content
|
50.9 | % | 51.2 | % | ||||||||||||
|
Gross
profit as a percentage of net sales, excluding precious metal
content
|
55.6 | % | 55.6 | % | ||||||||||||
- 27
- -
Gross
profit as a percentage of net sales, excluding precious metal content, was flat
during 2010 compared to 2009. Product price increases and cost
containment across the Company’s product distribution function were offset by
unfavorable product mix and negative foreign currency movements.
Expenses
Selling, General and
Administrative (“SG&A”) Expenses
|
Year
Ended December 31,
|
||||||||||||||||
|
(in
millions)
|
2010
|
2009
|
$ Change
|
% Change
|
||||||||||||
|
SG&A
expenses
|
$ | 738.9 | $ | 718.2 | $ | 20.7 | 2.9 | % | ||||||||
|
SG&A
expenses as a percentage of net sales, including precious metal
content
|
33.3 | % | 33.3 | % | ||||||||||||
|
SG&A
expenses as a percentage of net sales, excluding precious metal
content
|
36.4 | % | 36.1 | % | ||||||||||||
The
increase in SG&A expenses as a percentage of net sales, excluding precious
metal content, from 2009 to 2010 was primarily due to new investments in certain
businesses, increased spending in support of new product introductions,
reinstatement of annual salary increases and increases in certain discretionary
spending categories, such as travel expenses, partially offset by benefits from
expense reductions in other areas of the business. The Company
continues to maintain its focus on reducing costs and achieving operational
efficiencies through the consolidation of operations or functions where
opportunities exist.
Restructuring and Other
Costs
|
Year
Ended December 31,
|
|||||||||||||
|
(in
millions)
|
2010
|
2009
|
$ Change
|
% Change
|
|||||||||
|
Restructuring
and other costs
|
$ | 11.0 | $ | 6.9 | $ | 4.1 |
NM
|
||||||
NM- not
meaningful
The
Company recorded net restructuring and other costs of $11.0 million in 2010
compared to $6.9 million in 2009. The Company incurred $5.8 million
of costs related to several restructuring plans. These costs consist
of employee severance benefits, payments due under operating contracts and other
restructuring costs. The restructuring plans related to the continued
effort to streamline the Company’s operations to better leverage the Company’s
resources by reducing costs and obtaining operational
efficiencies. Additionally the Company recorded certain other costs
of $5.2 million of which $3.7 million was related to legal matters.
In 2009,
the Company incurred $5.9 million of costs related to several restructuring
plans in response to the worldwide economic crisis that began in late
2008. The restructuring plans related to the closure and/or
consolidation of certain production and selling facilities in the United States,
Europe and South America to better leverage the Company’s resources by reducing
costs and obtaining operational efficiencies. Additionally, the
Company executed targeted reductions in workforce both in the manufacturing and
non-manufacturing business functions in certain locations. Also, the
Company recorded certain other costs related to legal matters and an impairment
of an intangible asset.
Other
Income and Expenses
|
|
Year
Ended December 31,
|
|||||||||||
|
(in
millions)
|
2010
|
2009
|
$ Change
|
|||||||||
|
|
||||||||||||
|
Net
interest expense
|
$ | 20.8 | $ | 16.9 | $ | 3.9 | ||||||
|
Other
expense, net
|
1.8 | 1.0 | 0.8 | |||||||||
|
Net
interest and other expense
|
$ | 22.6 | $ | 17.9 | $ | 4.7 | ||||||
- 28
- -
Net Interest
Expense
The
change in net interest expense in 2010 compared to 2009, for the year ended
December 31, was mainly the result of higher average debt levels in the U.S.,
and lower cash levels due as a result of stock repurchases and investments in
acquisitions combined with weaker average euro exchange and lower average euro
interest rates on higher average euro cash balances. Interest income
decreased $0.7 million on lower average interest rates on euro investment
balances which were 50 basis points lower in the current year than the prior
year and the U.S. dollar was 7% stronger against the euro. Interest
expense increased $3.2 million on higher average debt partially offset by lower
interest rate difference on net investment hedges. The impact of the
Company’s net investment hedges typically move in the opposite direction of
currency movements, reducing some of the volatility caused by movement in
exchange rates on the Company’s income and equity.
Other Expense,
Net
Other
expense in the 2010 period included approximately $3.3 million of currency
transaction losses and $1.5 million of other non-operating income. The 2009
period included $0.3 million of currency transaction losses and $0.7 million of
other non-operating costs.
Income
Taxes and Net Income
|
Year
Ended December 31,
|
||||||||||||
|
(in
millions, except per share amounts)
|
2010
|
2009
|
$ Change
|
|||||||||
|
Effective
income tax rate
|
25.0 | % | 24.5 | % | ||||||||
|
Equity
in net loss of unconsolidated affilated company
|
$ | (1.1 | ) | $ | - | $ | (1.1 | ) | ||||
|
Net
income (loss) attributable to noncontrolling interests
|
$ | 1.6 | $ | 0.2 | $ | 1.4 | ||||||
|
Net
income attributable to DENTSPLY International
|
$ | 265.7 | $ | 274.3 | $ | (8.6 | ) | |||||
|
Diluted
earnings per common share
|
$ | 1.82 | $ | 1.83 | ||||||||
Income
Taxes
The
Company’s effective income tax rates for 2010 and 2009 were 25.0% and 24.5%,
respectively. In 2010, the Company’s effective income tax rate
included the impact of restructuring and other costs, acquisition related
activity, provisions for a credit risk adjustment to outstanding derivatives and
various income tax adjustments, which impacted income before income taxes and
the provision for income taxes by $14.9 million and $3.3 million,
respectively. In 2009, the Company’s effective income tax rate
included the impact of restructuring and other costs, acquisition related
activity and various income tax adjustments, which impacted income before income
taxes and the provision for income taxes by $11.0 million and $8.8 million,
respectively. In 2009, various income tax adjustments included the
impact of settlements with taxing authorities and statutes
closures.
Equity in net loss of
unconsolidated affiliated company
The
Company’s 16% ownership investment of DIO Corporation on December 9, 2010
resulted in a net loss of $1.1 million on an after-tax basis for
2010. The net loss of DIO was the result of mark-to-market charges
related to the derivative accounting for the convertible bonds issued by DIO to
DENTSPLY. The Company’s portion of the mark-to-market net loss
incurred by DIO was approximately $1.1 million.
Net income (loss)
attributable to noncontrolling interests
The
portion of consolidated net income attributable to noncontrolling interests
increased $1.4 million from 2009 to 2010. The increase is primarily
attributable to the strengthening performance of the Company’s Zhermack
division, where the Company has had a 60% ownership investment since December
2008.
- 29
- -
Net income attributable to
DENTSPLY International
In
addition to the results reported in accordance with US GAAP, the Company
provides adjusted net income attributable to DENTSPLY International and adjusted
earnings per diluted common share. These adjusted amounts consist of US
GAAP amounts excluding (1) restructuring and other costs, (2) acquisition
related charges, (3) loss on a derivative at an unconsolidated affiliated
company, (4) income tax related adjustments, and (5) credit risk adjustment to
outstanding derivatives. Adjusted earnings per diluted common share is
calculated by dividing adjusted net income attributable to DENTSPLY
International by diluted weighted-average common shares
outstanding. Adjusted net income attributable to DENTSPLY
International and adjusted earnings per diluted common share are considered
measures not calculated in accordance with US GAAP, and therefore are non-US
GAAP measures. These non-US GAAP measures may differ from other
companies.
The
Company believes that the presentation of adjusted net income attributable to
DENTSPLY International and adjusted earnings per diluted common share provides
important supplemental information to management and investors seeking to
understand the Company’s financial condition and results of operations.
The non-US GAAP financial information should not be considered in isolation
from, or as a substitute for, measures of financial performance prepared in
accordance with US GAAP.
|
Year
Ended December 31, 2010
|
||||||||
|
Income
|
Per
Diluted
|
|||||||
|
(in
thousands, except per share amounts)
|
(Expense)
|
Common Share
|
||||||
|
Net
income attributable to DENTSPLY International
|
$ | 265,708 | $ | 1.82 | ||||
|
Restructuring
and other costs, net of tax and noncontrolling interests
|
7,139 | 0.05 | ||||||
|
Acquisition
related activities, net of tax and noncontrolling
interests
|
2,152 | 0.01 | ||||||
|
Loss
on derivative at an unconsolidated affiliated company
|
1,131 | 0.01 | ||||||
|
Income
tax related adjustments
|
1,073 | 0.01 | ||||||
|
Credit
risk adjustment to outstanding derivatives, net of tax
|
732 | 0.01 | ||||||
|
Rounding
|
- | (0.01 | ) | |||||
|
Adjusted
non-US GAAP earnings
|
$ | 277,935 | $ | 1.90 | ||||
|
Year
Ended December 31, 2009
|
||||||||
|
Income
|
Per
Diluted
|
|||||||
|
(in
thousands, except per share amounts)
|
(Expense)
|
Common Share
|
||||||
|
Net
income attributable to DENTSPLY International
|
$ | 274,258 | $ | 1.83 | ||||
|
Restructuring
and other costs, net of tax and noncontrolling interests
|
5,075 | 0.03 | ||||||
|
Acquisition
related activities, net of tax and noncontrolling
interests
|
1,830 | 0.01 | ||||||
|
Income
tax related adjustments
|
(5,423 | ) | (0.03 | ) | ||||
|
Adjusted
non-US GAAP earnings
|
$ | 275,740 | $ | 1.84 | ||||
Operating
Segment Results
The
Company’s operating businesses are combined into operating groups, which have
overlapping product offerings, geographic presence, customer bases, distribution
channels and regulatory oversight. These operating groups are
considered the Company’s reportable segments as the Company’s chief operating
decision-maker regularly reviews financial results at the operating group level
and uses this information to manage the Company’s operations. Each of
these operating groups covers a wide range of product categories and geographic
regions. The product categories and geographic regions often overlap
across the groups. Further information regarding the details of each
group is presented in Note 4, Segment and Geographic Information, to the
consolidated financial statements. The management of each group is
evaluated for performance and incentive compensation purposes on net third party
sales, excluding precious metal content, and segment operating
income.
In
January 2010, the Company moved the reporting responsibility for several
locations between segments which resulted in a change to the management
structure and helped the Company gain operating efficiencies and
effectiveness. The segment information below reflects this revised
structure for all periods shown.
- 30
- -
|
Net Sales, Excluding Precious Metal Content
|
||||||||||||||||
|
(in millions)
|
Year Ended December 31,
|
|||||||||||||||
|
2010
|
2009
|
$ Change
|
% Change
|
|||||||||||||
|
U.S., Germany
and Certain Other
|
||||||||||||||||
|
European
Regions Consumable Businesses
|
$ | 526.8 | $ | 526.7 | $ | 0.1 | - | |||||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||||||
|
Africa,
Pacific Rim Businesses
|
$ | 445.6 | $ | 436.8 | $ | 8.8 | 2.0 | % | ||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||||||
|
Orthodontics
|
$ | 662.6 | $ | 618.4 | $ | 44.2 | 7.1 | % | ||||||||
|
Dental
Laboratory Business/
|
||||||||||||||||
|
Implants/Non-Dental
|
$ | 400.1 | $ | 412.2 | $ | (12.1 | ) | (2.9 | )% | |||||||
|
Segment Operating Income
|
||||||||||||||||
|
(in millions)
|
Year Ended December 31,
|
|||||||||||||||
|
2010
|
2009
|
$ Change
|
% Change
|
|||||||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||||||
|
European
Regions Consumable Businesses
|
$ | 176.1 | $ | 158.4 | $ | 17.7 | 11.2 | % | ||||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||||||
|
Africa,
Pacific Rim Businesses
|
$ | 17.2 | $ | 19.7 | $ | (2.5 | ) | (12.7 | )% | |||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||||||
|
Orthodontics
|
$ | 195.8 | $ | 185.8 | $ | 10.0 | 5.4 | % | ||||||||
|
Dental
Laboratory Business/
|
||||||||||||||||
|
Implants/Non-Dental
|
$ | 83.4 | $ | 92.6 | $ | (9.2 | ) | (9.9 | )% | |||||||
U.S.,
Germany and Certain Other European Regions Consumable Businesses
Net
sales, excluding precious metal content, were unchanged between the years ended
December 31, 2010 and 2009. On a constant currency basis, net sales,
excluding precious metals content, increased 1.6%, which included positive
endodontic sales and dental consumable product sales, excluding small equipment,
where 2009 was favorably impacted by increased net sales from promotional
activities.
Operating
income increased $17.7 million during the year ended December 31, 2010 compared
to 2009. Operating income was positively impacted by gross profit,
which was a result of higher net sales in European consumables markets, improved
manufacturing performance and an increase in sales price. Additionally, the 2009
results included a roll-off of inventory step-up related to acquisitions of $4
million. Operating income was further helped by a $6 million decrease
in selling, general and administrative expenses for 2010, of which half was due
to foreign currency translation.
France,
U.K., Italy and Certain Other European Countries, CIS, Middle East, Africa,
Pacific Rim Businesses
Net
sales, excluding precious metal content, increased $8.8 million, or 2.0%, during
the year ended December 31, 2010 compared to 2009. On a constant
currency basis, net sales, excluding precious metal content, increased $8.6
million, or 2.0%. This increase is primarily related to the
continuing business recovery in the CIS markets.
- 31
- -
Operating
income decreased $2.5 million during the year ended December 31, 2010 compared
to 2009. The decrease was driven primarily attributable to $4 million
higher expenses for certain investments in emerging markets partially offset by
an increase of $1.5 million in gross profit, primarily due to foreign currency
translation.
Canada/Latin
America/Endodontics/Orthodontics
Net
sales, excluding precious metal content, increased $44.2 million, or 7.1%,
during the year ended December 31, 2010 compared to 2009. On a
constant currency basis, net sales, excluding precious metal content, increased
by 5.5% primarily driven by dental specialty and non-dental
products. In addition, the 5.5% of constant currency growth included
1.1% of acquisition growth.
Operating
income increased $10.0 million during the year ended December 31, 2010 compared
to 2009. The increase was driven by a $25 million increase in gross
profit which was primarily from the endodontics business, as well as favorable
impacts from foreign currency translation. Offsetting this increase
in gross profit was a $15 million increase in selling, general and
administrative costs, which included incremental investments to promote certain
dental specialty products, the negative impact of foreign currency translation
and increased expenses in the Latin America businesses.
Dental
Laboratory Business/Implants/Non-Dental
Net
sales, excluding precious metal content, decreased $12.1 million, or 2.9%,
during the year ended December 31, 2010 compared to 2009. On a
constant currency basis, net sales, excluding precious metal content were flat
as growth in the dental implant and non-dental businesses was offset by the
dental laboratory business.
Operating
income decreased $9.2 million during the year ended December 31, 2010 compared
to 2009, primarily due to lower operating income in the dental laboratory
business.
RESULTS
OF OPERATIONS
2009
Compared to 2008
Net
Sales
The
discussion below summarizes the Company’s sales growth, excluding precious metal
content, from internal growth and net acquisition growth and highlights the
impact of foreign currency translation. These disclosures of net
sales growth provide the reader with sales results on a comparable basis between
periods.
|
Year Ended December 31,
|
||||||||||||||||
|
(in millions)
|
2009
|
2008
|
$ Change
|
% Change
|
||||||||||||
|
Net
sales
|
$ | 2,159.4 | $ | 2,191.5 | $ | (32.1 | ) | (1.5 | )% | |||||||
|
Less:
Precious metal content of sales
|
168.7 | 200.0 | (31.3 | ) | (15.7 | )% | ||||||||||
|
Net
sales, excluding precious metal content
|
$ | 1,990.7 | $ | 1,991.5 | $ | (0.8 | ) | - | ||||||||
Net
sales, excluding precious metal content, for 2009 was $1,990.7 million, which
remained relatively unchanged when compared to 2008. Net sales,
excluding precious metal content, included constant currency growth of 2.3%,
offset by currency translation, which reduced sales by
2.4%. The constant currency sales growth was comprised of
acquisition growth of 4.4%, partially offset by internal growth of negative
2.1%. Sales for dental products grew on a constant currency basis by
3.0%, including internal growth of negative 1.3% and acquisition growth of
4.3%.
Internal
Sales Growth
United
States
In 2009,
net sales, excluding precious metal content, decreased 0.7% in the United States
on a constant currency basis, including 1.0% acquisition growth and internal
growth of negative 1.7%. The negative internal growth was primarily
driven by lower sales in dental laboratory and non-dental products, which was
partially offset by internal growth in dental consumables products.
- 32
- -
Europe
In 2009,
net sales, excluding precious metal content, increased 4.0% in Europe on a
constant currency basis, including 7.8% acquisition growth and internal growth
of negative 3.8%. The negative internal growth was primarily driven
by lower sales in dental consumables, dental laboratory products and non-dental
products, which was partially offset by internal growth in dental specialty
products.
All Other
Regions
In 2009,
net sales, excluding precious metal content, increased 4.6% across all other
regions on a constant currency basis, including 4.3% acquisition growth and
internal growth of 0.3%. The dental consumables and dental specialty
products had positive internal growth, which was partially offset by negative
internal growth in dental laboratory and non-dental products.
Gross
Profit
|
Year Ended December 31,
|
||||||||||||||||
|
(in millions)
|
2009
|
2008
|
$ Change
|
% Change
|
||||||||||||
|
Gross
profit
|
$ | 1,106.4 | $ | 1,147.9 | $ | (41.5 | ) | (3.6 | )% | |||||||
|
Gross
profit as a percentage of net sales, including precious metal
content
|
51.2 | % | 52.4 | % | ||||||||||||
|
Gross
profit as a percentage of net sales, excluding precious metal
content
|
55.6 | % | 57.6 | % | ||||||||||||
Gross
profit as a percentage of net sales, excluding precious metal content, decreased
2.0 percentage points in 2009 compared to 2008. The decrease is the
result of unfavorable product and geographic sales mix, unfavorable
manufacturing overhead absorption and movements in foreign
currencies. Additionally, acquisitions completed in 2008 negatively
impacted gross profit as a percentage of net sales.
Expenses
Selling, General and
Administrative Expenses
|
Year Ended December 31,
|
||||||||||||||||
|
(in millions)
|
2009
|
2008
|
$ Change
|
% Change
|
||||||||||||
|
SG&A
expenses
|
$ | 718.2 | $ | 735.1 | $ | (16.9 | ) | (2.3 | )% | |||||||
|
SG&A
expenses as a percentage of net sales, including precious metal
content
|
33.3 | % | 33.5 | % | ||||||||||||
|
SG&A
expenses as a percentage of net sales, excluding precious metal
content
|
36.1 | % | 36.9 | % | ||||||||||||
The
reduction in SG&A expenses as a percentage of net sales, excluding precious
metal content, was largely the result of the Company’s focus on cost containment
in response to the recessionary economic conditions that occurred in late 2008
through 2009. In early 2009, the Company undertook action on
discretionary expense categories, such as travel, and addressed
non-discretionary expense categories where appropriate. Additionally,
the Company executed several restructuring plans that focused on reductions in
overhead spending. Although cost reductions were made across the
Company, management continues to focus on controlling costs while creating and
maintaining financial flexibility. These cost containment efforts
were partially offset by a higher percentage of SG&A expenses in businesses
acquired in 2008, costs related to the 2009 biennial International Dental Show
and cost increases and higher investments in sales and marketing to support
future growth in certain geographic areas.
- 33
- -
Restructuring and Other
Costs
|
Year Ended December 31,
|
|||||||||||||
|
(in millions)
|
2009
|
2008
|
$ Change
|
% Change
|
|||||||||
|
Restructuring
and other costs
|
$ | 6.9 | $ | 32.4 | $ | (25.5 | ) |
NM
|
|||||
|
NM
- Not Meaningful
|
|||||||||||||
The
Company recorded net restructuring and other costs of $6.9 million in 2009
compared to $32.4 million in 2008. The Company incurred $5.9 million
of costs in 2009 related to several restructuring plans in response to the
worldwide economic crisis that began in late 2008. The restructuring
plans related to the closure and/or consolidation of certain production and
selling facilities in the United States, Europe and South America to better
leverage the Company’s resources by reducing costs and obtaining operational
efficiencies. Additionally, the Company executed targeted reductions
in workforce both in the manufacturing and non-manufacturing business functions
in certain locations. Also, the Company recorded certain other costs
related to legal matters and an impairment of an intangible
asset. The 2010 restructuring plans and ongoing benefits associated
with these plans were immaterial to the current period as well as future
periods. The majority of the benefits of the 2009 and 2008 and prior
period restructuring plans have been incorporated into the Company’s
results. While certain restructuring plans continue to be executed,
the future benefits of these on the Company’s results would be immaterial in the
period realized.
In 2008,
the Company recorded costs of $24.2 million related to legal settlements and
impairments of long-term assets. The legal settlements related to
several legal matters with multiple plaintiffs. These cases included
a patent dispute and cases relating to a prior distribution practice of the
Company in connection with the sale of artificial teeth. The
impairment charge was related to abandonment of patented technology purchased in
2005 and the impairment of a long-term note receivable recorded from a sale of a
business in 2006. The impairment of the long-term note receivable
occurred as the result of a change in payment terms on the non-interest bearing
note receivable. Additionally, the Company initiated several
restructuring plans primarily related to the closure and consolidation of
certain production and selling facilities in the United States, Europe and Asia
to better leverage the Company’s resources by reducing costs and obtaining
operational efficiencies. These restructuring plans included charges
of $5.9 million. The Company also expensed $2.3 million for the fair
value of in-process research and development associated with acquired businesses
(See Note 14, Restructuring and Other Costs, to the consolidated financial
statements).
Other
Income and Expenses
|
Year Ended December 31,
|
||||||||||||
|
(in millions)
|
2009
|
2008
|
$ Change
|
|||||||||
|
Net
interest expense (income)
|
$ | 16.9 | $ | 15.4 | $ | 1.5 | ||||||
|
Other
expense (income), net
|
1.0 | 10.2 | (9.2 | ) | ||||||||
|
Net
interest and other expense (income)
|
$ | 17.9 | $ | 25.6 | $ | (7.7 | ) | |||||
Net Interest Expense
(Income)
The
change in net interest expense in 2009 compared to 2008 was primarily due to
lower interest rates earned on invested cash balances offset by lower average
debt and interest rates on the Company’s Euro net investment
hedges. The impact of the Company’s net investment hedges typically
move in the opposite direction of currency movements, reducing some of the
volatility caused by movement in exchange rates on the Company’s income and
equity.
Other Expense (Income),
Net
Other
expense in the 2009 period included approximately $0.3 million of currency
transaction losses and $0.7 million of other non-operating costs. The 2008
period included $8.9 million of currency transaction losses and $1.3 million of
other non-operating costs. In the fourth quarter of 2008, currency exchange rate
volatility was extremely high and global currencies weakened versus the U.S.
Dollar. The Company incurred transaction losses, mostly in the fourth
quarter of 2008, on settlement of intercompany and third party
transactions.
- 34
- -
Income
Taxes and Net Income
|
Year Ended December 31,
|
||||||||||||
|
(in millions, except per share amounts)
|
2009
|
2008
|
$ Change
|
|||||||||
|
Effective
income tax rate
|
24.5 | % | 20.2 | % | ||||||||
|
Net
income attributable to DENTSPLY International
|
$ | 274.3 | $ | 283.9 | $ | (9.6 | ) | |||||
|
Diluted
earnings per common share
|
$ | 1.83 | $ | 1.87 | ||||||||
Income
Taxes
The
Company’s effective income tax rates for 2009 and 2008 were 24.5% and 20.2%,
respectively. In 2009, the Company’s effective income tax rate
included the impact of restructuring, impairments and other costs, acquisition
related activity and various income tax adjustments, which impacted income
before income taxes and the provision for income taxes by $11.0 million and $8.8
million, respectively. In 2008, the Company’s effective income tax
rate included the impact of restructuring, impairments and other costs,
acquisition related activity, provisions for the fair value measurement
adjustment and various income tax adjustments, which impacted income before
income taxes and the provision for income taxes by $30.5 million and $28.3
million, respectively. The various income tax adjustments included
the impact of settlements with taxing authorities and statutes closures for both
periods.
Net Income attributable to
DENTSPLY International
In
addition to the results reported in accordance with US GAAP, the Company
provides adjusted net income attributable to DENTSPLY International and adjusted
earnings per diluted common share. These adjusted amounts consist of US
GAAP amounts excluding (1) restructuring and other costs, (2) acquisition
related charges, (3) income tax related adjustments, and (4) credit risk
adjustments. Adjusted earnings per diluted common share is calculated by
dividing adjusted net income attributable to DENTSPLY International by diluted
weighted-average common shares outstanding. Adjusted net income
attributable to DENTSPLY International and adjusted earnings per diluted common
share are considered measures not calculated in accordance with US GAAP, and
therefore are non-US GAAP measures. These non-US GAAP measures may differ
from other companies.
The
Company believes that the presentation of adjusted net income attributable to
DENTSPLY International and adjusted earnings per diluted common share provides
important supplemental information to management and investors seeking to
understand the Company’s financial condition and results of operations.
The non-US GAAP financial information should not be considered in isolation
from, or as a substitute for, measures of financial performance prepared in
accordance with US GAAP.
|
Year Ended December 31, 2009
|
||||||||
|
Income
|
Per Diluted
|
|||||||
|
(in thousands, except per share amounts)
|
(Expense)
|
Common Share
|
||||||
|
Net
income attributable to DENTSPLY International
|
$ | 274,258 | $ | 1.83 | ||||
|
Restructuring
and other costs, net of tax and
|
||||||||
|
noncontrolling
interests
|
5,075 | 0.03 | ||||||
|
Acquisition
related activities, net of tax and
|
||||||||
|
noncontrolling
interests
|
1,830 | 0.01 | ||||||
|
Income
tax related adjustments
|
(5,423 | ) | (0.03 | ) | ||||
|
Adjusted
non-US GAAP earnings
|
$ | 275,740 | $ | 1.84 | ||||
- 35
- -
|
Year Ended December 31, 2008
|
||||||||
|
Income
|
Per Diluted
|
|||||||
|
(in thousands, except per share amounts)
|
(Expense)
|
Common Share
|
||||||
|
Net
income attributable to DENTSPLY International
|
$ | 283,869 | $ | 1.87 | ||||
|
Restructuring
and other costs, net of tax and noncontrolling interests
|
19,770 | 0.13 | ||||||
|
Credit
risk adjustment to outstanding derivatives, net of tax
|
(1,129 | ) | (0.01 | ) | ||||
|
Income
tax related adjustments
|
(17,055 | ) | (0.11 | ) | ||||
|
Adjusted
non-US GAAP earnings
|
$ | 285,455 | $ | 1.88 | ||||
Operating
Segment Results
The
Company’s operating businesses are combined into operating groups, which have
overlapping product offerings, geographic presence, customer bases, distribution
channels and regulatory oversight. These operating groups are
considered the Company’s reportable segments as the Company’s chief operating
decision-maker regularly reviews financial results at the operating group level
and uses this information to manage the Company’s operations. Each of
these operating groups covers a wide range of product categories and geographic
regions. The product categories and geographic regions often overlap
across the groups. Further information regarding the details of each
group is presented in Note 4, Segment and Geographic Information, to the
consolidated financial statements. The management of each group is
evaluated for performance and incentive compensation purposes on net third party
sales, excluding precious metal content, and segment operating
income.
In
January 2009, the Company moved the reporting responsibility for several
locations between segments which resulted in a change to the management
structure and helped the Company gain operating efficiencies and
effectiveness. The segment information below reflects this revised
structure for all periods shown.
|
Net Sales, Excluding Precious Metal Content
|
||||||||||||||||
|
(in millions)
|
Year Ended December 31,
|
|||||||||||||||
|
2009
|
2008
|
$ Change
|
% Change
|
|||||||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||||||
|
European
Regions Consumable Businesses
|
$ | 526.7 | $ | 459.7 | $ | 67.0 | 14.6 | % | ||||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||||||
|
Africa,
Pacific Rim Businesses
|
$ | 436.8 | $ | 456.2 | $ | (19.4 | ) | (4.3 | )% | |||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||||||
|
Orthodontics
|
$ | 618.4 | $ | 628.9 | $ | (10.5 | ) | (1.7 | )% | |||||||
|
Dental
Laboratory Business/
|
||||||||||||||||
|
Implants/Non-Dental
|
$ | 412.2 | $ | 452.4 | $ | (40.2 | ) | (8.9 | )% | |||||||
- 36
- -
|
Segment Operating Income
|
||||||||||||||||
|
(in millions)
|
Year Ended December 31,
|
|||||||||||||||
|
2009
|
2008
|
$ Change
|
% Change
|
|||||||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||||||
|
European
Regions Consumable Businesses
|
$ | 158.4 | $ | 162.7 | $ | (4.3 | ) | (2.6 | )% | |||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||||||
|
Africa,
Pacific Rim Businesses
|
$ | 19.7 | $ | 14.5 | $ | 5.2 | 35.9 | % | ||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||||||
|
Orthodontics
|
$ | 185.8 | $ | 200.1 | $ | (14.3 | ) | (7.1 | )% | |||||||
|
Dental
Laboratory Business/
|
||||||||||||||||
|
Implants/Non-Dental
|
$ | 92.6 | $ | 123.4 | $ | (30.8 | ) | (25.0 | )% | |||||||
U.S.,
Germany and Certain Other European Regions Consumable Businesses
Net
sales, excluding precious metal content, increased $67.0 million, or 14.6%
during the year ended December 31, 2009 compared to 2008. On a
constant currency basis, sales increased 15.7%, which was driven primarily by
acquisition growth of 14.8%.
Operating
income decreased $4.3 million during the year ended December 31, 2009 compared
to 2008. Operating income was negatively affected by lower sales in
certain European markets, unfavorable product and geographic sales mix, and
currency translation. In addition, the decrease in operating income included the
roll-off of a $4 million inventory step-up related to an acquisition completed
in late 2008. The segment, excluding an acquisition completed in
2008, reduced operating expenses during 2009 when compared to the same period in
2008 by $5 million.
France,
U.K., Italy and Certain Other European Countries, CIS, Middle East, Africa,
Pacific Rim Businesses
Net
sales, excluding precious metal content, decreased $19.4 million, or 4.3% during
the year ended December 31, 2009 compared to 2008, of which negative 2.9% was
the result of currency translation. On a constant currency basis,
sales were negative 1.4% primarily due to lower sales in the CIS partially
offset by an acquisition growth of 1.5% and growth in the Pacific Rim businesses
of 1.1%.
Operating
income increased $5.2 million during the year ended December 31, 2009 compared
to 2008. Gross profit decreased $2 million primarily due to the
negative impact of foreign currency translation and lower sales in the CIS,
partially offset by higher sales and gross profit in the Pacific
Rim. More than offsetting this decrease in gross profit was a
reduction in selling, general and administrative cost of $7 million, of which,
approximately one half was due to foreign currency translation.
Canada/Latin
America/Endodontics/Orthodontics
Net
sales, excluding precious metal content, decreased $10.5 million, or 1.7% during
the year ended December 31, 2009 compared to 2008, of which negative 2.4% was
the result of currency translation. On a constant currency basis,
sales increased by 0.7% as a result of an acquisition completed in
2008.
Operating
income decreased $14.3 million during the year ended December 31, 2009 compared
to 2008. The decrease was the result of a $19 million decrease in
gross profit due to lower sales in non-dental products, unfavorable absorption
and a negative impact from foreign currency translations of $6
million. Partially offsetting this decrease in gross profit is a
reduction in selling, general and administrative of $5 million, primarily due to
the impact of foreign currency translation.
Dental
Laboratory Business/Implants/Non-Dental
Net
sales, excluding precious metal content, decreased $40.2 million, or 8.9% during
the year ended December 31, 2009 compared to 2008, of which negative 3.3% was
the result of currency translation. On a constant currency basis, sales
decreased 5.6%, primarily driven by the lower sales in dental laboratory
products, dental implant products and non-dental products partially offset by
acquisition growth of 2.2%.
- 37
- -
Operating
income decreased $30.8 million during the year ended December 31, 2009 compared
to 2008 as a result of profitability being down across the segment primarily
related to lower sales in the dental laboratory businesses, unfavorable product
sales mix and foreign currency translation.
CRITICAL
ACCOUNTING JUDGMENTS AND POLICIES
The
preparation of the Company’s consolidated financial statements in conformity
with US GAAP requires the Company to make estimates and assumptions about future
events that affect the amounts reported in the consolidated financial statements
and accompanying notes. Future events and their effects cannot be
determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results could
differ from those estimates, and such differences may be material to the
consolidated financial statements. The process of determining
significant estimates is fact specific and takes into account factors such as
historical experience, current and expected economic conditions, product mix and
in some cases, actuarial techniques. The Company evaluates these significant
factors as facts and circumstances dictate. Some events as described
below could cause results to differ significantly from those determined using
estimates. The Company has identified below the accounting estimates
believed to be critical to its business and results of operations.
Accounts
Receivable
The
Company sells dental products both through a worldwide network of distributors
and directly to end users. For customers on credit terms, the Company
performs an ongoing credit evaluation of those customers' financial condition
and generally does not require collateral from them. The Company
establishes allowances for doubtful accounts for estimated losses resulting from
the inability of its customers to make required payments. If the
financial condition of the Company’s customers were to improve or deteriorate,
their ability to make required payments may become less or more impaired and
decreases or increases in these allowances may be required. In
addition, a negative impact on sales to those customers may occur.
Inventories
Inventories
are stated at the lower of cost or market. The cost of inventories is
determined primarily by the first-in, first-out (“FIFO”) or average cost
methods, with a small portion being determined by the last in, first-out
(“LIFO”) method. The Company establishes reserves for inventory
estimated to be obsolete or unmarketable equal to the difference between the
cost of inventory and estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less
favorable than those anticipated, additional inventory reserves may be
required.
Goodwill
and Other Long-Lived Assets
Goodwill
The
Company follows the accounting standards for goodwill, which requires an annual
test for impairment to goodwill using a fair value approach. In
addition to minimum annual impairment tests, the Company also requires that
impairment assessments be made more frequently if events or changes in
circumstances indicate that the goodwill might be impaired. If
impairment related to goodwill is identified as a result of impairment tests,
the resulting charge is determined by recalculating goodwill through a
hypothetical purchase price allocation of the fair value and reducing the
current carrying value to the extent it exceeds the recalculated
goodwill.
Other Long-Lived
Assets
Other
long-lived assets, such as definite-lived intangible assets and fixed assets,
are amortized or depreciated over their estimated useful lives. In
accordance with US GAAP, these assets are reviewed for impairment whenever
events or circumstances provide evidence that suggest that the carrying amount
of the asset may not be recoverable based upon an evaluation of the identifiable
undiscounted cash flows. If impaired based on the identifiable
undiscounted cash flows, the asset’s fair value is determined using the
discounted cash flow and market participant assumptions. The
resulting charge reflects the excess of the asset’s carrying cost over its fair
value.
- 38
- -
Impairment
Assessment
Assessment
of the potential impairment of goodwill and other long-lived assets is an
integral part of the Company’s normal ongoing review of
operations. Testing for potential impairment of these assets is
significantly dependent on numerous assumptions and reflects management’s best
estimates at a particular point in time. The dynamic economic
environments in which the Company’s businesses operate and key economic and
business assumptions with respect to projected selling prices, increased
competition and introductions of new technologies can significantly affect the
outcome of impairment tests. Estimates based on these assumptions may
differ significantly from actual results. Changes in factors and
assumptions used in assessing potential impairments can have a significant
impact on the existence and magnitude of impairments, as well as the time at
which such impairments are recognized. If there are unfavorable
changes in these assumptions, particularly changes in the Company’s discount
rates, earnings multiples and future cash flows, the Company may be required to
recognize impairment charges. Information with respect to the
Company’s significant accounting policies on goodwill and other long-lived
assets are included in Note 1, Significant Accounting Policies, to the
consolidated financial statements.
Pension
and Other Postretirement Benefits
Substantially
all of the employees of the Company and its subsidiaries are covered by
government or Company-sponsored defined benefit or defined contribution
plans. Additionally, certain union and salaried employee groups in
the U.S. are covered by postretirement healthcare plans. Costs
for Company-sponsored plans are based on expected return on plan assets,
discount rates, employee compensation increase rates and health care cost
trends. Expected return on plan assets, discount rates and health
care cost trend assumptions are particularly important when determining the
Company’s benefit obligations and net periodic benefit costs associated with
postretirement benefits. Changes in these assumptions can impact the
Company’s income before income taxes. In determining the cost of
postretirement benefits, certain assumptions are established annually to reflect
market conditions and plan experience to appropriately reflect the expected
costs as actuarially determined. These assumptions include medical
inflation trend rates, discount rates, employee turnover and mortality
rates. In establishing its discount rates, the Company predominantly
uses observed indices of high-grade corporate bond yields with durations that
are equivalent to the expected duration of the underlying
liability. The discount rate for each plan is based on observed
corporate bond yield indices in the respective economic region covered by the
plan. The expected return on plan assets is the weighted average
long-term expected return based upon asset allocations and historic average
returns for the markets where the assets are invested, principally in foreign
locations. Additional information related to the impact of changes in
these assumptions is provided in Note 13, Benefit Plans, to the consolidated
financial statements.
Litigation
The
Company and its subsidiaries are from time to time parties to lawsuits arising
out of their respective operations. The Company records liabilities
when a loss is probable and can be reasonably estimated. These
estimates are typically in the form of ranges, and the Company records the
liabilities at the low point of the ranges. The ranges established by
management are based on an analysis made by internal and external legal counsel
who considers information known at the time. If the Company
determines a liability to be only reasonably possible, it considers the same
information to estimate the possible exposure and disclose any material
potential liability. These loss contingencies are monitored regularly
for a change in fact or circumstance that would require an accrual
adjustment. The Company believes it has estimated liabilities for
probable losses well in the past; however, the unpredictability of litigation
and court decisions could cause a liability to be incurred in excess of
estimates. Legal costs related to these lawsuits are expensed as
incurred.
Accruals
for Product Returns, Customer Rebates and Product Warranties
The
Company makes provisions for customer returns, customer rebates and for product
warranties at the time of sale. These accruals are based on past
history, projections of customer purchases and sales and expected product
performance in the future. Because the actual results for product
returns, rebates and warranties are dependent in part on future events, these
matters require the use of estimates. The Company has a long history
of product performance in the dental industry and thus has an extensive
knowledge base from which to draw in measuring these estimates.
Income
Taxes
Income
taxes are determined using the liability method of accounting for income
taxes. The Company’s tax expense includes the U.S. and international
income taxes plus the provision for U.S. taxes on undistributed earnings of
international subsidiaries not deemed to be permanently invested.
- 39
- -
The
Company applies a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The Company recognizes in the
financial statements, the impact of a tax position, if that position is more
likely than not of being sustained on audit, based on the technical merits of
the position.
Certain
items of income and expense are not reported in tax returns and financial
statements in the same year. The tax effect of such temporary
differences is reported as deferred income taxes. Deferred tax assets
are recognized if it is more likely than not that the assets will be realized in
future years. The Company establishes a valuation allowance for
deferred tax assets for which realization is not likely. As of
December 31, 2010, the Company recorded a valuation allowance of $75.4 million
against the benefit of certain deferred tax assets of foreign and domestic
subsidiaries.
The
Company operates within multiple taxing jurisdictions and in the normal course
of business is examined in various jurisdictions. The reversal of
accruals is recorded when examinations are completed, statutes of limitation are
closed or tax laws are changed.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
flows from operating activities during the year ended December 31, 2010 were
$362.3 million compared to $362.5 million during the year ended December 31,
2009. The decrease of $0.2 million in the 2010 period compared to 2009 was
primarily the result of higher working capital changes of $19.6 million offset
by earnings adjusted for favorable non-cash charges of $23.2
million. Inventory levels increased by $37.0 million, which was
partially offset by a decrease in accounts receivable of $22.1 million, in 2010
when compared to 2009. The Company’s cash, cash equivalents and
short-term investments increased by $89.7 million during the year ended December
31, 2010 to $540.1 million.
For
the years ended December 31, 2010 and 2009, the number of days for sales
outstanding in accounts receivable was 54 days and 55 days,
respectively. On a constant currency basis, the number of days sales
in inventory was 100 days and 99 days for the years ended December 31, 2010 and
2009, respectively.
Investing
activities during 2010 include capital expenditures of $44.2
million. Activity related to the acquisition of businesses, for the
year ended December 31, 2010, totaled $85.2
million. Investments of $35.6 million related to the
acquisition of several orthodontic and implant distributors in Europe and Asia
plus certain final payment on an acquisition from previous years and $49.6
million to acquire a 56.6 billion South Korea won (“KRW”) Convertible Bond
related to a minority investment in DIO Corporation, a Korean implant
manufacturer. (See Note 3, Business Acquisitions, to the consolidated financial
statements).
At
December 31, 2010, the Company had authorization to maintain up to 22.0 million
shares of treasury stock under its stock repurchase program as approved by the
Board of Directors. Under this program, the Company purchased approximately 6.7
million shares, or approximately 4.6% of average diluted shares outstanding,
during 2010 at an average price of $33.36. As of December 31, 2010 and 2009, the
Company held 21.0 million and 15.8 million shares of treasury stock,
respectively. The Company also received proceeds of $30.2 million primarily as a
result of 1.5 million stock option exercises during the year ended December 31,
2010.
DENTSPLY's
total long-term debt, including the current portion, at December 31, 2010 and
2009 was $606.5 million and $453.7 million, respectively. The Company’s
long-term borrowings increased by a net of $152.8 million during the year ended
December 31, 2010. This net change included a net increase in borrowings of
$126.5 million during the year ended 2010, plus an increase of $26.3 million due
to exchange rate fluctuations on debt denominated in foreign
currencies. During the year ended December 31, 2010, the Company’s
ratio of long-term debt, including the current portion, to total capitalization
increased to 24.1% compared to 19.2% at December 31, 2009. DENTSPLY
defines total capitalization as the sum of total long-term debt, including the
current portion, plus total equity.
On
February 19, 2010, the Company received the proceeds of a $250.0 million Private
Placement Note (“PPN”) at a fixed rate of 4.1% for an average term of five years
and a final maturity of six years. The PPN is unsecured and contains
certain affirmative and negative covenants relating to its operations and
financial condition of the Company similar in substance to the $150.0 million
U.S. Private Placement Note that matured March 15, 2010.
On March
1, 2010, the Company entered into a Term Loan Agreement (“Term Loan”) with PNC
Bank providing for the issuance by the Company of Swiss francs 65.0 million
aggregate principal amount of floating rate Senior Term Loan with a final
maturity in March 2012. This Term Loan is unsecured and contains certain
affirmative and negative covenants relating to its operations and financial
condition of the Company similar in substance to the existing multi-currency
revolving credit agreement maturing May 7, 2013. The new Term Loan
was used to refinance a loan under the existing multi-currency revolving credit
agreement.
- 40
- -
On May 7,
2010, the Company entered into a $200.0 million multi-currency revolving credit
agreement (“Revolver”) with a syndicate of eight lenders with a final maturity
in May 2013. The multi-currency revolving credit agreement replaced the $500.0
million multi-currency revolving credit agreement which matured May 9,
2010. This Revolver is unsecured and contains certain affirmative and
negative covenants relating to its operations and financial condition of the
Company similar in substance to the previous multi-currency revolving credit
agreement which matured May 9, 2010. As a consequence of the smaller
multi-currency revolving credit agreement, the Company also reduced its U.S.
dollar Commercial Paper facility to $200.0 million in May 2010.
Under its
multi-currency revolving credit agreement, the Company is able to borrow up to
$200.0 million through May 7, 2013. This facility is unsecured and contains
certain affirmative and negative covenants relating to its operations and
financial condition. The most restrictive of these covenants pertain to asset
dispositions and prescribed ratios of indebtedness to total capital and
operating income excluding depreciation and amortization to interest
expense. At December 31, 2010, the Company was in compliance with
these covenants. The Company also has available an aggregate $200.0 million
under its U.S. commercial paper facility. The multi-currency revolving credit
facility serves as a back-up to the commercial paper facility. The
total available credit under the commercial paper facility and the
multi-currency facility in the aggregate is $200.0 million with $2.1 million
outstanding under the multi-currency facility and $119.5 million outstanding
under the commercial paper facility at December 31, 2010. As of
December 31, 2010, the Company has classified $121.6 million as long-term
debt. The long-term debt classification is supported by the fact that
the Company has demonstrated its intent and ability to fund existing short-term
debt with the multicurrency revolver.
The
Company entered into new cross currency swaps of Swiss francs 100.0 million and
Swiss francs 55.5 million on February 18, 2010 and March 1, 2010 respectively to
replace maturing trades. The contracts are designated as net investment
hedges. The Company entered into new cross currency swaps of Euros
108.0 million on December 13, 2010 to replace maturing trades. The contracts are
designated as net investment hedges.
The
Company also has access to $77.3 million in uncommitted short-term financing
under lines of credit from various financial institutions. The lines of credit
have no major restrictions and are provided under demand notes between the
Company and the lending institutions. At December 31, 2010, $5.3 million was
outstanding under these short-term lines of credit. At December 31, 2010,
the Company had total unused lines of credit related to the revolving credit
agreement and the uncommitted short-term lines of credit of $150.5
million.
At
December 31, 2010, the Company held $122.6 million of precious metals on
consignment from several financial institutions. These consignment agreements
allow the Company to acquire the precious metal at market rates at a point in
time, which is approximately the same time, and for the same price as alloys are
sold to the Company’s customers. In the event that the financial institutions
would discontinue offering these consignment arrangements, and if the Company
could not obtain other comparable arrangements, the Company may be required to
obtain third party financing to fund an ownership position in the required
precious metal inventory levels.
The
following table presents the Company's scheduled contractual cash obligations at
December 31, 2010:
|
Contractual Obligations
|
Greater
|
|||||||||||||||||||
|
(in thousands)
|
Less Than
|
1-3
|
3-5
|
Than
|
||||||||||||||||
|
1 Year
|
Years
|
Years
|
5 Years
|
Total
|
||||||||||||||||
|
Long-term borrowings
|
$ | 2,478 | $ | 351,956 | $ | 176,048 | $ | 76,011 | $ | 606,493 | ||||||||||
|
Operating
leases
|
25,778 | 27,557 | 12,107 | 9,072 | 74,514 | |||||||||||||||
|
Interest
on long-term borrowings, net
|
||||||||||||||||||||
|
of
interest rate swap agreements
|
21,948 | 29,750 | 11,265 | 454 | 63,417 | |||||||||||||||
|
Postretirement
obligations
|
9,467 | 20,429 | 22,222 | 64,131 | 116,249 | |||||||||||||||
|
Cross
currency swaps
|
21,516 | 147,589 | - | - | 169,105 | |||||||||||||||
|
Precious
metal consignment agreements
|
122,554 | - | - | - | 122,554 | |||||||||||||||
| $ | 203,741 | $ | 577,281 | $ | 221,642 | $ | 149,668 | $ | 1,152,332 | |||||||||||
Due to
the uncertainty with respect to the timing of future cash flows associated with
the Company’s unrecognized tax benefits at December 31, 2010, the Company is
unable to make reasonably reliable estimates of the period of cash settlement
with the respective taxing authority. Therefore, $19.2 million of the
unrecognized tax benefit has been excluded from the contractual obligations
table above (See Note 12, Income Taxes, to the consolidated financial
statements).
The
Company expects on an ongoing basis to be able to finance cash requirements,
including capital expenditures, stock repurchases, debt service, operating
leases and potential future acquisitions, from the current cash, cash
equivalents and short-term investment balances, funds generated from operations
and amounts available under its existing credit facilities, which is further
discussed in Note 10, Financing Arrangements, to the consolidated financial
statements. As noted in the Company’s Consolidated Statements of Cash
Flows, the Company continues to generate strong cash flows from operations,
which is used to finance the Company’s activities.
- 41
- -
NEW
ACCOUNTING PRONOUNCEMENTS
Refer to
Note 1, Significant Accounting Policies, to the Consolidated Financial
Statements for a discussion of recent accounting guidance and
pronouncements.
Item
7A.
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The
Company's major market risk exposures are changing interest rates, movements in
foreign currency exchange rates and potential price volatility of commodities
used by the Company in its manufacturing processes. 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. The Company employs foreign currency denominated debt and currency
swaps which serve to partially offset the Company's exposure on its net
investments in subsidiaries denominated in foreign currencies. The Company's
policy generally is to hedge major foreign currency transaction exposures
through foreign exchange forward contracts. These contracts are entered into
with major financial institutions thereby minimizing the risk of credit loss. In
order to limit the unanticipated earnings fluctuations from volatility in
commodity prices, the Company selectively enters into commodity swaps to convert
variable raw material costs to fixed costs. 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 in addition to
the risks on its financial instruments, such as possible impacts on its pricing
and production costs, 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.
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, short-term investments, accounts
receivable (net of allowance for doubtful accounts), prepaid expenses and other
current assets, accounts payable, accrued liabilities, income taxes payable and
notes payable approximate fair value due to the short-term nature of these
instruments. The Company estimates the fair value and carrying value of its
total long term debt, including current portion of long-term debt, was $611.2
million and $606.5 million, respectively, as of December 31,
2010. As of December 31, 2009, the fair value approximated the
carrying value, which was $453.7 million. The interest rate on the
$250.0 million Private Placement Note is a fixed rate of 4.1%, and the fair
value is based on the interest rates as of December 31, 2010. The
interest rates on term loan debt and commercial paper are variable, and
therefore the fair value of these instruments approximates their carrying
values. The following table shows the Company’s principal outstanding
debt amounts and the associated weighted average interest rates as of December
31, 2010.
- 42
- -
|
Financial Instruments
|
||||||||||||||||||||||||||||||||
|
EXPECTED MATURITY DATES
|
||||||||||||||||||||||||||||||||
|
December
31, 2010
|
||||||||||||||||||||||||||||||||
|
(in
thousands)
|
2016
and
|
Carrying
|
Fair
|
|||||||||||||||||||||||||||||
|
2011
|
2012
|
2013
|
2014
|
2015
|
beyond
|
Value
|
Value
|
|||||||||||||||||||||||||
|
Notes
Payable:
|
||||||||||||||||||||||||||||||||
|
U.S.
dollar denominated
|
$ | 900 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 900 | $ | 900 | ||||||||||||||||
|
Average
interest rate
|
2.3 | % | 2.3 | % | ||||||||||||||||||||||||||||
|
Taiwan
dollar denominated
|
185 | - | - | - | - | - | 185 | 185 | ||||||||||||||||||||||||
|
Average
interest rate
|
0.0 | % | 0.0 | % | ||||||||||||||||||||||||||||
|
Euro
denominated
|
4,191 | - | - | - | - | - | 4,191 | 4,191 | ||||||||||||||||||||||||
|
Average
interest rate
|
2.5 | % | 2.5 | % | ||||||||||||||||||||||||||||
|
Total
Notes Payable
|
$ | 5,276 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 5,276 | $ | 5,276 | ||||||||||||||||
| 2.4 | % | 2.4 | % | |||||||||||||||||||||||||||||
|
Current
Portion of
|
||||||||||||||||||||||||||||||||
|
Long-term
Debt:
|
||||||||||||||||||||||||||||||||
|
Euro
denominated
|
$ | 2,478 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 2,478 | $ | 2,478 | ||||||||||||||||
|
Average
interest rate
|
1.9 | % | 1.9 | % | ||||||||||||||||||||||||||||
|
Total
Current Portion of Long-Term Debt
|
$ | 2,478 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 2,478 | $ | 2,478 | ||||||||||||||||
| 1.9 | % | 1.9 | % | |||||||||||||||||||||||||||||
|
Long
Term Debt:
|
||||||||||||||||||||||||||||||||
|
U.S.
dollar denominated
|
$ | - | $ | - | $ | 121,623 | $ | 75,015 | $ | 100,000 | $ | 75,000 | $ | 371,638 | $ | 376,313 | ||||||||||||||||
|
Average
interest rate
|
0.4 | % | 4.1 | % | 4.1 | % | 4.1 | % | 2.9 | % | ||||||||||||||||||||||
|
Swiss
franc denominated
|
- | - | 69,560 | - | - | - | 69,560 | 69,560 | ||||||||||||||||||||||||
|
Average
interest rate
|
1.7 | % | 1.7 | % | ||||||||||||||||||||||||||||
|
Japanese
yen denominated
|
- | 154,626 | - | - | - | - | 154,626 | 154,626 | ||||||||||||||||||||||||
|
Average
interest rate
|
0.9 | % | 0.9 | % | ||||||||||||||||||||||||||||
|
Euro
denominated
|
- | 4,833 | 1,314 | 703 | 330 | 1,011 | 8,191 | 8,191 | ||||||||||||||||||||||||
|
Average
interest rate
|
3.6 | % | 2.5 | % | 3.0 | % | 2.9 | % | 2.9 | % | 3.3 | % | ||||||||||||||||||||
|
Total
Long Term Debt,net current portion
|
$ | - | $ | 159,459 | $ | 192,497 | $ | 75,718 | $ | 100,330 | $ | 76,011 | $ | 604,015 | $ | 608,690 | ||||||||||||||||
| 1.0 | % | 0.9 | % | 4.1 | % | 4.1 | % | 4.1 | % | 2.3 | % | |||||||||||||||||||||
Derivative
Financial Instruments
The
Company employs derivative financial instruments to hedge certain anticipated
transactions, firm commitments, or assets and liabilities denominated in foreign
currencies. Additionally, the Company utilizes interest rate swaps to convert
floating rate debt to fixed rate, cross currency basis swaps to convert debt
denominated in one currency to another currency and commodity swaps to fix its
variable raw materials.
Foreign Exchange Risk
Management
The
Company 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.
The
Company selectively enters into forward foreign exchange contracts to hedge
anticipated purchases of product to effectively fix certain variable costs. The
forward foreign exchange contracts are used to stabilize the cost of certain of
the Company's products. The Company generally accounts for the forward foreign
exchange contracts as cash flow hedges. As a result, the Company
records the fair value of the contract primarily through other comprehensive
income based on the tested effectiveness of the forward foreign exchange
contracts. Realized gains or losses in other comprehensive income are released
and recorded to costs of products sold as the products associated with the
forward foreign exchange contracts are sold. The Company measures the
effectiveness of cash flow hedges of anticipated transactions on a spot to spot
basis rather than on a forward to forward basis. Accordingly, any time value
component of the hedge fair value is deemed ineffective and will be reported
currently as interest expense in the period which it is applicable. The spot to
spot change in the derivative fair value will be deferred in other comprehensive
income and released and recorded to costs of products sold as the products
associated with the forward foreign exchange contracts are sold. Any cash flows
associated with these instruments are included in cash from operations in
accordance with the Company’s policy of classifying the cash flows from these
instruments in the same category as the cash flows from the items being
hedged.
Determination
of hedge activity is based upon market conditions, the magnitude of the foreign
currency assets and liabilities and perceived risks. These foreign
exchange contracts generally have maturities of less than twelve months and the
counterparties to the transactions are typically large international financial
institutions. The Company’s significant contracts outstanding as of
December 31, 2010 are summarized in the table that follows.
- 43
- -
|
Foreign
Exchange Forward Contracts:
|
||||||||||||||||
|
EXPECTED
MATURITY DATES
|
||||||||||||||||
|
(represents
notional amounts for derivative financial instruments)
|
||||||||||||||||
|
(in
thousands)
|
December
31, 2010
|
|||||||||||||||
|
Carrying
|
Fair
|
|||||||||||||||
|
2011
|
2012
|
Value
|
Value
|
|||||||||||||
|
Forward
sale, 11.2 million
|
||||||||||||||||
|
Australian
dollars
|
$ | 10,460 | $ | 972 | $ | (784 | ) | $ | (784 | ) | ||||||
|
Forward
purchase, 8.4 million
|
||||||||||||||||
|
British
pounds
|
(12,286 | ) | (772 | ) | 250 | 250 | ||||||||||
|
Forward
sale, 34.3 million
|
||||||||||||||||
|
Canadian
dollars
|
31,114 | 3,428 | (664 | ) | (664 | ) | ||||||||||
|
Forward
sale, 5.2 million
|
||||||||||||||||
|
Danish
krone
|
925 | - | 10 | 10 | ||||||||||||
|
Forward
sale, 5.2 million
|
||||||||||||||||
|
Euros
|
6,923 | - | 1,916 | 1,916 | ||||||||||||
|
Forward
sale, 407.5 million
|
||||||||||||||||
|
Japanese
yen
|
5,019 | - | 268 | 268 | ||||||||||||
|
Forward
sale, 118.7 million
|
||||||||||||||||
|
Mexican
pesos
|
9,615 | - | 12 | 12 | ||||||||||||
|
Forward
purchase, 1.5 million
|
||||||||||||||||
|
Norwegian
krone
|
(262 | ) | - | 1 | 1 | |||||||||||
|
Forward
sale, 2.0 million
|
||||||||||||||||
|
Singapore
dollars
|
1,585 | - | (10 | ) | (10 | ) | ||||||||||
|
Forward
sale, 527.9 million
|
||||||||||||||||
|
South
Korean won
|
509 | - | (3 | ) | (3 | ) | ||||||||||
|
Forward
purchase, 11.5 million
|
||||||||||||||||
|
Swiss
francs
|
(12,324 | ) | - | 423 | 423 | |||||||||||
|
Forward
sale, 23.6 million
|
||||||||||||||||
|
Taiwanese
dollars
|
805 | - | 4 | 4 | ||||||||||||
|
Total
Foreign Exchange
|
||||||||||||||||
|
Forward
Contracts
|
$ | 42,083 | $ | 3,628 | $ | 1,423 | $ | 1,423 | ||||||||
The
Company has numerous investments in foreign subsidiaries. The net assets of
these subsidiaries are exposed to volatility in currency exchange rates.
Currently, the Company uses both non-derivative financial instruments, including
foreign currency denominated debt held at the parent company level and
derivative financial instruments to hedge some of this exposure. Translation
gains and losses related to the net assets of the foreign subsidiaries are
offset by gains and losses in the non-derivative and derivative financial
instruments designated as hedges of net investments, which are included in
accumulated other comprehensive income.
During
the first quarter of 2010, the Company entered into new cross currency basis
swaps of Swiss francs 100.0 million and Swiss francs 55.5 million (collectively
the “Swiss Swaps”). The Swiss Swaps mature in February 2013, and the Company
pays three month Swiss franc London Inter-Bank Offered Rate (“LIBOR”) and
receives three month U.S. dollar LIBOR on $93.0 million and $51.1 million,
respectively. The new contracts were entered into to replace maturing
contracts. During the fourth quarter of 2010, the Company entered
into new cross currency basis swaps of Euro 108.0 million (“Euro Swaps”). The
Euro Swaps mature in December 2013, and the Company pays three month Euro
Inter-Bank Offered Rate (“EURIBOR”) and receives three month U.S. dollar LIBOR
on $143.1 million. The new contracts were entered into to replace maturing
contracts. The Swiss franc and Euro cross currency interest rate
swaps are designated as net investment hedges of the Swiss and Euro denominated
net assets. The interest rate differential is recognized in the earnings as
interest income or interest expense as it is accrued. The foreign currency
revaluation is recorded in accumulated other comprehensive income, net of tax
effects.
At
December 31, 2010 and 2009, the Company had Swiss franc-denominated and Japanese
yen-denominated debt and cross currency basis swaps denominated in euro and
Swiss franc to hedge the currency exposure related to a designated portion of
the net assets of its European, Swiss and Japanese subsidiaries. The fair value
of the cross currency interest rate swap agreements is the estimated amount the
Company would (pay) receive at the reporting date, taking into account the
effective interest rates and foreign exchange rates. As of December 31, 2010 and
December 31, 2009, the estimated net fair values of the cross currency interest
rate swap agreements were negative $169.1 million and negative $176.6 million,
respectively, which are recorded in accumulated other comprehensive income, net
of tax effects. At December 31, 2010 and 2009, the accumulated translation gains
on investments in foreign subsidiaries, primarily denominated in Euros, Swiss
francs and Japanese yen, net of these net investment hedges, were $45.4 million
and $111.1 million,, respectively, which were included in accumulated other
comprehensive income, net of tax effects. The Company’s outstanding debt
denominated in foreign currencies and the outstanding cross currency interest
rate swaps as of December 31, 2010 are summarized in the table that
follows.
- 44
- -
|
Cross Currency Basis Swaps
|
||||||||||||||||||||
|
EXPECTED MATURITY DATES
|
||||||||||||||||||||
|
(represents notional amounts for derivative
financial instruments)
|
||||||||||||||||||||
|
December 31, 2010
|
||||||||||||||||||||
|
Carrying
|
Fair
|
|||||||||||||||||||
|
(in
thousands)
|
2011
|
2012
|
2013
|
Value
|
Value
|
|||||||||||||||
|
Swiss
franc 592.5 million @ 1.17
|
$ | 86,040 | $ | 60,570 | $ | 487,455 | $ | (126,987 | ) | $ | (126,987 | ) | ||||||||
|
pay
CHF 3mo. LIBOR rec. USD 3mo. LIBOR
|
(0.1 | )% | (0.1 | )% | (0.2 | )% | ||||||||||||||
|
Euros
358.0 million @ $1.22
|
- | - | 478,360 | (42,118 | ) | (42,118 | ) | |||||||||||||
|
pay
EUR 3mo. EURIBOR rec. USD 3mo. LIBOR
|
0.7 | % | ||||||||||||||||||
|
Total
Cross Currency Basis Swaps
|
$ | 86,040 | $ | 60,570 | $ | 965,815 | $ | (169,105 | ) | $ | (169,105 | ) | ||||||||
Interest Rate Risk
Management
The
Company uses interest rate swaps to convert a portion of its variable interest
rate debt to fixed interest rate debt. As of December 31, 2010, the
Company has two groups of significant variable interest rate to fixed rate
interest rate swaps. One of the groups of swaps has notional amounts
totaling 12.6 billion Japanese yen, and effectively converts the underlying
variable interest rates to an average fixed interest rate of 1.6% for a term of
ten years, ending in September 2012. Another swap has a notional
amount of 65.0 million Swiss francs, and effectively converts the underlying
variable interest rates to a fixed interest rate of 4.2% for a term of seven
years, ending in September 2012. The Company enters into interest
rate swap contracts infrequently as they are only used to manage interest rate
risk on long-term debt instruments and not for speculative
purposes. The Company’s significant contracts outstanding as of
December 31, 2010 are summarized in the table that follows.
|
Interest Rate Swaps
|
||||||||||||||||||||||||||||||||
|
EXPECTED MATURITY DATES
|
||||||||||||||||||||||||||||||||
|
(represents notional amounts for derivative
financial instruments)
|
||||||||||||||||||||||||||||||||
|
December
31, 2010
|
||||||||||||||||||||||||||||||||
|
2016
and
|
Carrying
|
Fair
|
||||||||||||||||||||||||||||||
|
(in
thousands)
|
2011
|
2012
|
2013
|
2014
|
2015
|
beyond
|
Value
|
Value
|
||||||||||||||||||||||||
|
Interest
rate swaps - Euro
|
$ | 1,262 | $ | 1,262 | $ | 1,262 | $ | 965 | $ | 965 | $ | 2,171 | $ | (660 | ) | $ | (660 | ) | ||||||||||||||
|
Average
interest rate
|
3.6 | % | 3.6 | % | 3.6 | % | 3.7 | % | 3.7 | % | 3.7 | % | ||||||||||||||||||||
|
Interest
rate swaps - Japanese yen
|
- | 154,626 | - | - | - | - | (2,058 | ) | (2,058 | ) | ||||||||||||||||||||||
|
Average
interest rate
|
1.6 | % | ||||||||||||||||||||||||||||||
|
Interest
rate swaps - Swiss francs
|
- | 69,560 | - | - | - | - | (3,026 | ) | (3,026 | ) | ||||||||||||||||||||||
|
Average
interest rate
|
4.2 | % | ||||||||||||||||||||||||||||||
|
Total
Interest Rate Swaps
|
$ | 1,262 | $ | 225,448 | $ | 1,262 | $ | 965 | $ | 965 | $ | 2,171 | $ | (5,744 | ) | $ | (5,744 | ) | ||||||||||||||
Commodity Risk
Management
The
Company selectively enters into commodity swaps to effectively fix certain
variable raw material costs. These swaps are used purely to stabilize the cost
of components used in the production of certain of the Company's products. The
Company generally accounts for the commodity swaps as cash flow hedges. As a
result, the Company records the fair value of the swap primarily through other
comprehensive income based on the tested effectiveness of the commodity swap.
Realized gains or losses in other comprehensive income are released and recorded
to costs of products sold as the products associated with the commodity swaps
are sold. The Company measures the effectiveness of cash flow hedges of
anticipated transactions on a spot to spot basis rather than on a forward to
forward basis. Accordingly, any time value component of the hedge fair value is
deemed ineffective and will be reported currently as interest expense in the
period which it is applicable. The spot to spot change in the derivative fair
value will be deferred in other comprehensive income and released and recorded
to costs of products sold as the products associated with the forward foreign
exchange contracts are sold. Any cash flows associated with these instruments
are included in cash from operations in accordance with the Company’s policy of
classifying the cash flows from these instruments in the same category as the
cash flows from the items being hedged. The Company’s significant
contracts outstanding as of December 31, 2010 are summarized in the table that
follows.
|
Commodity
Contracts:
|
||||||||||||
|
EXPECTED MATURITY DATES
|
||||||||||||
|
December 31, 2010
|
||||||||||||
|
Carrying
|
Fair
|
|||||||||||
|
(in
thousands)
|
2011
|
Value
|
Value
|
|||||||||
|
Silver
Swap - U.S. dollar
|
$ | (93 | ) | $ | 82 | $ | 82 | |||||
|
Platinum
Swap - U.S. dollar
|
(470 | ) | 6 | 6 | ||||||||
|
Total
Commodity Contracts
|
$ | (563 | ) | $ | 88 | $ | 88 | |||||
- 45
- -
Off
Balance Sheet Arrangements
Consignment
Arrangements
The
Company consigns the precious metals used in the production of precious metal
dental alloy products from various financial institutions. Under these
consignment arrangements, the banks own the precious metal, and, accordingly,
the Company does not report this consigned inventory as part of its inventory on
its consolidated balance sheet. These agreements are cancelable by either party
at the end of each consignment period, which typically run for a period of one
to nine months; however, because the Company typically has access to numerous
financial institutions with excess capacity, consignment needs created by
cancellations can be shifted among the other institutions. The consignment
agreements allow the Company to take ownership of the metal at approximately the
same time customer orders are received and to closely match the price of the
metal acquired to the price charged to the customer (i.e., the price charged to
the customer is largely a pass through).
As
precious metal prices fluctuate, the Company evaluates the impact of the
precious metal price fluctuation on its target gross margins for precious metal
dental alloy products and revises the prices customers are charged for precious
metal dental alloy products accordingly, depending upon the magnitude of the
fluctuation. While the Company does not separately invoice customers for the
precious metal content of precious metal dental alloy products, the underlying
precious metal content is the primary component of the cost and sales price of
the precious metal dental alloy products. For practical purposes, if the
precious metal prices go up or down by a small amount, the Company will not
immediately modify prices, as long as the cost of precious metals embedded in
the Company’s precious metal dental alloy price closely approximates the market
price of the precious metal. If there is a significant change in the price of
precious metals, the Company adjusts the price for the precious metal dental
alloys, maintaining its margin on the products.
At
December 31, 2010, the Company had 95,999 troy ounces of precious metal,
primarily gold, platinum and palladium, on consignment for periods of less than
one year with a market value of $122.6 million. Under the terms of the
consignment agreements, the Company also makes compensatory payments to the
consignor banks based on a percentage of the value of the consigned precious
metals inventory. At December 31, 2010, the average annual rate charged by the
consignor banks was 0.84%. These compensatory payments are considered
to be a cost of the metals purchased and are recorded as part of the cost of
products sold.
- 46
- -
Management's
Report on Internal Control Over Financial Reporting
The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as
amended. The Company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America. A Company’s internal control over financial
reporting includes those policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the
Company; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
Management of the Company has assessed
the effectiveness of the Company's internal control over financial reporting as
of December 31, 2010. In making its assessment, management used the
criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on its
assessment management concluded that, as of December 31, 2010, the Company’s
internal control over financial reporting was effective based on the criteria
established in Internal Control –
Integrated Framework issued by the COSO.
The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2010 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report, which appears
herein.
|
/s/
|
Bret W. Wise
|
/s/
|
William R. Jellison
|
|
|
Bret
W. Wise
|
William
R. Jellison
|
|||
|
Chairman
of the Board and
|
Senior
Vice President and
|
|||
|
Chief
Executive Officer
|
Chief
Financial Officer
|
|||
|
February
18, 2011
|
February
18, 2011
|
- 47
- -
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders
of
DENTSPLY International Inc.
In our
opinion, the consolidated financial statements
listed in the index appearing under Item 15(a)(1) present fairly, in all
material respects, the financial position of DENTSPLY International Inc. and its
subsidiaries at December 31,
2010 and 2009, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2010 in conformity
with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the index appearing
under Item 15(a)(2) presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2010, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible
for these financial statements and the financial statement schedule, for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in “Management's Report on Internal Control over Financial Reporting”
appearing under Item 15(a)(1). Our responsibility is to express
opinions on these financial statements, on the financial statement schedule, and
on the Company's internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
|
/s/
|
PricewaterhouseCoopers LLP
|
|
|
PricewaterhouseCoopers
LLP
|
||
|
Philadelphia,
Pennsylvania
|
||
|
February
18, 2011
|
- 48
- -
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
|
Year
Ended December 31,
|
||||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Net
sales
|
$ | 2,221,014 | $ | 2,159,378 | $ | 2,191,465 | ||||||
|
Cost
of products sold
|
1,090,856 | 1,053,015 | 1,043,565 | |||||||||
|
Gross
profit
|
1,130,158 | 1,106,363 | 1,147,900 | |||||||||
|
Selling,
general and administrative expenses
|
738,901 | 718,230 | 735,084 | |||||||||
|
Restructuring
and other costs
|
10,984 | 6,890 | 32,355 | |||||||||
|
Operating
income
|
380,273 | 381,243 | 380,461 | |||||||||
|
Other
income and expenses:
|
||||||||||||
|
Interest
expense
|
25,089 | 21,896 | 32,527 | |||||||||
|
Interest
income
|
(4,254 | ) | (5,032 | ) | (17,089 | ) | ||||||
|
Other
expense (income), net
|
1,782 | 1,023 | 10,150 | |||||||||
|
Income
before income taxes
|
357,656 | 363,356 | 354,873 | |||||||||
|
Provision
for income taxes
|
89,225 | 88,944 | 71,603 | |||||||||
|
Equity
in net loss of
|
||||||||||||
|
unconsolidated
affilated company
|
(1,096 | ) | - | - | ||||||||
|
Net
income
|
267,335 | 274,412 | 283,270 | |||||||||
|
Less:
Net income (loss) attributable
|
||||||||||||
|
to
noncontrolling interests
|
1,627 | 154 | (599 | ) | ||||||||
|
Net
income attributable to
|
||||||||||||
|
DENTSPLY
International
|
$ | 265,708 | $ | 274,258 | $ | 283,869 | ||||||
|
Earnings
per common share:
|
||||||||||||
|
Basic
|
$ | 1.85 | $ | 1.85 | $ | 1.90 | ||||||
|
Diluted
|
$ | 1.82 | $ | 1.83 | $ | 1.87 | ||||||
|
Weighted
average common shares outstanding:
|
||||||||||||
|
Basic
|
143,980 | 148,319 | 149,069 | |||||||||
|
Diluted
|
145,985 | 150,102 | 151,679 | |||||||||
The
accompanying notes are an integral part of these financial
statements.
- 49
- -
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(in
thousands)
|
December
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Assets
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 540,038 | $ | 450,348 | ||||
|
Accounts
and notes receivable-trade, net
|
344,796 | 348,684 | ||||||
|
Inventories,
net
|
308,738 | 291,640 | ||||||
|
Prepaid
expenses and other current assets
|
121,473 | 127,124 | ||||||
|
Total
Current Assets
|
1,315,045 | 1,217,796 | ||||||
|
Property,
plant and equipment, net
|
423,105 | 439,619 | ||||||
|
Identifiable
intangible assets, net
|
78,743 | 89,086 | ||||||
|
Goodwill,
net
|
1,303,055 | 1,312,596 | ||||||
|
Other
noncurrent assets, net
|
138,003 | 28,835 | ||||||
|
Total
Assets
|
$ | 3,257,951 | $ | 3,087,932 | ||||
|
Liabilities
and Equity
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable
|
$ | 114,479 | $ | 100,847 | ||||
|
Accrued
liabilities
|
224,745 | 249,169 | ||||||
|
Income
taxes payable
|
13,113 | 12,366 | ||||||
|
Notes
payable and current portion of long-term debt
|
7,754 | 82,174 | ||||||
|
Total
Current Liabilities
|
360,091 | 444,556 | ||||||
|
Long-term
debt
|
604,015 | 387,151 | ||||||
|
Deferred
income taxes
|
72,489 | 72,524 | ||||||
|
Other
noncurrent liabilities
|
311,444 | 276,743 | ||||||
|
Total
Liabilities
|
1,348,039 | 1,180,974 | ||||||
|
Commitments
and contingencies
|
||||||||
|
Equity:
|
||||||||
|
Preferred
stock, $.01 par value; .25 million shares authorized; no shares
issued
|
- | - | ||||||
|
Common
stock, $.01 par value; 200.0 million shares authorized; 162.8 million
shares issued at December 31, 2010 and December 31, 2009
|
1,628 | 1,628 | ||||||
|
Capital
in excess of par value
|
204,902 | 195,495 | ||||||
|
Retained
earnings
|
2,320,350 | 2,083,459 | ||||||
|
Accumulated
other comprehensive income
|
24,156 | 83,542 | ||||||
|
Treasury
stock, at cost, 21.0 million shares at December 31, 2010 and 15.8 million
shares at December 31, 2009
|
(711,650 | ) | (532,019 | ) | ||||
|
Total
DENTSPLY International Equity
|
1,839,386 | 1,832,105 | ||||||
|
Noncontrolling
Interests
|
70,526 | 74,853 | ||||||
|
Total
Equity
|
1,909,912 | 1,906,958 | ||||||
|
Total
Liabilities and Equity
|
$ | 3,257,951 | $ | 3,087,932 | ||||
The
accompanying notes are an integral part of these financial
statements.
- 50
- -
|
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||
|
CONSOLIDATED
STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
|
||||||||||||||||||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||||||||||
|
Accumulated
|
Total
|
|||||||||||||||||||||||||||||||
|
Capital
in
|
Other
|
DENTSPLY
|
||||||||||||||||||||||||||||||
|
Common
|
Excess
of
|
Retained
|
Comprehensive
|
Treasury
|
International
|
Noncontrolling
|
Total
|
|||||||||||||||||||||||||
|
Stock
|
Par
Value
|
Earnings
|
Income
(Loss)
|
Stock
|
Equity
|
Interests
|
Equity
|
|||||||||||||||||||||||||
|
Balance
at December 31, 2007
|
$ | 1,628 | $ | 173,084 | $ | 1,582,683 | $ | 145,819 | $ | (387,108 | ) | $ | 1,516,106 | $ | 296 | $ | 1,516,402 | |||||||||||||||
|
Purchase
of subsidiary shares from noncontrolling interest
|
- | - | - | - | - | - | 71,931 | 71,931 | ||||||||||||||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||
|
Net
income
|
- | - | 283,869 | - | - | 283,869 | (599 | ) | 283,270 | |||||||||||||||||||||||
|
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | (71,521 | ) | - | (71,521 | ) | 63 | (71,458 | ) | |||||||||||||||||||||
|
Net
loss on derivative financial instruments
|
- | - | - | (13,986 | ) | - | (13,986 | ) | - | (13,986 | ) | |||||||||||||||||||||
|
Pension
liability adjustments
|
- | - | - | (20,700 | ) | - | (20,700 | ) | - | (20,700 | ) | |||||||||||||||||||||
|
Comprehensive
Income
|
177,662 | (536 | ) | 177,126 | ||||||||||||||||||||||||||||
|
Exercise
of stock options
|
- | (7,268 | ) | - | - | 19,994 | 12,726 | - | 12,726 | |||||||||||||||||||||||
|
Tax
benefit from stock options exercised
|
- | 3,910 | - | - | - | 3,910 | - | 3,910 | ||||||||||||||||||||||||
|
Share
based compensation expense
|
- | 17,290 | - | - | - | 17,290 | - | 17,290 | ||||||||||||||||||||||||
|
Funding
of Employee Stock Option Plan
|
- | 62 | - | - | 118 | 180 | - | 180 | ||||||||||||||||||||||||
|
Treasury
shares purchased
|
- | - | - | - | (112,634 | ) | (112,634 | ) | - | (112,634 | ) | |||||||||||||||||||||
|
RSU
dividends
|
- | 76 | (76 | ) | - | - | - | - | - | |||||||||||||||||||||||
|
Cash
dividends ($0.185 per share)
|
- | - | (27,518 | ) | - | - | (27,518 | ) | - | (27,518 | ) | |||||||||||||||||||||
|
Balance
at December 31, 2008
|
$ | 1,628 | $ | 187,154 | $ | 1,838,958 | $ | 39,612 | $ | (479,630 | ) | $ | 1,587,722 | $ | 71,691 | $ | 1,659,413 | |||||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||
|
Net
income
|
- | - | 274,258 | - | - | 274,258 | 154 | 274,412 | ||||||||||||||||||||||||
|
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | 50,566 | - | 50,566 | 3,008 | 53,574 | ||||||||||||||||||||||||
|
Net
loss on derivative financial instruments
|
- | - | - | (13,960 | ) | - | (13,960 | ) | - | (13,960 | ) | |||||||||||||||||||||
|
Pension
liability adjustments
|
- | - | - | 7,324 | - | 7,324 | - | 7,324 | ||||||||||||||||||||||||
|
Comprehensive
Income
|
318,188 | 3,162 | 321,350 | |||||||||||||||||||||||||||||
|
Exercise
of stock options
|
- | (11,515 | ) | - | - | 24,921 | 13,406 | - | 13,406 | |||||||||||||||||||||||
|
Tax
benefit from stock options exercised
|
- | 3,505 | - | - | - | 3,505 | - | 3,505 | ||||||||||||||||||||||||
|
Share
based compensation expense
|
- | 16,276 | - | - | - | 16,276 | - | 16,276 | ||||||||||||||||||||||||
|
Funding
of Employee Stock Option Plan
|
- | (63 | ) | - | - | 1,408 | 1,345 | - | 1,345 | |||||||||||||||||||||||
|
Treasury
shares purchased
|
- | - | - | - | (78,718 | ) | (78,718 | ) | - | (78,718 | ) | |||||||||||||||||||||
|
RSU
dividends
|
- | 138 | (138 | ) | - | - | - | - | - | |||||||||||||||||||||||
|
Cash
dividends ($0.200 per share)
|
- | - | (29,619 | ) | - | - | (29,619 | ) | - | (29,619 | ) | |||||||||||||||||||||
|
Balance
at December 31, 2009
|
$ | 1,628 | $ | 195,495 | $ | 2,083,459 | $ | 83,542 | $ | (532,019 | ) | $ | 1,832,105 | $ | 74,853 | $ | 1,906,958 | |||||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||
|
Net
income
|
- | - | 265,708 | - | - | 265,708 | 1,627 | 267,335 | ||||||||||||||||||||||||
|
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||||||||||
|
Foreign
currency translation adjustment
|
- | - | - | (49,519 | ) | - | (49,519 | ) | (4,592 | ) | (54,111 | ) | ||||||||||||||||||||
|
Net
loss on derivative financial instruments
|
- | - | - | (12,848 | ) | - | (12,848 | ) | - | (12,848 | ) | |||||||||||||||||||||
|
Net
unrealized holding gains on available-for-sale investments
|
- | - | - | 11,029 | - | 11,029 | - | 11,029 | ||||||||||||||||||||||||
|
Pension
liability adjustments
|
- | - | - | (8,048 | ) | - | (8,048 | ) | - | (8,048 | ) | |||||||||||||||||||||
|
Comprehensive
Income
|
206,322 | (2,965 | ) | 203,357 | ||||||||||||||||||||||||||||
|
Exercise
of stock options
|
- | (10,107 | ) | - | - | 40,296 | 30,189 | - | 30,189 | |||||||||||||||||||||||
|
Tax
benefit from stock options exercised
|
- | 4,663 | - | - | - | 4,663 | - | 4,663 | ||||||||||||||||||||||||
|
Share
based compensation expense
|
- | 18,803 | - | - | - | 18,803 | - | 18,803 | ||||||||||||||||||||||||
|
Funding
of Employee Stock Option Plan
|
- | 208 | - | - | 1,132 | 1,340 | - | 1,340 | ||||||||||||||||||||||||
|
Treasury
shares purchased
|
- | - | - | - | (223,993 | ) | (223,993 | ) | - | (223,993 | ) | |||||||||||||||||||||
|
Dividends
from noncontrolling interest
|
- | - | - | - | - | - | (1,362 | ) | (1,362 | ) | ||||||||||||||||||||||
|
RSU
distributions
|
- | (4,313 | ) | - | - | - | (4,313 | ) | - | (4,313 | ) | |||||||||||||||||||||
|
RSU
dividends
|
- | 153 | (153 | ) | - | 2,934 | 2,934 | - | 2,934 | |||||||||||||||||||||||
|
Cash
dividends ($0.200 per share)
|
- | - | (28,664 | ) | - | - | (28,664 | ) | - | (28,664 | ) | |||||||||||||||||||||
|
Balance
at December 31, 2010
|
$ | 1,628 | $ | 204,902 | $ | 2,320,350 | $ | 24,156 | $ | (711,650 | ) | $ | 1,839,386 | $ | 70,526 | $ | 1,909,912 | |||||||||||||||
The
accompanying notes are an integral part of these financial
statements.
- 51
- -
|
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
|
||||||||||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||||||
|
(in
thousands)
|
Year
Ended December 31,
|
|||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
income
|
$ | 267,335 | $ | 274,412 | $ | 283,270 | ||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
|
Depreciation
|
56,868 | 54,087 | 47,887 | |||||||||
|
Amortization
|
9,472 | 11,088 | 9,042 | |||||||||
|
Deferred
income taxes
|
1,386 | 195 | 13,371 | |||||||||
|
Share
based compensation expense
|
18,803 | 16,276 | 17,290 | |||||||||
|
Restructuring
and other costs - non-cash
|
379 | 369 | 8,303 | |||||||||
|
Stock
option income tax benefit
|
(4,663 | ) | (3,505 | ) | (3,910 | ) | ||||||
|
Other
non-cash expense (income)
|
7,249 | (8,650 | ) | (19,654 | ) | |||||||
|
Loss
(gain) on disposal of property, plant and equipment
|
113 | (1,997 | ) | 1,373 | ||||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||||||
|
Accounts
and notes receivable-trade, net
|
5,115 | (16,942 | ) | (3,690 | ) | |||||||
|
Inventories,
net
|
(9,309 | ) | 27,710 | (32,824 | ) | |||||||
|
Prepaid
expenses and other current assets
|
(3,705 | ) | 6,996 | (1,220 | ) | |||||||
|
Other
non current assets
|
(1,154 | ) | (192 | ) | 390 | |||||||
|
Accounts
payable
|
2,165 | (4,947 | ) | 5,430 | ||||||||
|
Accrued
liabilities
|
9,004 | (1,708 | ) | 5,748 | ||||||||
|
Income
taxes
|
3,017 | 8,104 | 4,594 | |||||||||
|
Other
noncurrent liabilities
|
249 | 1,193 | 581 | |||||||||
|
Net
cash provided by operating activities
|
362,324 | 362,489 | 335,981 | |||||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Cash
paid for acquisitions of businesses and equity investments
|
(35,556 | ) | (2,986 | ) | (117,300 | ) | ||||||
|
Capital
expenditures
|
(44,236 | ) | (56,481 | ) | (76,440 | ) | ||||||
|
Purchase
of convertible debt issued by affiliate
|
(49,654 | ) | - | - | ||||||||
|
Purchase
of company owned life insurance policies
|
(2,000 | ) | - | - | ||||||||
|
Expenditures
for identifiable intangible assets
|
(1,606 | ) | (14 | ) | (2,477 | ) | ||||||
|
Purchases
of short-term investments
|
- | - | (166,208 | ) | ||||||||
|
Liquidations
of short-term investments
|
- | 222 | 314,025 | |||||||||
|
Proceeds
from sale of property, plant and equipment
|
3,562 | 5,860 | 596 | |||||||||
|
Net
cash used in investing activities
|
(129,490 | ) | (53,399 | ) | (47,804 | ) | ||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Proceeds
from long-term borrowings, net of deferred financing costs
|
368,611 | 86,091 | 117,900 | |||||||||
|
Payments
on long-term borrowings
|
(242,137 | ) | (58,403 | ) | (226,147 | ) | ||||||
|
(Decrease)
increase in short-term borrowings
|
(9,657 | ) | (7,465 | ) | 2,111 | |||||||
|
Proceeds
from exercise of stock options
|
30,189 | 13,406 | 12,726 | |||||||||
|
Excess
tax benefits from share based compensation
|
4,663 | 3,505 | 3,910 | |||||||||
|
Cash
paid for treasury stock
|
(223,993 | ) | (78,718 | ) | (112,634 | ) | ||||||
|
Cash
dividends paid
|
(29,077 | ) | (29,836 | ) | (26,952 | ) | ||||||
|
Net
cash used in financing activities
|
(101,401 | ) | (71,420 | ) | (229,086 | ) | ||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(41,743 | ) | 8,687 | (24,484 | ) | |||||||
|
Net
increase in cash and cash equivalents
|
89,690 | 246,357 | 34,607 | |||||||||
|
Cash
and cash equivalents at beginning of period
|
450,348 | 203,991 | 169,384 | |||||||||
|
Cash
and cash equivalents at end of period
|
$ | 540,038 | $ | 450,348 | $ | 203,991 | ||||||
|
Supplemental
disclosures of cash flow information:
|
||||||||||||
|
Interest
paid, net of amounts capitalized
|
$ | 21,856 | $ | 23,231 | $ | 34,222 | ||||||
|
Income
taxes paid
|
$ | 64,787 | $ | 76,207 | $ | 66,696 | ||||||
The
accompanying notes are an integral part of these financial
statements.
- 52
- -
DENTSPLY
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES
Description
of Business
DENTSPLY
International Inc. (“DENTSPLY” or the “Company”), designs, develops,
manufactures and markets a broad range of professional dental
products. The Company believes that it is the world's leading
manufacturer and distributor of dental prosthetics, endodontic
instruments and materials, and ultrasonic scalers; the leading United States
manufacturer and distributor of denture teeth, dental handpieces, dental x-ray
film holders, film mounts and prophylaxis paste; and a leading worldwide
manufacturer or distributor of dental injectable anesthetics, impression
materials, orthodontic appliances, dental cutting instruments, dental implants
and restorative dental materials, dental sealants, and crown and bridge
materials. The Company distributes its dental products in over 120 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
products for the dental market.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America (“US GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
as of the date of the financial statements and the reported amounts of revenue
and expense during the reporting period. Actual results could differ
from those estimates, and such differences may be material to the consolidated
financial statements.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company. The
Company also consolidates all variable interest entities (“VIE”) where
the Company has determined that it has the power to direct the
activities that most significantly impact the VIE’s economic performance and
shares in either the significant risks or rewards of the VIE. The Company
continually reassesses its VIE to determine if consolidation is
appropriate. All significant intercompany accounts and transactions
are eliminated in consolidation.
Investments
in nonconsolidated affiliates (20-50 percent owned companies, joint ventures and
partnerships as well as less than 20 percent ownership positions where the
Company maintains significant influence over the subsidiary) are accounted for
using the equity method.
Cash and Cash
Equivalents
Cash and
cash equivalents include deposits with banks as well as highly liquid time
deposits with maturities at the date of purchase of ninety days or
less.
Short-term
Investments
Short-term
investments are highly liquid time deposits with original maturities at the date
of purchase greater than ninety days and with remaining maturities of one year
or less.
Accounts
and Notes Receivable-Trade
The
Company sells dental products through a worldwide network of distributors and
directly to end users. For customers on credit terms, the Company
performs ongoing credit evaluation of those customers' financial condition and
generally does not require collateral from them. The Company
establishes allowances for doubtful accounts for estimated losses resulting from
the inability of its customers to make required payments. The Company
records a provision for doubtful accounts, which is included in “Selling,
general and administrative expenses.”
- 53
- -
Accounts
receivable – trade is stated net of these allowances that were $8.8 million and
$12.2 million at December 31, 2010 and 2009, respectively. For the
years ended December 31, 2010 and 2009, the Company wrote-off $2.6 million and
$4.3 million, respectively, of accounts receivable that were previously
reserved. The tighter credit markets caused the Company to reassess
and tighten its controls over customer credit terms, increase collection efforts
and analyze accounts receivable activity. This, along with improved
customer liquidity, enabled the Company to reduce the provision for doubtful
accounts by $0.2 million and $3.1 million in 2010 and 2009,
respectively.
Additionally,
notes receivable – trade is stated net of these allowances that were $0.8
million and $1.1 million at December 31, 2010 and 2009,
respectively. The Company recorded provisions for doubtful accounts
on notes receivable – trade of $0.7 million for 2010 and $0.5 million for
2009. Additionally, the Company wrote-off $1.0 million in
2010.
Inventories
Inventories
are stated at the lower of cost or market. At December 31, 2010 and
2009, the cost of $6.9 million, or 2.2%, and $7.8 million, or 2.7%,
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 methods. The Company establishes
reserves for inventory estimated to be obsolete or unmarketable equal to the
difference between the cost of inventory and estimated market value based upon
assumptions about future demand and market conditions.
If the
FIFO method had been used to determine the cost of LIFO inventories, the amounts
at which net inventories are stated would be higher than reported at December
31, 2010 and 2009 by $4.9 million and $4.0 million, respectively.
Valuation
of Goodwill and Other Long-Lived Assets
Assessment
of the potential impairment of goodwill and other long-lived assets is an
integral part of the Company’s normal ongoing review of
operations. Testing for potential impairment of these assets is
significantly dependent on assumptions and reflects management’s best estimates
at a particular point in time. The dynamic economic environments in
which the Company’s businesses operate and key economic and business assumptions
with respect to projected selling prices, increased competition and
introductions of new technologies can significantly affect the outcome of
impairment tests. Estimates based on these assumptions may differ
significantly from actual results. Changes in factors and assumptions
used in assessing potential impairments can have a significant impact on the
existence and magnitude of impairments, as well as the time at which such
impairments are recognized. If there are unfavorable changes in these
assumptions, the future cash flows, a key variable in assessing the impairment
of these assets, may decrease and as a result the Company may be required to
recognize impairment charges. Future changes in the environment and
the economic outlook for the assets being evaluated could also result in
additional impairment charges being recognized. The following
information outlines the Company’s significant accounting policies on long-lived
assets by type.
Goodwill
US GAAP
requires that at least an annual impairment test be applied to
goodwill. The Company performs impairment tests using a fair value
approach. If impairment is identified on goodwill, the resulting
charge is determined by recalculating goodwill through a hypothetical purchase
price allocation of the fair value and reducing the current carrying value to
the extent it exceeds the recalculated goodwill.
The
Company’s fair value approach involves using a discounted cash flow model with
market-based support as its valuation technique to measure the fair value for
its reporting units. The discounted cash flow model uses five year
forecasted cash flows plus a terminal value based on a multiple of
earnings. In addition, the Company applies gross profit and operating
expense assumptions consistent with its historical trends. The total
cash flows were discounted based on market participant data, which included the
Company’s weighted-average cost of capital. The Company considered
the current market conditions when determining its
assumptions. Lastly, the Company reconciled the aggregate fair values
of its reporting units to its market capitalization, which included a reasonable
control premium based on market conditions. Additional information
related to the testing for goodwill impairment is provided in Note 8, Goodwill
and Intangible Assets.
Identifiable Definite-Lived
Intangible Assets
Identifiable
definite-lived intangible assets, which primarily consist of patents,
trademarks, brand names, non-compete agreements and licensing agreements, are
amortized on a straight-line basis over their estimated useful
lives. These assets are reviewed for impairment whenever events or
circumstances suggest that the carrying amount of the asset may not be
recoverable. The Company closely monitors certain intangible assets
related to new and existing technologies for indicators of impairment as these
assets have more risk of becoming impaired. Impairment is based upon
an initial evaluation of the identifiable undiscounted cash flows. If
the initial evaluation identifies a potential impairment, a fair value is
determined by using a discounted cash flows valuation. If impaired,
the resulting charge reflects the excess of the asset’s carrying cost over its
fair value.
- 54
- -
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. Maintenance and repairs are expensed as incurred to the
statement of operations; replacements and major improvements are
capitalized. These assets groups are reviewed for impairment whenever
events or circumstances suggest that the carrying amount of the asset group may
not be recoverable. Impairment is based upon an evaluation of the
identifiable undiscounted cash flows. If impaired, the resulting
charge reflects the excess of the asset group’s carrying cost over its fair
value.
Marketable
Security
The
Company’s marketable securities consist of debt instruments that are classified
as available-for-sale in “Other noncurrent assets” on the consolidated balance
sheets as the instruments mature in December 2015. The Company determined the
appropriate classification at the time of purchase and will re-evaluate such
designation as of each balance sheet date. In addition, the Company reviews the
securities each quarter for indications of possible impairment. Once impairment
is identified, the determination of whether the impairment is temporary or
other-than-temporary requires significant judgment. The primary factors that the
Company considers in classifying the impairment include the extent and time the
fair value of each investment has been below cost and the existence of a credit
loss. If a decline in fair value is judged other-than-temporary, the basis of
the securities is written down to fair value and the amount of the write-down is
included as a realized loss.
Derivative
Financial Instruments
The
Company requires that all derivative instruments be recorded on the balance
sheet at fair value and that changes in fair value be recorded each period in
current earnings or accumulated other comprehensive income
(“AOCI”).
The
Company employs derivative financial instruments to hedge certain anticipated
transactions, firm commitments, and assets and liabilities denominated in
foreign currencies. Additionally, the Company utilizes interest rate
swaps to convert floating rate debt to fixed rate, fixed rate debt to floating
rate, cross currency basis swaps to convert debt denominated in one currency to
another currency, and commodity swaps to fix its variable raw materials
costs.
Pension
and Other Postretirement Benefits
Substantially
all of the employees of the Company and its subsidiaries are covered by
government or Company-sponsored defined benefit or defined contribution
plans. Additionally, certain union and salaried employee groups in
the United States are covered by postretirement healthcare
plans. Costs for Company-sponsored plans are based on expected return
on plan assets, discount rates, employee compensation increase rates and health
care cost trends. Expected return on plan assets, discount rates and
health care cost trend assumptions are particularly important when determining
the Company’s benefit obligations and net periodic benefit costs associated with
postretirement benefits. Changes in these assumptions can impact the
Company’s earnings before income taxes. In determining the cost of
postretirement benefits, certain assumptions are established annually to reflect
market conditions and plan experience to appropriately reflect the expected
costs as actuarially determined. These assumptions include medical
inflation trend rates, discount rates, employee turnover and mortality
rates. The Company predominantly uses liability durations in
establishing its discount rates, which are observed from indices of high-grade
corporate bond yields in the respective economic regions of the
plans. The expected return on plan assets is the weighted average
long-term expected return based upon asset allocations and historic average
returns for the markets where the assets are invested, principally in foreign
locations. The Company reports the funded status of its defined
benefit pension and other postretirement benefit plans on its consolidated
balance sheets as a net liability or asset. Additional information
related to the impact of changes in these assumptions is provided in Note 13,
Benefit Plans.
Accruals
for Self-Insured Losses
The
Company maintains insurance for certain risks, including workers’ compensation,
general liability, product liability and vehicle liability, and is self-insured
for employee related health care benefits. The Company accrues for
the expected costs associated with these risks by considering historical claims
experience, demographic factors, severity factors and other relevant
information. Costs are recognized in the period the claim is
incurred, and the financial statement accruals include an estimate of claims
incurred but not yet reported. The Company has stop-loss coverage to
limit its exposure to any significant exposure on a per claim
basis.
- 55
- -
Litigation
The
Company and its subsidiaries are from time to time parties to lawsuits arising
out of their respective operations. The Company records liabilities when a loss
is probable and can be reasonably estimated. These estimates are typically in
the form of ranges, and the Company records the liabilities at the low point of
the ranges. The ranges established by management are based on an analysis made
by internal and external legal counsel who considers information known at the
time. If the Company determines a liability to be only reasonably possible, it
considers the same information to estimate the possible exposure and disclose
any material potential liability. These loss contingencies are monitored
regularly for a change in fact or circumstance that would require an accrual
adjustment. The Company believes it has estimated liabilities for probable
losses well in the past; however, the unpredictability of litigation and court
decisions could cause a liability to be incurred in excess of estimates. Legal
costs related to these lawsuits are expensed as incurred.
Accumulated
Other Comprehensive Income
AOCI
includes foreign currency translation adjustments related to the Company’s
foreign subsidiaries, net of the related changes in certain financial
instruments hedging these foreign currency investments. In addition, changes in
the Company’s fair value of certain derivative financial instruments, net
unrealized holding gain on available-for-sale securities and pension liability
adjustments and prior service costs, net are recorded in AOCI. These changes are
recorded in AOCI net of any related tax adjustments. For the years ended
December 31, 2010, 2009 and 2008, these tax adjustments were $158.7 million,
$143.0 million and $138.5 million, respectively, primarily related to foreign
currency translation adjustments.
The
balances included in AOCI in the consolidated balance sheets are as
follows:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Foreign
currency translation adjustments
|
$ | 170,597 | $ | 220,116 | ||||
|
Net
loss on derivative financial instruments
|
(126,648 | ) | (113,800 | ) | ||||
|
Net
unrealized holding gain on available for-sale securities
|
11,029 | - | ||||||
|
Pension
liability adjustments
|
(30,822 | ) | (22,774 | ) | ||||
| $ | 24,156 | $ | 83,542 | |||||
The
cumulative foreign currency translation adjustments included translation gains
of $294.6 million and $327.8 million as of December 31, 2010 and 2009,
respectively, offset by losses of $124.0 million and $107.7 million,
respectively, on loans designated as hedges of net investments.
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 foreign exchange rates
on the balance sheet date; revenue and expenses are translated at the average
year-to-date foreign exchange rates. The effects of these translation
adjustments are reported in Equity within AOCI of the consolidated balance
sheets. During the year ended December 31, 2010, the Company had losses of $16.3
million on its loans designated as hedges of net investments and translation
losses of $33.2 million. During the year ended December 31, 2009, the Company
had gains of $0.9 million on its loans designated as hedges of net investments
and translation gains of $49.7 million.
Foreign
exchange gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved and remeasurement
adjustments in countries with highly inflationary economies are included in
income. Net foreign exchange losses of $3.3 million, net foreign exchange gains
of $0.3 million and net foreign exchange losses of $8.9 million in 2010, 2009,
and 2008, respectively, are included in “Other expense (income),
net.”
- 56
- -
Revenue
Recognition
Revenue,
net of related discounts and allowances, is recognized when the earnings process
is complete. This occurs when products are shipped to or received by the
customer in accordance with the terms of the agreement, title and risk of loss
have been transferred, collectability is reasonably assured and pricing is fixed
or determinable. Net sales include shipping and handling costs collected from
customers in connection with the sale. Sales taxes, value added taxes and other
similar types of taxes collected from customers in connection with the sale are
recorded by the Company on a net basis and are not included in the statement of
operations.
Certain
of the Company’s customers are offered cash rebates based on targeted sales
increases. In accounting for these rebate programs, the Company records an
accrual as a reduction of net sales for the estimated rebate as sales take place
throughout the year.
A portion
of the Company’s net sales is comprised of sales of precious metals generated
through its precious metal dental alloy product offerings. As the precious metal
content of the Company’s sales is largely a pass-through to customers, the
Company uses its cost of precious metal purchased as a proxy for the precious
metal content of sales, as the precious metal content of sales is not separately
tracked and invoiced to customers. The Company believes that it is reasonable to
use the cost of precious metal content purchased in this manner since precious
metal alloy sale prices are typically adjusted when the prices of underlying
precious metals change. The precious metals content of sales was $189.2 million,
$168.7 million and $200.0 million for 2010, 2009 and 2008,
respectively.
Cost
of Products Sold
Cost of
products sold represents costs directly related to the manufacture and
distribution of the Company’s products. Primary costs include raw materials,
packaging, direct labor, overhead, shipping and handling, warehousing and the
depreciation of manufacturing, warehousing and distribution facilities. Overhead
and related expenses include salaries, wages, employee benefits, utilities,
lease costs, maintenance and property taxes.
Warranties
The
Company provides warranties on certain equipment products. Estimated warranty
costs are accrued when sales are made to customers. Estimates for warranty costs
are based primarily on historical warranty claim experience. Warranty costs are
included in “Cost of products sold.”
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses represent costs incurred in generating
revenues and in managing the business of the Company. Such costs include
advertising and other marketing expenses, salaries, employee benefits, incentive
compensation, research and development, travel, office expenses, lease costs,
amortization of capitalized software and depreciation of administrative
facilities.
Research
and Development Costs
Research and development (“R&D”)
costs relate primarily to internal costs for salaries and direct overhead
expenses. In addition, the Company contracts with outside vendors to conduct
R&D activities. All such R&D costs are charged to expense when incurred.
The Company capitalizes the costs of equipment that have general R&D uses
and expenses such equipment that is solely for specific R&D projects. The
depreciation expense related to this capitalized equipment is included in the
Company’s R&D costs. R&D costs are included in “Selling, general and
administrative expenses” and amounted to $49.4 million, $50.3 million and $48.5
million for 2010, 2009 and 2008, respectively. The year-over-year comparisons for 2010
versus 2009 and 2009 versus 2008 were both impacted by foreign currency
translation which decreased the reported expense variations.
Stock Compensation
The
Company recognizes the compensation cost relating to share-based payment
transactions in the financial statements. The cost of share-based payment
transactions is measured at the grant date, based on the calculated fair value
of the award, and is recognized as an expense over the employee’s requisite
service period (generally the vesting period of the equity awards). The
compensation cost is only recognized for the portion of the awards that are
expected to vest.
- 57
- -
Income Taxes
The
Company’s tax expense includes U.S. and international income taxes plus the
provision for U.S. taxes on undistributed earnings of international subsidiaries
not deemed to be permanently invested. Tax credits and other incentives reduce
tax expense in the year the credits are claimed. Certain items of income and
expense are not reported in tax returns and financial statements in the same
year. The tax effect of such temporary differences is reported as deferred
income taxes. Deferred tax assets are recognized if it is more likely than not
that the assets will be realized in future years. The Company establishes a
valuation allowance for deferred tax assets for which realization is not
likely.
The
Company applies a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The Company recognizes in the financial
statements, the impact of a tax position, if that position is more likely than
not of being sustained on audit, based on the technical merits of the
position.
Earnings
Per Share
Basic
earnings per share are calculated by dividing net earnings by the weighted
average number of shares outstanding for the period. Diluted earnings per share
is calculated by dividing net earnings by the weighted average number of shares
outstanding for the period, adjusted for the effect of an assumed exercise of
all dilutive options outstanding at the end of the period.
Business
Acquisitions
The
Company acquires businesses as well as partial interests in businesses. Acquired
businesses are accounted for using the acquisition method of accounting which
requires that the purchase price be allocated to net assets at their respective
fair values. Any excess of the purchase price over estimated fair values of net
assets is recorded as goodwill. Under the acquisition method, amounts allocated
to acquired in-process research and development and contingent consideration are
recorded to the consolidated balance sheet at the date of acquisition at their
respective fair values. The assumptions made in determining fair value assigned
to acquired assets and liabilities as well as asset lives can materially impact
the results of operations.
The
Company obtains information during due diligence and through other sources to
get respective fair values. Examples of factors and information that the Company
uses to determine the fair values include: tangible and intangible asset
evaluations and appraisals; evaluations of existing contingencies and
liabilities; product line integration information; and information systems
compatibilities. If the initial accounting for an acquisition is incomplete by
the end of the quarter in which the acquisition occurred, the Company will
record a provisional estimate in the financial statements. The provisional
estimate will be finalized as soon as information becomes available but will
only occur up to one year from the acquisition date.
Equity
Method Investments
Investments
in partnerships, joint ventures and less-than-majority-owned subsidiaries in
which the Company has significant influence are accounted for under the equity
method.
Equity
investments are carried at original cost adjusted for the proportionate share of
the investees’ income, losses and distributions. The Company assesses the
carrying value of its equity investments when an indicator of a loss in value is
present and record a loss in value of the investment when the assessment
indicates that an other-than-temporary decline in the investment
exists.
The
Company classifies its equity in net earnings of unconsolidated affiliates in
the consolidated statements of operations under the title of “Equity in net loss
of unconsolidated affiliated company”.
Noncontrolling
Interests
The
Company reports noncontrolling interest (“NCI”) in a subsidiary as a separate
component of Equity in the consolidated balance sheets. Additionally, the
Company reports the portion of net income and comprehensive income (loss)
attributed to the Company and NCI separately in the consolidated statements of
operations. The Company also includes a separate column for NCI in the
consolidated statements of changes in equity and comprehensive
income.
- 58
- -
Variable
Interest Entities
On
January 1, 2010, the Company adopted the new accounting guidance for variable
interest entities (“VIE”). The guidance includes: (1) the elimination of the
exemption from consolidation for qualifying special purpose entities, (2) a new
approach for determining the primary beneficiary of a VIE, which requires that
the primary beneficiary have both (i) the power to control the most significant
activities of the VIE and (ii) either the obligation to absorb losses or the
right to receive benefits that could potentially be significant to the VIE, and
(3) the requirement to continually reassess who should consolidate a VIE. The
adoption did not have a material impact on the Company’s financial position and
results of operations.
The
Company consolidates all VIE where the Company has determined that it has the
power to direct the activities that most significantly impact the VIE’s economic
performance and shares in either the significant risks or rewards of the VIE.
The Company continually reassesses VIE to determine if consolidation is
appropriate. The Company continues to believe that it is the primary beneficiary
of Materialise Dental N.V. (“Materialise”) and Zhermack S.p.A. (“Zhermack”)
under this new accounting guidance for VIE. The accounting for Materialise and
Zhermack are discussed further in Note 3, Business Acquisitions.
Segment
Reporting
The
Company has numerous operating businesses covering a wide range of products and
geographic regions, primarily serving the professional dental market.
Professional dental products represented approximately 97% of sales in 2010,
2009 and 2008. The Company has four reportable segments and a description of the
activities of these segments is included in Note 4, Segment and Geographic
Information.
Fair
Value Measurement
Recurring
Basis
The
Company records certain financial assets and liabilities at fair value in
accordance with the accounting guidance, which defines fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. The accounting guidance establishes a hierarchal disclosure
framework associated with the level of pricing observability utilized in
measuring financial instruments at fair value. The three broad levels defined by
the fair value hierarchy are as follows:
Level 1 –
Quoted prices are available in active markets for identical assets or
liabilities as of the reported date.
Level 2 –
Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reported date. The nature of these
financial instruments include, derivative instruments whose fair value have been
derived using a model where inputs to the model are directly observable in the
market, or can be derived principally from or corroborated by observable market
data.
Level 3 –
Instruments that have little to no pricing observability as of the reported
date. These financial instruments do not have two-way markets and are measured
using management’s best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or
estimation.
The
degree of judgment utilized in measuring the fair value of certain financial
assets and liabilities generally correlates to the level of pricing
observability. Pricing observability is impacted by a number of factors,
including the type of financial instrument. Financial assets and liabilities
with readily available active quoted prices or for which fair value can be
measured from actively quoted prices generally will have a higher degree of
pricing observability and a lesser degree of judgment utilized in measuring fair
value. Conversely, financial assets and liabilities rarely traded or not quoted
will generally have less, or no pricing observability and a higher degree of
judgment utilized in measuring fair value.
The
Company primarily applies the market approach for recurring fair value
measurements and endeavors to utilize the best available information.
Accordingly, the Company utilizes valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs. Additionally, the
Company considers its credit risks and its counterparties' credit risks when
determining the fair values of its financial assets and liabilities. The Company
has presented the required disclosures in Note 16, Fair Value
Measurement.
- 59
- -
Non-Recurring
Basis
When
events or circumstances require an asset or liability to be fair valued that
otherwise is generally recorded based on another valuation method, such as, net
realizable value, the Company will utilize the valuation techniques described
above.
Reclassification
of Prior Year Amounts
Certain
reclassifications have been made to prior years' data in order to conform to
current year presentation.
NOTE
2 - EARNINGS PER COMMON SHARE
The
following table sets forth the computation of basic and diluted earnings per
common share:
|
Net income
|
||||||||||||
|
attributable to
|
||||||||||||
|
DENTSPLY
|
Earnings per
|
|||||||||||
|
(in thousands, except for share amounts)
|
International
|
Shares
|
common share
|
|||||||||
|
Year
Ended December 31, 2010
|
||||||||||||
|
Basic
|
$ | 265,708 | 143,980 | $ | 1.85 | |||||||
|
Incremental
shares from assumed exercise of dilutive options
|
- | 2,005 | ||||||||||
|
Diluted
|
$ | 265,708 | 145,985 | $ | 1.82 | |||||||
|
Year
Ended December 31, 2009
|
||||||||||||
|
Basic
|
$ | 274,258 | 148,319 | $ | 1.85 | |||||||
|
Incremental
shares from assumed exercise of dilutive options
|
- | 1,783 | ||||||||||
|
Diluted
|
$ | 274,258 | 150,102 | $ | 1.83 | |||||||
|
Year
Ended December 31, 2008
|
||||||||||||
|
Basic
|
$ | 283,869 | 149,069 | $ | 1.90 | |||||||
|
Incremental
shares from assumed exercise of dilutive options
|
- | 2,610 | ||||||||||
|
Diluted
|
$ | 283,869 | 151,679 | $ | 1.87 | |||||||
Options
to purchase 3.1 million, 2.9 million and 1.6 million shares of common stock that
were outstanding during the years ended 2010, 2009 and 2008, respectively, were
not included in the computation of diluted earnings per common share since the
options' exercise prices were greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
NOTE
3 - BUSINESS ACQUISITIONS AND INVESTMENTS IN AFFILIATES
During
2010, the acquisition related activity was $35.6 million, net of cash acquired,
which included a payment for a non-controlling interest investment in DIO
Corporation (“DIO”). In 2009, the acquisition related activity was $3.0 million,
net of cash. This activity was related to an additional earn-out payment on a
prior acquisition from 2007 and the acquisition of a small sales and marketing
organization of 3D digital implantology products.
- 60
- -
Investment
in Affiliates
On
December 9, 2010, the Company purchased an initial ownership interest of 16% of
the outstanding shares of DIO. The Company accounts for the ownership in DIO
under the equity method of accounting as it has significant influence over DIO.
In addition, on December 9, 2010, the Company invested $49.7 million in the
corporate convertible bonds of DIO, which may be converted into commons shares
after a one year period. The bonds are designated by the Company as
available-for-sale securities which are reported in, “Other noncurrent assets,
net,” on the consolidated balance sheets and the changes in fair value are
reported in AOCI. The convertible feature of the bond has not been bifurcated
from the underlying bond as the feature does not contain a net-settlement
feature, nor would the Company be able to achieve a hypothetical net-settlement
that would substantially place the Company in a comparable cash settlement
position. As such, the derivative is not accounted for separately from the bond.
The cash paid by the Company is equal to the face value of the bonds issued by
DIO, and therefore, the Company has not recorded any bond premium or discount on
acquiring the bonds. At December 31, 2010, the amortized cost and fair value of
the DIO bond was $49.7 million and $66.0 million, respectively, and $11.0
million of unrealized holding gains on available-for-sale securities, net of
tax, have been recorded in AOCI. The contractual maturity of the bond is in
December 2015.
DIO is
located in Busan, South Korea and manufactures a wide range of dental implants
including STEADY®, BioTite-H, SM implant, internal implant, external implant,
ProTem implant, and SM Extra Wide implant systems. In addition, DIO offers
various dental devices including implant surgical devices, handpieces, dental
materials, impression materials sterilizers, toothpaste that contains
dyrdoxyapatite, and the iTero® 3D intra-oral scanner (Cadent Inc.).
Business
Acquisitions
The
business acquisitions were related to the purchase of several small distributors
that sell dental specialty products. The purchase agreements for three of the
acquisitions provide for additional payments to be made based upon the
achievement of certain operating performance of the respective businesses;
however, the Company does not expect the additional payments to be material to
the financial statements. The results of operations for these businesses have
been included in the accompanying financial statements since the effective date
of the respective transactions. The purchase prices have been allocated on the
basis of preliminary estimates of the fair values of assets acquired and
liabilities assumed.
Variable
Interest Entities
The
Company adopted new accounting guidance for VIE on January 1, 2010, which is
discussed in Note 1, Significant Accounting Policies. The Company continues to
believe that it will be the primary beneficiary of Materialise and Zhermack
under this accounting guidance for VIE.
Additional Earn-out
Payments
Several
of the Company’s 2005, 2007 and 2008 acquisitions included provisions for
possible additional payments based on the future performance of the individual
businesses (generally for two to three years). During 2010, the Company paid
$5.1 million in additional purchase price under these agreements.
Fair Value Allocations for
the Business Acquisitions and Additional Earnout Payments
As
of December 31, 2010, the Company has recorded a total of $20.4 million in
goodwill related to four business combinations, one investment in an
unconsolidated affiliate, and additional earn-out payments on acquisitions from
prior years. None of this goodwill is expected to be deductible for tax
purposes.
- 61
- -
The
following table summarizes the estimated fair values of the indentified assets
acquired and liabilities assumed (in thousands):
|
Current
assets
|
$ | 10,755 | ||
|
Property,
plant and equipment
|
1,255 | |||
|
Identifiable
intangible assets and goodwill
|
21,055 | |||
|
Other
long-term assets
|
28 | |||
|
Total
assets
|
$ | 33,093 | ||
|
Current
liabilities
|
(12,495 | ) | ||
|
Long-term
liabilities
|
(1,283 | ) | ||
|
Total
liabilities
|
$ | (13,778 | ) | |
|
Net
assets
|
$ | 19,315 |
Also, as a result of the finalization
of fair values assigned to assets acquired and liabilities assumed from 2010
acquisition related activity, the Company has recorded a total of $0.7 million
in intangible assets as non-compete agreements and customer lists with an
average weighted life of 5.0 years.
Goodwill
was assigned to the following four segments:
|
•
|
$1.5 million to U.S., Germany,
and Certain Other European Regions Consumable
Businesses;
|
|
•
|
$12.7
million Canada/Latin America/Endodontics/Orthodontics;
and,
|
|
•
|
$6.2 million to Dental Laboratory
Business/Implants/Non-Dental.
|
NOTE
4 – SEGMENT AND GEOGRAPHIC INFORMATION
The
operating businesses are combined into operating groups, which have overlapping
product offerings, geographical presence, customer bases, distribution channels
and regulatory oversight. These operating groups are considered the Company’s
reportable segments as the Company’s chief operating decision-maker regularly
reviews financial results at the operating group level and uses this information
to manage the Company’s operations. The accounting policies of the segments are
consistent with those described for the consolidated financial statements in the
summary of significant accounting policies (see Note 1, Significant Accounting
Policies). The Company measures segment income for reporting purposes as net
operating income before restructuring, impairments, and other costs, interest
and taxes. Additionally, net operating income is derived from net third party
sales, excluding precious metal content. A description of the services provided
within each of the Company’s four reportable segments is provided below. The
disclosure below reflects the Company’s segment reporting
structure.
In
January 2010, the Company moved the reporting responsibility for several
locations between segments as a result of a change to the management structure.
This change also helped the Company gain operating efficiencies and
effectiveness. The segment information below reflects this revised structure for
all periods shown.
United
States, Germany and Certain Other European Regions Consumable
Businesses
This
business group includes responsibility for the design, manufacturing, sales and
distribution of certain small equipment and chairside consumable products in the
United States, Germany and certain other European regions. It also has
responsibility for the sales and distribution of certain Endodontic products in
Germany.
France,
United Kingdom, Italy and Certain Other European Countries, CIS, Middle East,
Africa, Pacific Rim Businesses
This
business group includes responsibility for the sales and distribution for
certain small equipment, chairside consumable products, certain laboratory
products and certain Endodontic products in France, United Kingdom, Italy, the
Commonwealth of Independent States (“CIS”), Middle East, Africa, Asia (excluding
Japan), Japan and Australia, as well as the sale and distribution of implant
products and bone substitute/grafting materials in France, Italy, Asia and
Australia. This business group also includes the responsibility for sales and
distribution for certain laboratory products, implants products and bone
substitution/grafting materials for Austria. It also is responsible for sales
and distribution of certain small equipment and chairside consumable products,
certain laboratory products, implant products and bone substation/grafting
materials in certain other European countries. In addition this business group
also includes the manufacturing and sale of Orthodontic products and certain
laboratory products in Japan, and the manufacturing of certain laboratory and
certain Endodontic products in Asia.
- 62
- -
Canada/Latin
America/Endodontics/Orthodontics
This
business group includes responsibility for the design, manufacture, and/or sales
and distribution of certain small equipment, chairside consumable products,
certain laboratory products and Endodontic products in Brazil. It also has
responsibility for the sales and distribution of most of the Company’s dental
products sold in Latin America and Canada. This business group also includes the
responsibility for the design and manufacturing of Endodontic products in the
United States, Switzerland and Germany and is responsible for the sales and
distribution of the Company’s Endodontic products in the United States, Canada,
Switzerland, Benelux, Scandinavia, Austria, Latin America and Eastern Europe,
and for certain Endodontic products in Germany. This business group is also
responsible for the world-wide sales and distribution, excluding Japan, as well
as some manufacturing of the Company’s Orthodontic products. In addition, this
business group is also responsible for sales and distribution in the United
States of implant and bone substitute/grafting materials and the sales and
distribution of implants in Brazil. This business group is also responsible for
the manufacture and sale of certain products in the Company’s non-dental
business.
Dental
Laboratory Business/Implants/Non-Dental
This
business group includes the responsibility for the design, manufacture, sales
and distribution of most laboratory products, excluding certain countries
mentioned previously, and the design, manufacture, and/or sales and distribution
of the Company’s dental implant products and bone substitute/grafting materials,
excluding sales and distribution of implants and bone substitute/grafting
materials in the United States; France, Italy, Austria, and certain other
Eastern European countries; and Australia. This business group is also
responsible for most of the Company’s non-dental business.
Significant
interdependencies exist among the Company’s operations in certain geographic
areas. Inter-group sales are at prices intended to provide a reasonable profit
to the manufacturing unit after recovery of all manufacturing costs and to
provide a reasonable profit for purchasing locations after coverage of
marketing, sales, distribution and general and administrative
costs.
Generally,
the Company evaluates performance of the operating groups based on the groups’
operating income, excluding restructuring, impairments and other costs, interest
and taxes, and net third party sales, excluding precious metal content. The
Company considers net third party sales, excluding precious metal content, as
the appropriate sales measurement due to the fluctuations of precious metal
prices and due to the fact that the precious metal content is largely a
pass-through to customers and has a minimal effect on earnings.
The
following table sets forth information about the Company’s operating groups for
the years ended December 31, 2010, 2009 and 2008.
Third Party Net
Sales
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 526,781 | $ | 526,668 | $ | 459,678 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
482,146 | 471,232 | 487,126 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
665,032 | 621,256 | 632,151 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
550,359 | 543,637 | 618,077 | |||||||||
|
All
Other (a)
|
(3,304 | ) | (3,415 | ) | (5,567 | ) | ||||||
|
Total
net sales
|
$ | 2,221,014 | $ | 2,159,378 | $ | 2,191,465 | ||||||
|
|
(a)
|
Includes
amounts recorded at Corporate
headquarters.
|
- 63
- -
Third Party Net Sales,
Excluding Precious Metal Content
|
(in
thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 526,781 | $ | 526,668 | $ | 459,678 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
445,627 | 436,790 | 456,192 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
662,556 | 618,414 | 628,887 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
400,097 | 412,209 | 452,352 | |||||||||
|
All
Other (b)
|
(3,304 | ) | (3,415 | ) | (5,567 | ) | ||||||
|
Total
net sales, excluding precious metal content
|
$ | 2,031,757 | $ | 1,990,666 | $ | 1,991,542 | ||||||
|
Precious
metal content of sales
|
189,257 | 168,712 | 199,923 | |||||||||
|
Total
net sales, including precious metal content
|
$ | 2,221,014 | $ | 2,159,378 | $ | 2,191,465 | ||||||
|
|
(b)
|
Includes
results of Corporate headquarters and one distribution warehouse not
managed by named segments.
|
Intersegment Net
Sales
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 116,440 | $ | 104,328 | $ | 130,463 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
17,103 | 13,202 | 15,941 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
115,158 | 103,329 | 106,031 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
112,285 | 114,591 | 123,157 | |||||||||
|
All
Other (c)
|
179,780 | 176,539 | 177,251 | |||||||||
|
Eliminations
|
(540,766 | ) | (511,989 | ) | (552,843 | ) | ||||||
|
Total
|
$ | - | $ | - | $ | - | ||||||
|
|
(c)
|
Includes
amounts recorded at Corporate
headquarters.
|
- 64
- -
Depreciation and
Amortization
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 16,315 | $ | 14,945 | $ | 12,807 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
3,939 | 3,884 | 3,188 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
18,419 | 16,978 | 17,179 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
20,479 | 21,461 | 16,062 | |||||||||
|
All
Other (d)
|
7,188 | 7,907 | 7,693 | |||||||||
|
Total
|
$ | 66,340 | $ | 65,175 | $ | 56,929 | ||||||
|
|
(d)
|
Includes
amounts recorded at Corporate
headquarters.
|
Segment Operating
Income
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 176,128 | $ | 158,389 | $ | 162,717 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
17,187 | 19,737 | 14,474 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
195,817 | 185,772 | 200,101 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
83,428 | 92,554 | 123,442 | |||||||||
|
All
Other (e)
|
(81,303 | ) | (68,319 | ) | (87,918 | ) | ||||||
|
Segment
Operating Income
|
$ | 391,257 | $ | 388,133 | $ | 412,816 | ||||||
|
Reconciling
Items:
|
||||||||||||
|
Restructuring
and other costs
|
10,984 | 6,890 | 32,355 | |||||||||
|
Interest
expense
|
25,089 | 21,896 | 32,527 | |||||||||
|
Interest
income
|
(4,254 | ) | (5,032 | ) | (17,089 | ) | ||||||
|
Other
expense (income), net
|
1,782 | 1,023 | 10,150 | |||||||||
|
Income
before income taxes
|
$ | 357,656 | $ | 363,356 | $ | 354,873 | ||||||
|
|
(e)
|
Includes
results of Corporate headquarters, inter-segment eliminations and one
distribution warehouse not managed by named
segments.
|
- 65
- -
Capital
Expenditures
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
U.S.,
Germany and Certain Other
|
||||||||||||
|
European
Regions Consumable Businesses
|
$ | 9,267 | $ | 8,333 | $ | 19,836 | ||||||
|
France,
U.K., Italy and Certain Other
|
||||||||||||
|
European
Countries, CIS, Middle East,
|
||||||||||||
|
Africa,
Pacific Rim Businesses
|
2,978 | 2,506 | 3,839 | |||||||||
|
Canada/Latin
America/Endodontics/
|
||||||||||||
|
Orthodontics
|
17,078 | 14,434 | 19,593 | |||||||||
|
Dental
Laboratory Business/
|
||||||||||||
|
Implants/Non-Dental
|
11,397 | 25,546 | 24,510 | |||||||||
|
All
Other (f)
|
3,516 | 5,662 | 8,662 | |||||||||
|
Total
|
$ | 44,236 | $ | 56,481 | $ | 76,440 | ||||||
|
|
(f)
|
Includes
capital expenditures of Corporate
headquarters.
|
|
Assets
|
||||||||
|
(in
thousands)
|
2010
|
2009
|
||||||
|
U.S.,
Germany and Certain Other
|
||||||||
|
European
Regions Consumable Businesses
|
$ | 578,770 | $ | 602,272 | ||||
|
France,
U.K., Italy and Certain Other
|
||||||||
|
European
Countries, CIS, Middle East,
|
||||||||
|
Africa,
Pacific Rim Businesses
|
390,572 | 388,831 | ||||||
|
Canada/Latin
America/Endodontics/
|
||||||||
|
Orthodontics
|
932,126 | 809,924 | ||||||
|
Dental
Laboratory Business/
|
||||||||
|
Implants/Non-Dental
|
995,090 | 973,764 | ||||||
|
All
Other (g)
|
361,393 | 313,141 | ||||||
|
Total
|
$ | 3,257,951 | $ | 3,087,932 | ||||
|
|
(g)
|
Includes
assets of Corporate headquarters, inter-segment eliminations and one
distribution warehouse not managed by named
segments.
|
- 66
- -
Geographic
Information
The
following table sets forth information about the Company's operations in
different geographic areas for the years ended December 31, 2010, 2009 and 2008.
Net sales reported below represent revenues for shipments made by operating
businesses located in the country or territory identified, including export
sales. Assets reported represent those held by the operating businesses located
in the respective geographic areas.
|
United
|
Other
|
|||||||||||||||
|
(in thousands)
|
States
|
Germany
|
Foreign
|
Consolidated
|
||||||||||||
|
2010
|
||||||||||||||||
|
Net
sales
|
$ | 841,232 | $ | 469,796 | $ | 909,986 | $ | 2,221,014 | ||||||||
|
Long-lived
assets
|
119,533 | 116,916 | 186,656 | 423,105 | ||||||||||||
|
2009
|
||||||||||||||||
|
Net
sales
|
$ | 843,349 | $ | 482,130 | $ | 833,899 | $ | 2,159,378 | ||||||||
|
Long-lived
assets
|
124,129 | 132,348 | 183,143 | 439,620 | ||||||||||||
|
2008
|
||||||||||||||||
|
Net
sales
|
$ | 865,743 | $ | 470,836 | $ | 854,886 | $ | 2,191,465 | ||||||||
|
Long-lived
assets
|
129,286 | 131,960 | 171,029 | 432,275 | ||||||||||||
Product
and Customer Information
The
following table presents net sales information by product category:
|
December 31,
|
||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
Dental
consumables products
|
$ | 717,718 | $ | 708,713 | $ | 677,758 | ||||||
|
Dental
laboratory products
|
511,061 | 504,526 | 558,291 | |||||||||
|
Dental
specialty products
|
925,317 | 892,421 | 888,484 | |||||||||
|
Non-dental
products
|
66,918 | 53,718 | 66,932 | |||||||||
|
Total
net sales
|
$ | 2,221,014 | $ | 2,159,378 | $ | 2,191,465 | ||||||
Dental
consumable products consist of dental sundries and small equipment products used
in dental offices for the treatment of patients. DENTSPLY’s products in this
category include dental anesthetics, infection control products, prophylaxis
paste, dental sealants, impression materials, restorative materials, bone
grafting materials, tooth whiteners and topical fluoride. The Company
manufactures thousands of different consumable products marketed under more than
a hundred brand names. Small equipment products consist of various durable goods
used in dental offices for treatment of patients. DENTSPLY’s small equipment
products include high and low speed handpieces, intraoral curing light systems
and ultrasonic scalers and polishers.
Dental
laboratory products are used in dental laboratories in the preparation of dental
appliances. DENTSPLY’s products in this category include dental prosthetics,
including artificial teeth, precious metal dental alloys, dental ceramics, crown
and bridge materials, and equipment products used in laboratories consisting of
computer aided machining (CAM) ceramic systems and porcelain
furnaces.
Dental
specialty products are specialized treatment products used within the dental
office and laboratory settings. DENTSPLY’s products in this category include
endodontic (root canal) instruments and materials, implants and related
products, bone grafting material, 3D digital implantology, and orthodontic
appliances and accessories.
Non-dental
products are comprised primarily of investment casting materials that are used
in the production of jewelry, golf club heads and other casting products, as
well as certain medical products.
One
customer, Henry Schein, Incorporated, a dental distributor, accounted for more
than ten percent of consolidated net sales in 2010, 2009 and 2008 accounting for
11% of all net sales. Third party export sales from the U.S. are less than ten
percent of consolidated net sales.
- 67
- -
NOTE
5 – OTHER EXPENSE (INCOME), NET
Other
expense (income), net, consists of the following:
|
December 31,
|
||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
Foreign
exchange transaction losses (gains), net
|
$ | 3,331 | $ | 336 | $ | 8,881 | ||||||
|
Other
(income) expense, net
|
(1,549 | ) | 687 | 1,269 | ||||||||
| $ | 1,782 | $ | 1,023 | $ | 10,150 | |||||||
NOTE
6 – INVENTORIES, NET
Inventories,
net, consist of the following:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Finished
goods
|
$ | 189,343 | $ | 178,721 | ||||
|
Work-in-process
|
57,272 | 53,056 | ||||||
|
Raw
materials and supplies
|
62,123 | 59,863 | ||||||
| $ | 308,738 | $ | 291,640 | |||||
The
Company’s inventory valuation reserve was $35.5 million for 2010 and $31.9
million for 2009.
NOTE
7- PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment, net, consist of the following:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Assets,
at cost:
|
||||||||
|
Land
|
$ | 40,032 | $ | 43,207 | ||||
|
Buildings
and improvements
|
304,341 | 295,297 | ||||||
|
Machinery
and equipment
|
576,704 | 546,806 | ||||||
|
Construction
in progress
|
20,639 | 18,610 | ||||||
| 941,716 | 903,920 | |||||||
|
Less:
Accumulated depreciation
|
518,611 | 464,301 | ||||||
|
Property,
plant and equipment, net
|
$ | 423,105 | $ | 439,619 | ||||
NOTE
8 – GOODWILL AND INTANGIBLE ASSETS
The
Company requires that impairment tests on goodwill or other indefinite-lived
intangible assets be performed annually and are based upon a fair value
approach. If goodwill impairment is identified, the resulting charge is
calculating the implied goodwill through a hypothetical purchase price
allocation of the fair value and reducing the current carrying value to the
extent it exceeds the implied goodwill. If impairment is identified on
indefinite-lived intangibles, the resulting charge reflects the excess of the
asset’s carrying cost over its fair value. Other intangible assets with finite
lives are amortized over their useful lives and tested for impairment when
events or changes in circumstances indicate that the finite-lived intangible
assets may be impaired
In
addition to minimum annual impairment tests, the Company also requires that
impairment assessments be made more frequently if events or changes in
circumstances indicate that the goodwill or indefinite-lived intangible assets
might be impaired. As the Company learns of such changes in circumstances
through periodic analysis of actual results or through the annual development of
operating unit business plans in the fourth quarter of each year, for example,
impairment assessments will be performed as necessary.
- 68
- -
The
Company performs its annual goodwill impairment test in the second quarter of
each year. This impairment assessment includes an evaluation of various
reporting units, which is an operating segment or one reporting level below the
operating segment. The Company compares the fair value of each reporting unit to
its carrying amount to determine if there is potential goodwill impairment. If
the fair value of a reporting unit is less than its carrying value, an
impairment loss is recorded to the extent that the fair value of the goodwill of
the reporting unit is less than the carrying value of its goodwill.
The
Company performed the required annual impairment tests of goodwill as of April
30, 2010 on seven reporting units. To determine the fair value of the Company’s
reporting units, the Company uses a discounted cash flow model with market-based
support as its valuation technique to measure the fair value for its reporting
units. The discounted cash flow model uses five year forecasted cash flows plus
a terminal value based on a multiple of earnings. In addition, the Company
applies gross margin and operating expense assumptions consistent with
historical trends. The total cash flows were discounted based on a range between
7% to 10%, which included assumptions regarding the Company’s weighted-average
cost of capital. The Company considered the current market conditions when
determining its assumptions as the global economy, and to a certain extent the
U.S. economy, began to stabilize from the recessionary conditions in 2009.
Lastly, the Company reconciled the aggregated fair values of its reporting units
to its market capitalization, which included a reasonable control premium based
on market conditions. As a result of the annual impairment tests of goodwill, no
impairment was identified.
As of
December 31, 2010, the Company has assigned no value to indefinite-lived
intangible assets. Impairments of identifiable definite-lived intangible assets
for the years ended December 31, 2010, 2009 and 2008 were $0.4 million, $0.3
million and $2.7 million, respectively.
The table
below presents the net carrying values of goodwill and identifiable
definite-lived intangible assets.
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Goodwill
|
$ | 1,303,055 | $ | 1,312,596 | ||||
|
Identifiable
definite-lived intangible assets, net
|
$ | 78,743 | $ | 89,086 | ||||
A
reconciliation of changes in the Company’s goodwill is as follows:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Balance,
beginning of the year
|
$ | 1,312,596 | $ | 1,277,026 | ||||
|
Acquisition
activity
|
20,382 | 3,572 | ||||||
|
Changes
to purchase price allocations
|
- | 5,245 | ||||||
|
Effects
of exchange rate changes
|
(29,923 | ) | 26,753 | |||||
|
Balance,
end of the year
|
$ | 1,303,055 | $ | 1,312,596 | ||||
The
change in the net carrying value of goodwill from 2009 to 2010 was due to
foreign currency translation adjustments, additional payments based on the
performance of the previously acquired businesses and changes to purchase price
allocations. The purchase price allocation changes were primarily related to the
finalization of the purchase price allocation on 2009 acquisitions.
- 69
- -
Goodwill
by reportable segment is as follows:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
U.S.,
Germany and Certain Other
|
||||||||
|
European
Regions Consumable Businesses
|
$ | 249,522 | $ | 252,538 | ||||
|
France,
U.K., Italy and Certain Other
|
||||||||
|
European
Countries, CIS, Middle East,
|
||||||||
|
Africa,
Pacific Rim Businesses
|
167,258 | 159,383 | ||||||
|
Canada/Latin
America/Endodontics/
|
||||||||
|
Orthodontics
|
282,321 | 267,427 | ||||||
|
Dental
Laboratory Business/
|
||||||||
|
Implants/Non-Dental
|
603,954 | 633,248 | ||||||
|
Total
|
$ | 1,303,055 | $ | 1,312,596 | ||||
Identifiable
definite-lived intangible assets consist of the following:
|
December 31, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
|
(in thousands)
|
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
||||||||||||||||||
|
Patents
|
$ | 21,956 | $ | (12,108 | ) | $ | 9,848 | $ | 38,840 | $ | (25,842 | ) | $ | 12,998 | ||||||||||
|
Trademarks
|
68,344 | (20,835 | ) | 47,509 | 70,353 | (17,939 | ) | 52,414 | ||||||||||||||||
|
Licensing
agreements
|
28,509 | (15,709 | ) | 12,800 | 28,880 | (14,138 | ) | 14,742 | ||||||||||||||||
|
Other
|
16,994 | (8,408 | ) | 8,586 | 15,364 | (6,432 | ) | 8,932 | ||||||||||||||||
| $ | 135,803 | $ | (57,060 | ) | $ | 78,743 | $ | 153,437 | $ | (64,351 | ) | $ | 89,086 | |||||||||||
Amortization
expense for identifiable definite-lived intangible assets for 2010, 2009 and
2008 was $9.0 million, $10.6 million and $8.7 million, respectively. The annual
estimated amortization expense related to these intangible assets for each of
the five succeeding fiscal years is $8.4 million, $7.7 million, $6.3 million,
$5.6 million and $5.5 million for 2011, 2012, 2013, 2014 and 2015,
respectively.
- 70
- -
NOTE
9 - ACCRUED LIABILITIES
Accrued
liabilities consist of the following:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Payroll,
commissions, bonuses, other cash compensation and employee
benefits
|
$ | 61,334 | $ | 60,083 | ||||
|
General
insurance
|
12,118 | 13,222 | ||||||
|
Sales
and marketing programs
|
31,070 | 28,468 | ||||||
|
Professional
and legal costs
|
10,844 | 10,248 | ||||||
|
Restructuring
costs
|
9,191 | 9,966 | ||||||
|
Warranty
liabilities
|
4,253 | 4,141 | ||||||
|
Deferred
income
|
5,656 | 3,385 | ||||||
|
Accrued
vacation and holidays
|
12,528 | 13,425 | ||||||
|
Third
party royalties
|
9,184 | 9,806 | ||||||
|
Current
portion of derivatives
|
27,668 | 59,250 | ||||||
|
Other
|
40,899 | 37,175 | ||||||
| $ | 224,745 | $ | 249,169 | |||||
A
reconciliation of changes in the Company's warranty liability for 2010 and 2009
is as follows:
|
December
31,
|
||||||||
|
(in
thousands)
|
2010
|
2009
|
||||||
|
Balance,
beginning of the year
|
$ | 4,141 | $ | 4,260 | ||||
|
Accruals
for warranties issued during the year
|
1,581 | 1,129 | ||||||
|
Accruals
related to pre-existing warranties
|
103 | - | ||||||
|
Warranty
settlements made during the year
|
(1,494 | ) | (1,295 | ) | ||||
|
Effects
of exchange rate changes
|
(78 | ) | 47 | |||||
|
Balance,
end of the year
|
$ | 4,253 | $ | 4,141 | ||||
NOTE 10 - FINANCING
ARRANGEMENTS
Financing
Activities
On
February 19, 2010, the Company received the proceeds of a $250.0 million Private
Placement Note (“PPN”) at a fixed rate of 4.1% for an average term of five years
and a final maturity of six years. The PPN is unsecured and contains certain
affirmative and negative covenants relating to its operations and financial
condition of the Company similar in substance to the $150.0 million U.S. Private
Placement Note that matured March 15, 2010.
On March
1, 2010, the Company entered into a Term Loan Agreement (“Term Loan”) with PNC
Bank providing for the issuance by the Company of 65.0 million Swiss francs
aggregate principal amount of floating rate Senior Term Loan with a final
maturity in March 2012. This Term Loan is unsecured and contains certain
affirmative and negative covenants relating to its operations and financial
condition of the Company similar in substance to the existing multi-currency
revolving credit agreement maturing May 7, 2013. The new Term Loan was used
to refinance a loan under the existing multi-currency revolving credit
agreement.
On May 7,
2010, the Company entered into a $200.0 million multi-currency revolving credit
agreement (“Revolver”) with a syndicate of eight lenders with a final maturity
in May 2013. The multi-currency revolving credit agreement replaced the $500.0
million multi-currency revolving credit agreement which matured May 9, 2010.
This Revolver is unsecured and contains certain affirmative and negative
covenants relating to its operations and financial condition of the Company
similar in substance to the previous multi-currency revolving credit agreement
which matured May 9, 2010.
- 71
- -
Short-Term
Borrowings
Short-term bank borrowings
amounted to $5.3 million and $15.6 million at December 31, 2010 and 2009,
respectively. The weighted-average interest rates of these borrowings were 3.0%
at December 31, 2010 and 2009. Unused lines of credit for short-term financing
at December 31, 2010 and 2009 were $72.1 million and $56.9 million,
respectively. Substantially all other short-term borrowings were classified as
long-term as of December 31, 2010 and 2009, reflecting the Company's intent and
ability to refinance these obligations beyond one year and are included in the
following table. The 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.
Long-Term
Borrowings
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Multi-currency
revolving credit agreement expiring May 2013:
|
||||||||
|
U.S.
dollar denominated
|
$ | 2,123 | $ | 3,967 | ||||
|
Swiss
francs 65 million
|
- | 62,844 | ||||||
|
Private
placement notes:
|
||||||||
|
U.S.
dollar denominated expiring March 2010 at 0.55%
|
- | 150,000 | ||||||
|
U.S.
dollar denominated expiring March 2016 at 4.11%
|
250,000 | - | ||||||
|
Term
Loan Agreement:
|
||||||||
|
Swiss
francs denominated expiring March 2012 at 1.67%
|
69,560 | - | ||||||
|
Term
Loan Agreement:
|
||||||||
|
Japanese
yen denominated expiring March 2012 at 0.91%
|
154,626 | 134,776 | ||||||
|
U.S.
dollar commercial paper:
|
||||||||
|
Facility
rated A/2-P/2 U.S. dollar borrowings at 0.40%
|
119,500 | 85,200 | ||||||
|
Other
borrowings, various currencies and rates
|
10,684 | 16,944 | ||||||
| $ | 606,493 | $ | 453,731 | |||||
|
Less:
Current portion
|
||||||||
|
(included
in notes payable and current portion of long-term debt)
|
2,478 | 66,580 | ||||||
|
Long-term
portion
|
$ | 604,015 | $ | 387,151 | ||||
The table
below reflects the contractual maturity dates of the various borrowings at
December 31, 2010. The borrowings under the commercial paper program are
considered contractually due in 2013.
|
(in
thousands)
|
||||
|
2011
|
$ | 2,478 | ||
|
2012
|
159,459 | |||
|
2013
|
192,497 | |||
|
2014
|
75,718 | |||
|
2015
|
100,330 | |||
|
2016
and beyond
|
76,011 | |||
| $ | 606,493 | |||
The
Company utilizes interest rate swaps to convert the Swiss franc denominated Term
Loan debt to fixed rate debt. The Company utilizes interest rate swaps to
convert the variable rate Japanese yen denominated notes to fixed rate debt. The
Company's use of interest rate swaps is further described in Note 15, Financial
Instruments and Derivatives.
The
Company has a $200.0 million revolving credit agreement with participation from
eight banks, which expires in May 2013. The revolving credit agreement contains
a number of covenants and two financial ratios, which the Company is required to
satisfy. The most restrictive of these covenants pertain to asset dispositions
and prescribed ratios of indebtedness to total capital and operating income
excluding depreciation and amortization to interest expense. Any breach of any
such covenants or restrictions would result in a default under the existing
borrowing documentation that would permit the lenders to declare all borrowings
under such documentation to be immediately due and payable and, through cross
default provisions, would entitle the Company's other lenders to accelerate
their loans. At December 31, 2010, the Company was in compliance with these
covenants. The Company pays a facility fee of 0.25% annually on the amount of
the commitment under the $200.0 million three-year 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 the
Company’s long-term credit rating from Standard and Poor’s and
Moody’s.
- 72
- -
The
Company has a U.S. dollar commercial paper facility totaling $200.0 million,
which has utilization, dealer and annual appraisal fees which on average cost
0.16% annually. The $200.0 million revolving credit facility acts as back-up
credit to this commercial paper facility. The total available credit under the
commercial paper facility and the revolving credit facility is $200.0 million.
As of December 31, 2010, the Company had $119.5 million outstanding in
commercial paper and $2.1 million in revolving credit obligations.
At
December 31, 2010, the Company had total unused lines of credit, including lines
available under its short-term arrangements and revolving credit agreement, of
$150.5 million.
NOTE 11 - EQUITY
At
December 31, 2010, the Company had authorization to repurchase shares under its
stock repurchase program in an amount up to 22,000,000 shares of treasury stock.
Under its stock repurchase program, the Company purchased 6,714,508 shares and
2,452,903 shares during 2010 and 2009 at an average price of $33.36 and $32.09,
respectively. As of December 31, 2010 and 2009, the Company held 21.0 million
and 15.8 million shares of treasury stock, respectively. During 2010, the
Company repurchased $224.0 million in treasury stock. The Company also received
proceeds of $30.2 million primarily as a result of the exercise of 1.5 million
stock options during the year ended December 31, 2010. It is the Company’s
practice to issue shares from treasury stock when options are exercised. The tax
benefit realized for the options exercised during the year ended December 31,
2010 is $5.4 million.
The
following table represents total outstanding shares for the years ended December
31:
|
Common
|
Treasury
|
Outstanding
|
||||||||||
|
(in thousands)
|
Shares
|
Shares
|
Shares
|
|||||||||
|
Balance
at December 31, 2007
|
162,776 | (11,954 | ) | 150,822 | ||||||||
|
Shares
Issued
|
- | 677 | 677 | |||||||||
|
Repurchase
of common stock at cost
|
- | (2,971 | ) | (2,971 | ) | |||||||
|
Balance
at December 31, 2008
|
162,776 | (14,248 | ) | 148,528 | ||||||||
|
Shares
Issued
|
- | 886 | 886 | |||||||||
|
Repurchase
of common stock at cost
|
- | (2,453 | ) | (2,453 | ) | |||||||
|
Balance
at December 31, 2009
|
162,776 | (15,815 | ) | 146,961 | ||||||||
|
Shares
Issued
|
- | 1,489 | 1,489 | |||||||||
|
Repurchase
of common stock at cost
|
- | (6,715 | ) | (6,715 | ) | |||||||
|
Balance
at December 31, 2010
|
162,776 | (21,041 | ) | 141,735 | ||||||||
The
Company maintains the 2010 Equity Incentive Plan (the “Plan”) under which it may
grant non-qualified stock options, incentive stock options, restricted stock,
restricted stock units (“RSU”) and stock appreciation rights, collectively
referred to as “Awards.” Awards are granted at exercise prices that are equal to
the closing stock price on the date of grant. The Company authorized grants
under the Plan of 13.0 million shares of common stock, plus any unexercised
portion of cancelled or terminated stock options granted under the DENTSPLY
International Inc. 2002 Equity Incentive Plan, as amended, subject to adjustment
as follows: each January, if 7% of the total outstanding common shares of the
Company exceed 13.0 million, the excess becomes available for grant under the
Plan. No more than 2.5 million shares may be awarded as restricted stock and
RSU, and no key employee may be granted restricted stock and RSU in excess of
approximately 0.2 million shares of common stock in any calendar year. The
number of shares available for grant under the 2010 Plan as of December 31, 2010
is 13.8 million.
- 73
- -
Stock
options generally expire ten years after the date of grant under these plans and
grants become exercisable over a period of three years after the date of grant
at the rate of one-third per year, except when they become immediately
exercisable upon death, disability or qualified retirement. RSU vest 100% on the
third anniversary of the date of grant and are subject to a service condition,
which requires grantees to remain employed by the Company during the three-year
period following the date of grant. In addition to the service condition,
certain key executives are subject to performance requirements. Similar to stock
options, RSU become immediately exercisable upon death, disability or qualified
retirement. The fair value of each RSU assumes that performance goals will be
achieved. If such goals are not met, no compensation cost is recognized and any
recognized compensation costs is reversed. Under the terms of the RSU, the
three-year period is referred to as the restricted period. RSU and the rights
under the award may not be sold, assigned, transferred, donated, pledged or
otherwise disposed of during the three year restricted period prior to vesting.
Upon the expiration of the applicable restricted period and the satisfaction of
all conditions imposed, all restrictions imposed on RSU will lapse, and one
share of common stock will be issued as payment for each vested
RSU.
The following table represents total
stock based compensation expense and the tax related benefit for the years
ended:
|
December 31,
|
||||||||||||
|
(in millions)
|
2010
|
2009
|
2008
|
|||||||||
|
Stock
option expense
|
$ | 10.4 | $ | 8.7 | $ | 11.7 | ||||||
|
RSU
expense
|
7.2 | 6.4 | 4.4 | |||||||||
|
Total
stock based compensation expense
|
$ | 17.6 | $ | 15.1 | $ | 16.1 | ||||||
|
Related
deferred income tax benefit
|
$ | 4.9 | $ | 3.6 | $ | 3.9 | ||||||
The stock
option expense shown in the preceding table represents the aggregate fair value
of shares vested during the year ended December 31, 2010, 2009 and 2008. There
were 1.8 million non-qualified stock options unvested as of December 31, 2010.
The remaining unamortized compensation cost related to non-qualified stock
options is $8.9 million, which will be expensed over the weighted average
remaining vesting period of the options, or 1.4 years. The unamortized
compensation cost related to RSU is $6.9 million, which will be expensed over
the remaining weighted average restricted period of the RSU, or 1.2
years.
The
Company uses the Black-Scholes option-pricing model to estimate the fair value
of each option awarded. The following table sets forth the assumptions used to
determine compensation cost for the Company’s non-qualified stock options
(“NQSO”) issued during the years ended:
|
December 31,
|
||||||||||||
|
2010 (a)
|
2009
|
2008
|
||||||||||
|
Weighted
average fair value per share
|
$ | 9.06 | $ | 7.31 | $ | 5.23 | ||||||
|
Expected
dividend yield
|
0.58 | % | 0.60 | % | 0.69 | % | ||||||
|
Risk-free
interest rate
|
2.55 | % | 2.14 | % | 1.85 | % | ||||||
|
Expected
volatility
|
22 | % | 22 | % | 21 | % | ||||||
|
Expected
life (years)
|
6.42 | 4.84 | 4.66 | |||||||||
|
|
(a)
|
In
2010, the Human Resources Committee of the Company’s Board of Directors
reviewed the Company’s practices for NQSO grants and determined that it
would be more appropriate to make all regular equity grants in the
February time frame, after the Company’s financial results are known for
the prior year. Accordingly, there were no grants of NQSO in December
2010, which had been the historic
practice.
|
The total
intrinsic value of options exercised for the years ended December 31, 2010, 2009
and 2008 was $16.5 million, $12.3 million and $13.7 million,
respectively.
- 74
- -
The
following table summarizes the non-qualified stock option transactions for the
year ended December 31, 2010:
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||
|
Weighted
|
Weighted
|
|||||||||||||||||||||||
|
Average
|
Aggregate
|
Average
|
Aggregate
|
|||||||||||||||||||||
|
Exercise
|
Intrinsic
|
Exercise
|
Intrinsic
|
|||||||||||||||||||||
|
(in thousands, except per share amounts)
|
Shares
|
Price
|
Value
|
Shares
|
Price
|
Value
|
||||||||||||||||||
|
December
31, 2009
|
12,038 | $ | 28.34 | $ | 94,148 | 8,682 | $ | 26.78 | $ | 80,839 | ||||||||||||||
|
Granted
|
150 | 34.56 | ||||||||||||||||||||||
|
Exercised
|
(1,344 | ) | 22.46 | |||||||||||||||||||||
|
Forfeited
|
(208 | ) | 33.15 | |||||||||||||||||||||
|
December
31, 2010
|
10,636 | $ | 29.07 | $ | 66,722 | 8,815 | $ | 28.58 | $ | 61,450 | ||||||||||||||
The
weighted average remaining contractual term of all outstanding options is 5.8
years and the weighted average remaining contractual term of exercisable options
is 5.1 years.
The
following table summarizes information about non-qualified stock options
outstanding for the year ended December 31, 2010:
|
Outstanding
|
Exercisable
|
|||||||||||||||||||
|
Weighted
|
||||||||||||||||||||
|
Number
|
Average
|
Number
|
||||||||||||||||||
|
Outstanding
|
Remaining
|
Weighted
|
Exercisable
|
Weighted
|
||||||||||||||||
|
at
|
Contractual
|
Average
|
at
|
Average
|
||||||||||||||||
|
Incremental Changes
|
December 31,
|
Life
|
Exercise
|
December 31,
|
Exercise
|
|||||||||||||||
|
in Stock Price
|
2010
|
(in years)
|
Price
|
2010
|
Price
|
|||||||||||||||
|
10.01
- 15.00
|
30,600 | 0.5 | $ | 13.61 | 30,600 | $ | 13.61 | |||||||||||||
|
15.01
- 20.00
|
1,165,283 | 1.6 | 17.64 | 1,165,283 | 17.64 | |||||||||||||||
|
20.01
- 25.00
|
1,037,798 | 3.1 | 22.17 | 1,019,398 | 22.17 | |||||||||||||||
|
25.01
- 30.00
|
4,270,074 | 6.1 | 27.07 | 3,681,669 | 27.18 | |||||||||||||||
|
30.01
- 35.00
|
2,844,220 | 7.6 | 32.81 | 1,749,067 | 32.19 | |||||||||||||||
|
35.01
- 40.00
|
203,315 | 7.8 | 36.77 | 93,764 | 37.29 | |||||||||||||||
|
40.01
- 45.00
|
37,774 | 7.2 | 41.16 | 28,587 | 41.19 | |||||||||||||||
|
45.01
- 50.00
|
1,046,867 | 6.8 | 45.15 | 1,046,867 | 45.15 | |||||||||||||||
| 10,635,931 | 5.8 | $ | 29.07 | 8,815,235 | $ | 28.58 | ||||||||||||||
The
following table summarizes the unvested RSU transactions for the year ended
December 31, 2010:
|
Unvested Restricted Stock Units
|
||||||||
|
Weighted Average
|
||||||||
|
(in thousands, except per share amounts)
|
Grant Date
|
|||||||
|
Shares
|
Fair Value
|
|||||||
|
Unvested
at December 31, 2009
|
668 | $ | 31.95 | |||||
|
Granted
|
250 | 32.92 | ||||||
|
Exercised
|
(144 | ) | 30.95 | |||||
|
Forfeited
|
(30 | ) | 32.86 | |||||
|
Unvested
at December 31, 2010
|
744 | $ | 32.43 | |||||
- 75
- -
NOTE
12 - INCOME TAXES
The
components of income before income taxes from operations are as
follows:
|
December 31,
|
||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
United
States
|
$ | 104,424 | $ | 99,009 | $ | 45,171 | ||||||
|
Foreign
|
253,232 | 264,347 | 309,702 | |||||||||
| $ | 357,656 | $ | 363,356 | $ | 354,873 | |||||||
The
components of the provision for income taxes from operations are as
follows:
|
December 31,
|
||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
Current:
|
||||||||||||
|
U.S.
federal
|
$ | 21,848 | $ | 30,851 | $ | (9,913 | ) | |||||
|
U.S.
state
|
3,795 | 5,886 | 2,291 | |||||||||
|
Foreign
|
62,196 | 52,012 | 65,854 | |||||||||
|
Total
|
$ | 87,839 | $ | 88,749 | $ | 58,232 | ||||||
|
Deferred:
|
||||||||||||
|
U.S.
federal
|
$ | 3,067 | $ | (8,046 | ) | $ | 23,496 | |||||
|
U.S.
state
|
1,062 | (476 | ) | 3,283 | ||||||||
|
Foreign
|
(2,743 | ) | 8,717 | (13,408 | ) | |||||||
|
Total
|
$ | 1,386 | $ | 195 | $ | 13,371 | ||||||
| $ | 89,225 | $ | 88,944 | $ | 71,603 | |||||||
The
reconciliation of the U.S. federal statutory tax rate to the effective rate for
the years ended is as follows:
|
December 31,
|
||||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Statutory
federal income tax rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
Effect
of:
|
||||||||||||
|
State
income taxes, net of federal benefit
|
0.9 | 1.0 | 1.0 | |||||||||
|
Federal
benefit of R&D and foreign tax credits
|
(6.9 | ) | (11.3 | ) | (15.8 | ) | ||||||
|
Tax
effect of international operations
|
(4.7 | ) | 0.7 | 4.9 | ||||||||
|
Net
effect of tax audit activity
|
1.0 | (1.3 | ) | (4.4 | ) | |||||||
|
Tax
effect of enacted statutory rate changes
|
- | - | 0.1 | |||||||||
|
Federal
tax on unremitted earnings of certain
|
||||||||||||
|
foreign
subsidiaries
|
0.2 | 0.1 | (0.3 | ) | ||||||||
|
Other
|
(0.5 | ) | 0.3 | (0.3 | ) | |||||||
|
Effective
income tax rate on operations
|
25.0 | % | 24.5 | % | 20.2 | % | ||||||
- 76
- -
The tax
effect of significant temporary differences giving rise to deferred tax assets
and liabilities are as follows:
|
December 31, 2010
|
December 31, 2009
|
|||||||||||||||
|
Deferred
|
Deferred
|
Deferred
|
Deferred
|
|||||||||||||
|
Tax
|
Tax
|
Tax
|
Tax
|
|||||||||||||
|
(in thousands)
|
Asset
|
Liability
|
Asset
|
Liability
|
||||||||||||
|
Commission
and bonus accrual
|
$ | 1,201 | $ | - | $ | 1,764 | $ | - | ||||||||
|
Employee
benefit accruals
|
33,139 | - | 27,876 | - | ||||||||||||
|
Inventory
|
17,497 | - | 15,554 | - | ||||||||||||
|
Identifiable
intangible assets
|
- | 138,621 | - | 130,419 | ||||||||||||
|
Insurance
premium accruals
|
4,610 | - | 5,068 | - | ||||||||||||
|
Miscellaneous
accruals
|
7,088 | - | 8,529 | - | ||||||||||||
|
Other
|
13,820 | - | 12,827 | - | ||||||||||||
|
Unrealized
losses included in other
|
||||||||||||||||
|
comprehensive
income
|
59,618 | - | 55,545 | - | ||||||||||||
|
Property,
plant and equipment
|
- | 36,881 | - | 38,663 | ||||||||||||
|
Product
warranty accruals
|
901 | - | 980 | - | ||||||||||||
|
R&D
and foreign tax credit carryforward
|
34,844 | - | 35,609 | - | ||||||||||||
|
Restructuring
and other cost accruals
|
1,011 | - | 777 | - | ||||||||||||
|
Sales
and marketing accrual
|
4,545 | - | 4,553 | - | ||||||||||||
|
Taxes
on unremitted earnings of foreign subsidiaries
|
- | 2,083 | - | 1,486 | ||||||||||||
|
Tax
loss carryforwards and other tax attributes
|
94,286 | - | 70,010 | - | ||||||||||||
|
Valuation
allowance
|
(75,392 | ) | - | (51,809 | ) | - | ||||||||||
| $ | 197,168 | $ | 177,585 | $ | 187,283 | $ | 170,568 | |||||||||
The
deferred tax assets and liabilities are included in the following consolidated
balance sheet line items:
|
December 31,
|
||||||||
|
(in thousands)
|
2010
|
2009
|
||||||
|
Prepaid
expenses and other current assets
|
$ | 55,747 | $ | 77,277 | ||||
|
Income
taxes payable
|
3,004 | 1,747 | ||||||
|
Other
noncurrent assets
|
39,329 | 13,709 | ||||||
|
Deferred
income taxes
|
72,489 | 72,524 | ||||||
The
Company has $34.8 million of foreign tax credit carryforwards, of which $7.8
million, $7.1 million, $9.9 million, $7.1 million, and $2.9 million will expire
in 2015, 2016, 2017, 2019, and 2020 respectively.
Certain
foreign and domestic subsidiaries of the Company have tax loss carryforwards of
$585.7 million at December 31, 2010, of which $443.1 million expire through 2030
and $142.6 million may be carried forward indefinitely. The tax benefit of
certain tax loss carryforwards and deferred tax assets has been offset by a
valuation allowance as of December 31, 2010, because it is uncertain whether the
benefits will be realized in the future. The valuation allowance at December 31,
2010 and 2009 was $75.4 million and $51.8 million, respectively.
The
Company has provided federal income taxes on certain undistributed earnings of
its foreign subsidiaries that the Company anticipates will be repatriated.
Deferred federal income taxes have not been provided on $800.1 million of
cumulative earnings of foreign subsidiaries that the Company has determined to
be permanently reinvested. It is not practicable to estimate the amount of tax
that might be payable on these permanently reinvested earnings.
Tax
Contingencies
The
Company applies a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The Company recognizes in the financial
statements, the impact of a tax position, if that position is more likely than
not of being sustained on audit, based on the technical merits of the
position.
- 77
- -
The total
amount of gross unrecognized tax benefits at December 31, 2010, is approximately
$19.2 million, of this total, approximately $17.8 million represents the amount
of unrecognized tax benefits that, if recognized, would affect the effective
income tax rate. It is reasonably possible that certain amounts of
unrecognized tax benefits will significantly increase or decrease within twelve
months of the reporting date of the Company’s consolidated financial statements.
Final settlement and resolution of outstanding tax matters in various
jurisdictions during the next twelve months could include unrecognized tax
benefits of approximately $3.1 million. In addition, expiration of
statutes of limitation in various jurisdictions during the next twelve months
could include unrecognized tax benefits of approximately $0.3
million.
The total
amount of accrued interest and penalties were $6.0 million and $5.6 million as
of December 31, 2010 and 2009, respectively. The Company has
consistently classified interest and penalties recognized in its consolidated
financial statements as income taxes based on the accounting policy election of
the Company. During the year ended December 31, 2010 and December 31,
2009, the Company recognized income tax benefits in the amount of $0.6 million
and $1.7 million for interest and penalties. During the year ended
December 31, 2008, the company recognized income tax expense of $5.5 million in
interest and penalties.
The
Company is subject to U.S. federal income tax as well as income tax of multiple
state and foreign jurisdictions. The significant jurisdictions
include the U.S., Germany and Switzerland. The Company has
substantially concluded all U.S. federal income tax matters for years through
2005, resulting in the years 2006 through 2009 being subject to future potential
tax audit adjustments while years prior to 2006 are settled. The
Company has concluded audits in Germany through the tax year 2003 and is
currently under audit for the years 2004 through 2008. The taxable
years that remain open for Switzerland are 2000 through 2009.
The
Company had the following activity recorded for unrecognized tax
benefits:
|
December 31,
|
||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
|||||||||
|
Unrecognized
tax benefits at beginning of period
|
$ | 12,864 | $ | 17,285 | $ | 36,307 | ||||||
|
Gross
change for prior period positions
|
47 | (5,120 | ) | (10,154 | ) | |||||||
|
Gross
change for current year positions
|
1,036 | 1,630 | 785 | |||||||||
|
Decrease
due to settlements and payments
|
- | (255 | ) | (2,584 | ) | |||||||
|
Decrease
due to statute expirations
|
(424 | ) | (1,026 | ) | (5,752 | ) | ||||||
|
Increase
due to effect of foreign currency translation
|
- | 350 | - | |||||||||
|
Decrease
due to effect from foreign currency translation
|
(380 | ) | - | (1,317 | ) | |||||||
|
Unrecognized
tax benefits at end of period
|
$ | 13,143 | $ | 12,864 | $ | 17,285 | ||||||
NOTE
13 - BENEFIT 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 $26.2 million, $24.6 million and $21.2 million in 2010, 2009 and
2008, respectively.
Defined
Contribution Plans
The
DENTSPLY Employee Stock Ownership Plan (“ESOP”) and 401(k) plans are designed to
have contribution allocations of “Covered Compensation,” with a targeted 3%
going into the ESOP in Company stock and a targeted 3% going into the 401(k) as
a Non-Elective Contribution (“NEC”) in cash. The Company sponsors an employee
401(k) savings plan for its U.S. workforce to which enrolled participants may
contribute up to Internal Revenue Service (“IRS”) defined limits. The annual
expense and cash contribution to the 401(k) is expected to be $4.7 million for
2010 (to be contributed in the first quarter of 2011), and was $5.3 million for
2009 (contributed in the first quarter of 2010), and $5.0 million for 2008
(contributed in the first quarter of 2009).
The ESOP
is a non-contributory defined contribution plan that covers substantially all of
the U.S. based non-union employees of the Company. Contributions to the ESOP,
net of forfeitures, are expected to be $3.0 million for 2010 (to be contributed
in the first quarter of 2011), and were $1.4 million for 2009 (contributed in
the first quarter of 2010), and were $1.3 million for 2008 (contributed in the
first quarter of 2009).
All
future ESOP allocations will come from a combination of forfeited shares and
shares acquired in the open market. The Company has targeted future ESOP
allocations at 3% of “Covered Compensation.” The share allocation will be
accounted at fair value at the point of allocation, which is normally
year-end.
- 78
- -
Defined
Benefit Plans
The
Company maintains a number of separate contributory and non-contributory
qualified defined benefit pension plans and other postretirement medical plans
for certain union and salaried employee groups in the U.S. 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 minimum funding requirements. Pension plan
assets are held in trust and consist mainly of common stock and fixed income
investments. The U.S. plans are funded in excess of the funding required by the
U.S. Department of Labor.
In
addition to the U.S. plans, the Company maintains defined benefit pension plans
for its employees in Germany, Japan, the Netherlands, Switzerland and Taiwan.
These plans provide benefits based upon age, years of service and remuneration.
Substantially all of 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 U.S. are covered by government health
plans.
Defined Benefit Pension Plan
Assets
The
primary investment strategy is to ensure that the assets of the plans, along
with anticipated future contributions, will be invested in order that the
benefit entitlements of employees, pensioners and beneficiaries covered under
the plan can be met when due with high probability. Pension plan
assets consist mainly of common stock and fixed income investments. The target
allocations for plan assets are 30% to 65% equity securities, 30% to 65% fixed
income securities, 0% to 15% real estate, and 0% to 25% in all other types of
investments. Equity securities include investments in companies
located both in and outside the U.S. Equity securities do not include
common stock of the Company. Fixed income securities include corporate bonds of
companies from diversified industries, government bonds, mortgage notes and
pledge letters. Other types of investments include investments in
mutual funds, common trusts, insurance contracts, hedge funds and real
estate. These plan assets are not recorded on the Company’s
consolidated balance sheet as they are held in trust or other off-balance sheet
investment vehicles.
The
defined benefit pension plan assets in the U.S. are held in trust and the
investment policies of the plans are generally to invest the plans assets in
equities and fixed income investments. The objective is to achieve a
long-term rate of return in excess of 5% while at the same time mitigating the
impact of investment risk associated with investment categories that are
expected to yield greater than average returns. In accordance with
the investment policies of the U.S. plans, the plans assets were invested in the
following investment categories: interest-bearing cash, registered investment
companies (e.g. mutual funds), common/collective trusts, master trust investment
accounts and insurance company general accounts. The investment
objective is for assets to be invested in a manner consistent with the fiduciary
standards of the Employee Retirement Income Security Act of 1974
(“ERISA”).
The
defined benefit pension plan assets maintained in Germany, Japan, the
Netherlands, Switzerland and Taiwan all have separate investment policies but
generally have an objective to achieve a long-term rate of return in excess 5%
while at the same time mitigating the impact of investment risk associated with
investment categories that are expected to yield greater than average
returns. In accordance with the investment policies for the plans
outside the U.S., the plans’ assets were invested in the following investment
categories: interest-bearing cash, U.S. and foreign equities, foreign fixed
income securities (primarily corporate and government bonds), insurance company
contracts, real estate and hedge funds.
Postretirement
Healthcare
The plans
for postretirement healthcare have no plan assets. The postretirement healthcare
plans cover certain union and salaried employee groups in the U.S. and is
contributory, with retiree contributions adjusted annually to limit the
Company’s contribution for 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.
- 79
- -
Reconciliations
of changes in the defined benefit and postretirement healthcare plans’ benefit
obligations, fair value of assets and statement of funded status are as
follows:
|
Other Postretirement
|
||||||||||||||||
|
Pension Benefits
|
Benefits
|
|||||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||||
|
(in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Change
in Benefit Obligation
|
||||||||||||||||
|
Benefit
obligation at beginning of year
|
$ | 191,976 | $ | 183,785 | $ | 11,666 | $ | 10,501 | ||||||||
|
Service
cost
|
8,108 | 8,375 | 58 | 50 | ||||||||||||
|
Interest
cost
|
8,415 | 8,003 | 605 | 676 | ||||||||||||
|
Participant
contributions
|
2,886 | 2,774 | 616 | 689 | ||||||||||||
|
Actuarial
losses (gains)
|
7,976 | (7,202 | ) | (548 | ) | 1,018 | ||||||||||
|
Amendments
|
- | (29 | ) | - | - | |||||||||||
|
Divestitures
|
291 | 286 | - | - | ||||||||||||
|
Effects
of exchange rate changes
|
3,474 | 4,929 | - | - | ||||||||||||
|
Settlement
gains
|
- | (808 | ) | - | - | |||||||||||
|
Benefits
paid
|
(11,622 | ) | (8,137 | ) | (790 | ) | (1,268 | ) | ||||||||
|
Benefit
obligation at end of year
|
$ | 211,504 | $ | 191,976 | $ | 11,607 | $ | 11,666 | ||||||||
|
Change
in Plan Assets
|
||||||||||||||||
|
Fair
value of plan assets at beginning of year
|
$ | 88,866 | $ | 75,986 | $ | - | $ | - | ||||||||
|
Actual
return on assets
|
1,883 | 5,687 | - | - | ||||||||||||
|
Settlement
gains
|
- | - | - | - | ||||||||||||
|
Effects
of exchange rate changes
|
8,374 | 2,474 | - | - | ||||||||||||
|
Employer
contributions
|
9,159 | 10,082 | 174 | 579 | ||||||||||||
|
Participant
contributions
|
2,886 | 2,774 | 616 | 689 | ||||||||||||
|
Benefits
paid
|
(11,622 | ) | (8,137 | ) | (790 | ) | (1,268 | ) | ||||||||
|
Fair
value of plan assets at end of year
|
$ | 99,546 | $ | 88,866 | $ | - | $ | - | ||||||||
|
Funded
status at end of year
|
$ | (111,958 | ) | $ | (103,110 | ) | $ | (11,607 | ) | $ | (11,666 | ) | ||||
The
amounts recognized in the accompanying consolidated balance sheets, net of tax
effects, are as follows:
|
Other Postretirement
|
||||||||||||||||
|
Pension Benefits
|
Benefits
|
|||||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||||
|
(in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Other
noncurrent assets
|
$ | - | $ | 1 | $ | - | $ | - | ||||||||
|
Deferred
tax asset
|
9,834 | 7,177 | 1,113 | 1,427 | ||||||||||||
|
Total
assets
|
$ | 9,834 | $ | 7,178 | $ | 1,113 | $ | 1,427 | ||||||||
|
Current
liabilities
|
(3,462 | ) | (3,604 | ) | (1,099 | ) | (1,107 | ) | ||||||||
|
Long-term
liabilities
|
(108,496 | ) | (99,507 | ) | (10,508 | ) | (10,559 | ) | ||||||||
|
Deferred
tax liability
|
(22 | ) | (238 | ) | - | - | ||||||||||
|
Total
liabilities
|
$ | (111,980 | ) | $ | (103,349 | ) | $ | (11,607 | ) | $ | (11,666 | ) | ||||
|
Accumulated
other comprehensive income
|
29,050 | 20,504 | 1,771 | 2,270 | ||||||||||||
|
Net
amount recognized
|
$ | (73,096 | ) | $ | (75,667 | ) | $ | (8,723 | ) | $ | (7,969 | ) | ||||
- 80
- -
Amounts
recognized in AOCI consist of:
|
Other Postretirement
|
||||||||||||||||
|
Pension Benefits
|
Benefits
|
|||||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||||
|
(in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Net
actuarial loss
|
$ | 38,694 | $ | 27,056 | $ | 2,884 | $ | 3,697 | ||||||||
|
Net
prior service cost
|
168 | 262 | - | - | ||||||||||||
|
Net
transition obligation
|
- | 125 | - | - | ||||||||||||
|
Pretax
AOCI
|
$ | 38,862 | $ | 27,443 | $ | 2,884 | $ | 3,697 | ||||||||
|
Less
deferred taxes
|
9,812 | 6,939 | 1,113 | 1,427 | ||||||||||||
|
Post
tax AOCI
|
$ | 29,050 | $ | 20,504 | $ | 1,771 | $ | 2,270 | ||||||||
Information
for pension plans with an accumulated benefit obligation in excess of plan
assets:
|
December 31,
|
||||||||
|
(in
thousands)
|
2010
|
2009
|
||||||
|
Projected
benefit obligation
|
$ | 211,504 | $ | 191,785 | ||||
|
Accumulated
benefit obligation
|
200,574 | 182,594 | ||||||
|
Fair
value of plan assets
|
99,546 | 88,674 | ||||||
Components
of net periodic benefit cost:
|
Other Postretirement
|
||||||||||||||||||||||||
|
Pension Benefits
|
Benefits
|
|||||||||||||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||||||||||||||
|
Service
cost
|
$ | 8,108 | $ | 8,375 | $ | 6,980 | $ | 58 | $ | 50 | $ | 50 | ||||||||||||
|
Interest
cost
|
8,415 | 8,003 | 7,910 | 605 | 676 | 635 | ||||||||||||||||||
|
Expected
return on assets
|
(4,662 | ) | (3,991 | ) | (4,458 | ) | - | - | - | |||||||||||||||
|
Amortization
of actuarial losses
|
124 | 240 | 240 | - | - | - | ||||||||||||||||||
|
Amortization
of prior service
|
86 | 138 | 141 | - | - | - | ||||||||||||||||||
|
Amortization
of net loss
|
1,002 | 1,652 | 155 | 265 | 281 | 168 | ||||||||||||||||||
|
Settlement
gains
|
- | (1,148 | ) | (2,259 | ) | - | - | - | ||||||||||||||||
|
Net
periodic benefit cost
|
$ | 13,073 | $ | 13,269 | $ | 8,709 | $ | 928 | $ | 1,007 | $ | 853 | ||||||||||||
Other
changes in plan assets and benefit obligations recognized in AOCI:
|
Other Postretirement
|
||||||||||||||||||||||||
|
Pension Benefits
|
Benefits
|
|||||||||||||||||||||||
|
(in thousands)
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||||||||||||||
|
Net
actuarial (gain) loss
|
$ | 12,640 | $ | (7,994 | ) | $ | 26,214 | $ | (548 | ) | $ | 1,020 | $ | 670 | ||||||||||
|
Net
prior service (credit)
|
(8 | ) | (37 | ) | (3 | ) | - | - | - | |||||||||||||||
|
Net
transition obligation
|
(1 | ) | 1 | 32 | - | - | - | |||||||||||||||||
|
Amortization
|
(1,212 | ) | (2,030 | ) | (536 | ) | (265 | ) | (281 | ) | (168 | ) | ||||||||||||
|
Total
recognized in AOCI
|
$ | 11,419 | $ | (10,060 | ) | $ | 25,707 | $ | (813 | ) | $ | 739 | $ | 502 | ||||||||||
|
Total recognized in net
periodic benefit cost and
AOCI
|
$ | 24,493 | $ | 3,209 | $ | 34,416 | $ | 114 | $ | 1,746 | $ | 1,355 | ||||||||||||
The
estimated net loss, prior service cost and transition obligation for the defined
benefit plans that will be amortized from AOCI into net periodic benefit cost
over the next fiscal year are $1.6 million. The estimated net loss and prior
service credit for the other postretirement plans that will be amortized from
AOCI into net periodic benefit cost over the next fiscal year is $0.2
million.
- 81
- -
The
amounts in AOCI that are expected to be amortized as net expense (income) during
fiscal year 2011 are as follows:
|
Other
|
||||||||
|
Pension
|
Postretirement
|
|||||||
|
(in
thousands)
|
Benefits
|
Benefits
|
||||||
|
Amount
of net transition obligation (asset)
|
$ | - | $ | - | ||||
|
Amount
of net prior service cost
|
0.1 | - | ||||||
|
Amount
of net loss
|
1.5 | 0.2 | ||||||
The
weighted average assumptions used to determine benefit obligations for the
Company's plans, principally in foreign locations, are as follows:
|
|
Other Postretirement
|
|||||||||||||||||||||||
|
|
Pension Benefits
|
Benefits
|
||||||||||||||||||||||
|
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||||||||||||||
|
Discount
rate
|
4.1 | % | 4.7 | % | 4.5 | % | 5.0 | % | 5.5 | % | 6.3 | % | ||||||||||||
|
Rate
of compensation increase
|
2.6 | % | 2.7 | % | 2.7 | % | n/a | n/a | n/a | |||||||||||||||
|
Health
care cost trend
|
n/a | n/a | n/a | 8.0 | % | 8.5 | % | 9.0 | % | |||||||||||||||
|
Ultimate
health care cost trend
|
n/a | n/a | n/a | 5.0 | % | 5.0 | % | 5.0 | % | |||||||||||||||
|
Years
until ultimate trend is reached
|
n/a | n/a | n/a | 7.0 | 8.0 | 9.0 | ||||||||||||||||||
The
weighted average assumptions used to determine net periodic benefit cost for the
Company's plans, principally in foreign locations, are as follows:
|
|
Other Postretirement
|
|||||||||||||||||||||||
|
|
Pension Benefits
|
Benefits
|
||||||||||||||||||||||
|
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||||||||||||||
|
Discount
rate
|
4.7 | % | 4.5 | % | 5.0 | % | 5.5 | % | 6.3 | % | 6.3 | % | ||||||||||||
|
Expected
return on plan assets
|
5.2 | % | 5.2 | % | 5.4 | % | n/a | n/a | n/a | |||||||||||||||
|
Rate
of compensation increase
|
2.7 | % | 2.7 | % | 2.8 | % | n/a | n/a | n/a | |||||||||||||||
|
Health
care cost trend
|
n/a | n/a | n/a | 8.0 | % | 8.5 | % | 9.0 | % | |||||||||||||||
|
Ultimate
health care cost trend
|
n/a | n/a | n/a | 5.0 | % | 5.0 | % | 5.0 | % | |||||||||||||||
|
Years
until ultimate trend is reached
|
n/a | n/a | n/a | 7.0 | 8.0 | 9.0 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Measurement Date
|
12/31/2010
|
12/31/2009
|
12/31/2008
|
12/31/2010
|
12/31/2009
|
12/31/2008
|
||||||||||||||||||
To
develop the assumptions for the expected long-term rate of return on assets, the
Company considered the current level of expected returns on risk free
investments (primarily government bonds), the historical level of the risk
premium associated with the other asset classes in which the assets are invested
and the expectations for future returns of each asset class. The
expected return for each asset class was then weighted based on the target asset
allocations to develop the assumptions for the expected long-term rate of return
on assets.
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, 2010:
|
|
Other Postretirement
|
|||||||
|
|
Benefits
|
|||||||
|
(in thousands)
|
1% Increase
|
1% Decrease
|
||||||
|
|
||||||||
|
Effect
on total of service and interest cost components
|
$ | 59 | $ | (49 | ) | |||
|
Effect
on postretirement benefit obligation
|
988 | (845 | ) | |||||
Fair
Value Measurements of Plan Assets
The fair
value of the Company's pension plan assets at December 31, 2010 are presented in
the table below by asset category. Over 80% of the total plan assets are
categorized as Level 1, and therefore, the values assigned to these pension
assets are based on quoted prices available in active markets. For
the other category levels, a description of the valuation is provided in Note 1,
Significant Accounting Policies, under the “fair value measurement”
heading.
- 82
- -
|
December 31, 2010
|
||||||||||||||||
|
(in
thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Assets
Category
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 3,028 | $ | 2,775 | $ | 253 | $ | - | ||||||||
|
Equity
securities:
|
||||||||||||||||
|
U.
S.
|
1,103 | 1,103 | - | - | ||||||||||||
|
International
|
29,944 | 29,944 | - | - | ||||||||||||
|
Fixed
income securities:
|
||||||||||||||||
|
Fixed
rate bonds (a)
|
41,215 | 41,215 | - | - | ||||||||||||
|
Other
types of investments:
|
||||||||||||||||
|
Mutual
funds (b)
|
8,857 | 417 | 8,440 | - | ||||||||||||
|
Common
trusts (c)
|
1,648 | - | - | 1,648 | ||||||||||||
|
Insurance
contracts
|
4,858 | - | 3,034 | 1,824 | ||||||||||||
|
Hedge
funds
|
1,334 | - | - | 1,334 | ||||||||||||
|
Real
estate
|
7,559 | 7,199 | - | 360 | ||||||||||||
|
Total
|
$ | 99,546 | $ | 82,653 | $ | 11,727 | $ | 5,166 | ||||||||
|
December 31, 2009
|
||||||||||||||||
|
(in
thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Assets
Category
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 3,180 | $ | 3,038 | $ | 142 | $ | - | ||||||||
|
Equity
securities:
|
||||||||||||||||
|
U.
S.
|
954 | 954 | - | - | ||||||||||||
|
International
|
27,907 | 27,907 | - | - | ||||||||||||
|
Fixed
income securities:
|
||||||||||||||||
|
Fixed
rate bonds (a)
|
35,350 | 35,350 | - | - | ||||||||||||
|
Other
types of investments:
|
||||||||||||||||
|
Mutual
funds (b)
|
7,872 | - | 7,872 | - | ||||||||||||
|
Common
trusts (c)
|
1,932 | 90 | - | 1,842 | ||||||||||||
|
Insurance
contracts
|
4,567 | - | 2,825 | 1,742 | ||||||||||||
|
Hedge
funds
|
1,672 | - | - | 1,672 | ||||||||||||
|
Real
estate
|
5,432 | 5,107 | - | 325 | ||||||||||||
|
Total
|
$ | 88,866 | $ | 72,446 | $ | 10,839 | $ | 5,581 | ||||||||
|
(a)
|
This
category includes fixed income securities invested primarily in Swiss
bonds, foreign bonds in Swiss currency, foreign currency bonds, mortgage
notes and pledged letters.
|
|
(b)
|
Mutual
funds balanced between moderate-income generation and moderate capital
appreciation with investments allocation of approximately 50% equities and
50% fixed income investments.
|
|
(c)
|
This
category includes common/collective funds with investments in
approximately 65% equities and 35% in fixed income
investments.
|
- 83
- -
The
following tables provide a reconciliation from December 31, 2009 to December 31,
2010 for the plans assets categorized as Level 3. No assets were
transferred in or out of the Level 3 category during the year ended December 31,
2010.
|
Changes within Level 3 Category for
|
||||||||||||||||||||
|
Year Ended December 31, 2010
|
||||||||||||||||||||
|
Common
|
Insurance
|
Hedge
|
Real
|
|||||||||||||||||
|
(in thousands)
|
Trust
|
Contracts
|
Funds
|
Estate
|
Total
|
|||||||||||||||
|
Beginning
balance at December 31, 2009
|
$ | 1,842 | $ | 1,742 | $ | 1,672 | $ | 325 | $ | 5,581 | ||||||||||
|
Actual
return on plan assets:
|
||||||||||||||||||||
|
Relating
to assets still held at the reporting date
|
116 | 29 | 37 | - | 182 | |||||||||||||||
|
Relating
to assets sold during the period
|
46 | - | - | - | 46 | |||||||||||||||
|
Purchases,
sales and settlements
|
(356 | ) | 109 | (541 | ) | - | (788 | ) | ||||||||||||
|
Effects
of exchange rate changes
|
- | (56 | ) | 166 | 35 | 145 | ||||||||||||||
|
Ending
balance at December 31, 2010
|
$ | 1,648 | $ | 1,824 | $ | 1,334 | $ | 360 | $ | 5,166 | ||||||||||
The
following tables provide a reconciliation from December 31, 2008 to December 31,
2009 for the plans assets categorized as Level 3. No assets were
transferred in or out of the Level 3 category during the year ended December 31,
2009.
|
Changes within Level 3 Category for
|
||||||||||||||||||||
|
Year Ended December 31, 2009
|
||||||||||||||||||||
|
Common
|
Insurance
|
Hedge
|
Real
|
|||||||||||||||||
|
(in thousands)
|
Trust
|
Contracts
|
Funds
|
Estate
|
Total
|
|||||||||||||||
|
Beginning
balance at December 31, 2008
|
$ | 1,233 | $ | 1,578 | $ | 1,002 | $ | 314 | $ | 4,127 | ||||||||||
|
Actual
return on plan assets:
|
||||||||||||||||||||
|
Relating
to assets still held at the reporting date
|
239 | 31 | (224 | ) | - | 46 | ||||||||||||||
|
Relating
to assets sold during the period
|
16 | - | - | - | 16 | |||||||||||||||
|
Purchases,
sales and settlements
|
354 | 89 | 832 | - | 1,275 | |||||||||||||||
|
Effects
of exchange rate changes
|
- | 44 | 62 | 11 | 117 | |||||||||||||||
|
Ending
balance at December 31, 2009
|
$ | 1,842 | $ | 1,742 | $ | 1,672 | $ | 325 | $ | 5,581 | ||||||||||
Fair
values for Level 3 assets are determined as follows:
Common
Trusts and Hedge Funds: The investments are valued using the net
asset value provided by the administrator of the trust or fund, which is based
on the fair value of the underlying securities.
Real
Estate: Investment is stated by its appraised value.
Insurance
Contracts: The value of the asset represents the mathematical reserve of the
insurance policies and is calculated by the insurance firms using their own
assumptions.
Cash
Flows
In 2011,
the Company expects to contribute $6.2 million to its defined benefit pension
plans and $1.1 million to its postretirement medical plans.
- 84
- -
Estimated
Future Benefit Payments
|
(in thousands)
|
Pension
Benefits
|
Other
Postretirement
Benefits
|
||||||
|
2011
|
$ | 8,368 | $ | 1,099 | ||||
|
2012
|
8,656 | 1,124 | ||||||
|
2013
|
9,569 | 1,080 | ||||||
|
2014
|
10,140 | 1,046 | ||||||
|
2015
|
10,058 | 978 | ||||||
|
2016-2019
|
59,982 | 4,149 | ||||||
NOTE
14 – RESTRUCTURING AND OTHER COSTS
Restructuring
Costs
Restructuring
costs of $5.8 million and $5.9 million for 2010 and 2009, respectively, are
reflected in Restructuring and other costs in the statement of operations and
the associated liabilities are recorded in accrued liabilities and other
non-current liabilities in the consolidated balance sheet. These
costs consist of employee severance benefits, payments due under operating
contracts, and other restructuring costs. These costs consist of employee
severance benefits, payments due under operating contracts, and other
restructuring costs. During 2010 and 2009, the Company initiated
several restructuring plans primarily related to the closure and/or
consolidation of certain production and selling facilities in the United States,
Europe and South America to better leverage the Company’s resources by reducing
costs and obtaining operational efficiencies. Additionally, the
Company executed targeted reductions in workforce both in the manufacturing and
non-manufacturing business functions in certain locations on 2009.
The 2010
restructuring plans and ongoing benefits associated with these plans were
immaterial to the current period as well as future periods. The
majority of the benefits of the 2009 and 2008 and prior period restructuring
plans have been incorporated into the Company’s results. While
certain restructuring plans continue to be executed, the future benefits of
these on the Company’s results would be immaterial in the period
realized.
As of
December 31, 2010, the Company’s restructuring accruals were as
follows:
|
Severances
|
||||||||||||||||
|
2008 and
|
||||||||||||||||
|
(in thousands)
|
Prior Plans
|
2009 Plans
|
2010 Plans
|
Total
|
||||||||||||
|
Balance,
December 31, 2009
|
$ | 5,505 | $ | 3,240 | $ | - | $ | 8,745 | ||||||||
|
Provisions
and adjustments
|
(700 | ) | (514 | ) | 6,552 | 5,338 | ||||||||||
|
Amounts
applied
|
(2,780 | ) | (1,873 | ) | (1,292 | ) | (5,945 | ) | ||||||||
|
Balance,
December 31, 2010
|
$ | 2,025 | $ | 853 | $ | 5,260 | $ | 8,138 | ||||||||
|
Lease/contract terminations
|
||||||||
|
2008 and
|
||||||||
|
(in thousands)
|
Prior Plans
|
Total
|
||||||
|
Balance,
December 31, 2009
|
$ | 1,093 | $ | 1,093 | ||||
|
Provisions
and adjustments
|
- | - | ||||||
|
Amounts
applied
|
(97 | ) | (97 | ) | ||||
|
Balance,
December 31, 2010
|
$ | 996 | $ | 996 | ||||
- 85
- -
|
Other restructuring costs
|
||||||||||||||||
|
2008 and
|
||||||||||||||||
|
(in thousands)
|
Prior Plans
|
2009 Plans
|
2010 Plans
|
Total
|
||||||||||||
|
Balance,
December 31, 2009
|
$ | 112 | $ | 16 | $ | - | $ | 128 | ||||||||
|
Provisions
and adjustments
|
90 | 209 | 206 | 505 | ||||||||||||
|
Amounts
applied
|
(161 | ) | (209 | ) | (206 | ) | (576 | ) | ||||||||
|
Balance,
December 31, 2010
|
$ | 41 | $ | 16 | $ | - | $ | 57 | ||||||||
The
following table provides the cumulative amounts for the provisions and
adjustments and amounts applied for all the plans by segment:
|
December 31,
|
Provisions
|
Amounts
|
December 31,
|
|||||||||||||
|
(in thousands)
|
2009
|
and adjustments
|
applied
|
2010
|
||||||||||||
|
U.S.,
Germany and Certain Other European Regions Consumable
Businesses
|
$ | 1,247 | $ | 405 | $ | (561 | ) | $ | 1,091 | |||||||
|
France,
U.K., Italy and Certain Other European Countries, CIS, Middle East,
Africa, Pacific Rim Businesses
|
84 | 422 | (391 | ) | 115 | |||||||||||
|
Canada/Latin
America/Endodontics/ Orthodontics
|
638 | 582 | (820 | ) | 400 | |||||||||||
|
Dental
Laboratory Business/ Implants/Non-Dental
|
7,997 | 4,434 | (4,846 | ) | 7,585 | |||||||||||
|
Total
Balance
|
$ | 9,966 | $ | 5,843 | $ | (6,618 | ) | $ | 9,191 | |||||||
Other
Costs
In 2010,
the Company recorded certain other costs of $5.2 million, of which $3.7 million
related to legal matters. The remaining portion consists of
impairments related to intangible assets and acquisition related
costs. In 2009, the Company recorded certain other costs of $0.9
million related to legal matters and an impairment of an intangible
asset.
NOTE
15 – FINANCIAL INSTRUMENTS AND DERIVATIVES
Derivative
Instruments and Hedging Activities
The
Company's activities expose it to a variety of market risks, which primarily
include the risks related to the effects of changes in foreign currency exchange
rates, interest rates and commodity prices. These financial exposures
are monitored and managed by the Company as part of its overall risk management
program. The objective of this risk management program is to reduce the
volatility that these market risks may have on the Company's operating results
and equity.
Certain
of the Company's inventory purchases are denominated in foreign currencies,
which expose the Company to market risk associated with foreign currency
exchange rate movements. The Company's policy generally is to hedge
major foreign currency transaction exposures through foreign exchange forward
contracts. These contracts are entered into with major financial
institutions thereby minimizing the risk of credit loss. In addition,
the Company's investments in foreign subsidiaries are denominated in foreign
currencies, which create exposures to changes in foreign currency exchange
rates. The Company uses debt and derivatives denominated in the
applicable foreign currency as a means of hedging a portion of this
risk.
With the
Company’s significant level of variable interest rate long-term debt and net
investment hedges, changes in the interest rate environment can have a major
impact on the Company’s earnings, depending upon its interest rate
exposure. As a result, the Company manages its interest rate exposure
with the use of interest rate swaps, when appropriate, based upon market
conditions.
The
manufacturing of some of the Company’s products requires the use of commodities,
which are subject to market fluctuations. In order to limit the
unanticipated impact on income from such market fluctuations, the Company
selectively enters into commodity swaps for certain materials used in the
production of its products. Additionally, the Company uses
non-derivative methods, such as the precious metal consignment agreements to
effectively hedge commodity risks.
- 86
- -
Cash
Flow Hedges
The
Company uses interest rate swaps to convert a portion of its variable interest
rate debt to fixed interest rate debt. As of December 31, 2010, the
Company has two groups of significant variable interest rate to fixed rate
interest rate swaps. One of the groups of swaps has notional amounts
totaling 12.6 billion Japanese yen, and effectively converts the underlying
variable interest rates to an average fixed interest rate of 1.6% for a term of
ten years, ending in March 2012. Another swap has a notional amount
of 65.0 million Swiss francs, and effectively converts the underlying variable
interest rates to a fixed interest rate of 4.2% for a term of seven years,
ending in March 2012. The Company enters into interest rate swap
contracts infrequently as they are only used to manage interest rate risk on
long-term debt instruments and not for speculative purposes.
The
Company selectively enters into commodity swaps to effectively fix certain
variable raw material costs. At December 31, 2010, the Company had
swaps in place to purchase 270 troy ounces of platinum bullion for use in the
production of its impression material products. The average fixed
rate of this agreement is $1,739 per troy ounce. In addition, the
Company had swaps in place to purchase 5,736 troy ounces of silver bullion for
use in the production of its dental amalgam products at an average fixed rate of
$16 per troy ounce.
The
Company enters into forward exchange contracts to hedge the foreign currency
exposure of its anticipated purchases of certain inventory. In
addition, exchange contracts are used by certain of the Company's subsidiaries
to hedge intercompany inventory purchases, which are denominated in non-local
currencies. The forward contracts that are used in these programs
typically mature in twelve months or less. For these derivatives
which qualify as hedges of future anticipated cash flows, the effective portion
of changes in fair value is temporarily deferred in AOCI and then recognized in
earnings when the hedged item affects earnings.
The
following tables summarize the fair value of the Company’s cash flow hedges at
December 31, 2010.
|
Foreign Exchange Forward Contracts
|
Notional Amounts
|
Fair Value Net
Asset (Liability)
|
||||||||||
|
(in thousands)
|
2010
|
2011
|
December 31, 2010
|
|||||||||
|
Forward
sale, 11.2 million Australian dollars
|
$ | 10,460 | $ | 972 | $ | (784 | ) | |||||
|
Forward
purchase, 8.4 million British pounds
|
(12,286 | ) | (772 | ) | 250 | |||||||
|
Forward
sale, 34.3 million Canadian dollars
|
31,114 | 3,428 | (664 | ) | ||||||||
|
Forward
sale, 5.2 million Danish krone
|
925 | - | 10 | |||||||||
|
Forward
sale, 5.2 million euros
|
6,923 | - | 1,916 | |||||||||
|
Forward
sale, 407.5 million Japanese yen
|
5,019 | - | 268 | |||||||||
|
Forward
sale, 118.7 million Mexican pesos
|
9,615 | - | 12 | |||||||||
|
Forward
purchase, 1.5 million Norwegian krone
|
(262 | ) | - | 1 | ||||||||
|
Forward
sale, 2.0 million Singapore dollars
|
1,585 | - | (10 | ) | ||||||||
|
Forward
sale, 527.9 million South Korean won
|
509 | - | (3 | ) | ||||||||
|
Forward
purchase, 11.5 million Swiss francs
|
(12,324 | ) | - | 423 | ||||||||
|
Forward
sale, 23.6 million Taiwanese dollars
|
805 | - | 4 | |||||||||
|
Total
foreign exchange forward contracts
|
$ | 42,083 | $ | 3,628 | $ | 1,423 | ||||||
|
Notional Amount
|
Fair Value Net
Asset (Liability)
|
|||||||||||||||||||||||
|
Interest Rate Swaps
(in thousands)
|
2011
|
2012
|
2013
|
2014
|
2015 and
Beyond
|
December 31, 2010
|
||||||||||||||||||
|
Euro
|
$ | 1,262 | $ | 1,262 | $ | 1,262 | $ | 965 | $ | 3,136 | $ | (660 | ) | |||||||||||
|
Japanese
yen
|
- | 154,626 | - | - | - | (2,058 | ) | |||||||||||||||||
|
Swiss
francs
|
- | 69,560 | - | - | - | (3,026 | ) | |||||||||||||||||
|
Total
interest rate swaps
|
$ | 1,262 | $ | 225,448 | $ | 1,262 | $ | 965 | $ | 3,136 | $ | (5,744 | ) | |||||||||||
- 87
- -
|
Notional
Amount
|
Fair Value Net
Asset (Liability)
|
|||||||
|
Commodity Contracts
(in thousands)
|
2011
|
December 31, 2010
|
||||||
|
Silver
swap - U.S. dollar
|
$ | (93 | ) | $ | 82 | |||
|
Platinum
swap - U.S. dollar
|
(470 | ) | 6 | |||||
|
Total
commodity contracts
|
$ | (563 | ) | $ | 88 | |||
Hedges
of Net Investments in Foreign Operations
The
Company has numerous investments in foreign subsidiaries. The net
assets of these subsidiaries are exposed to volatility in currency exchange
rates. Currently, the Company uses non-derivative financial
instruments, including foreign currency denominated debt held at the parent
company level and derivative financial instruments to hedge some of this
exposure. Translation gains and losses related to the net assets of
the foreign subsidiaries are offset by gains and losses in the non-derivative
and derivative financial instruments designated as hedges of net
investments.
During
the first quarter of 2010, the Company entered into new cross currency basis
swaps of Swiss francs 100.0 million and Swiss francs 55.5 million (collectively
the “Swiss Swaps”). The Swiss Swaps mature in February 2013, and the Company
pays three month Swiss franc London Inter-Bank Offered Rate (“LIBOR”) and
receives three month U.S. dollar LIBOR. The new contracts were entered into to
replace maturing contracts. During the fourth quarter of 2010, the Company
entered into new cross currency basis swaps of euro 108.0 million (“Euro
Swaps”). The Euro Swaps mature in December 2013, and the Company pays three
month Euro Inter-Bank Offered Rate (“EURIBOR”) and receives three month U.S.
dollar LIBOR. The new contracts were entered into to replace maturing contracts.
The Swiss franc and euro cross currency interest rate swaps are designated as
net investment hedges of the Swiss franc and euro denominated net
assets. The interest rate differential is recognized in income as
interest income or interest expense as it is accrued, the foreign currency
revaluation is recorded in AOCI, net of tax.
The fair
value of these cross currency interest rate swap agreements is the estimated
amount the Company would either pay or receive at the reporting date, taking
into consideration the effective interest rates and foreign exchange
rates. As of December 31, 2010 and December 31, 2009, the estimated
net fair values of the swap agreements were negative $169.1 million and negative
$176.6 million, respectively, which are recorded in AOCI, net of tax, and as
other noncurrent liabilities and other noncurrent assets in the consolidated
balance sheets.
At
December 31, 2010 and December 31, 2009, the Company had Swiss franc-denominated
and Japanese yen-denominated debt and cross currency basis swaps denominated in
euro and Swiss franc to hedge the currency exposure related to a designated
portion of the net assets of its European, Swiss and Japanese
subsidiaries. At December 31, 2010 and 2009, the accumulated
translation gains on investments in foreign subsidiaries, primarily denominated
in euro, Swiss franc and Japanese yen, net of these net investment hedges, were
$45.4 million and $111.1 million, respectively, which are included in AOCI,
net of tax.
The
following table summarizes the fair value of the Company’s cross currency basis
swaps that are designated as hedges of net investments in foreign operations at
December 31, 2010:
|
Notional Amount
|
Fair Value Net
Asset (Liability)
|
|||||||||||||||
|
Cross Currency Basis Swaps
(in thousands)
|
2011
|
2012
|
2013
|
December 31, 2010
|
||||||||||||
|
Swiss
franc 592.5 million @ 1.17 pay CHF 3 mth. LIBOR rec. USD 3 mth.
LIBOR
|
$ | 86,040 | $ | 60,570 | $ | 487,455 | $ | (126,987 | ) | |||||||
|
Euro
358.0 million @ $1.22 pay EUR 3 mth. EURIBOR rec. USD 3 mth.
LIBOR
|
- | - | 478,360 | (42,118 | ) | |||||||||||
|
Total
cross currency basis swaps
|
$ | 86,040 | $ | 60,570 | $ | 965,815 | $ | (169,105 | ) | |||||||
As of
December 31, 2010, net losses on derivative instruments of $0.8 million, which
were recorded in AOCI, net of tax, are expected to be reclassified to current
earnings during the next twelve months. This reclassification is
primarily due to the sale of inventory that includes previously hedged purchases
and interest rate swaps. The maximum term over which the Company is
hedging exposures to variability of cash flows (for all forecasted transactions,
excluding interest payments on variable interest rate debt) is eighteen
months. Overall, the derivatives designated as cash flow hedges are
highly effective. Any cash flows associated with these instruments
are included in cash provided by operating activities in the consolidated
statements of cash flows in accordance with the Company’s policy of classifying
the cash flows from these instruments in the same category as the cash flows
from the items being hedged.
- 88
- -
The
following tables summarize the fair value and location on the consolidated
balance sheets of the Company’s derivatives at:
|
December 31, 2010
|
||||||||||||||||
|
Prepaid
|
||||||||||||||||
|
(in thousands)
|
Expenses
|
Other
|
Other
|
|||||||||||||
|
and Other
|
Noncurrent
|
Accrued
|
Noncurrent
|
|||||||||||||
|
Designated as Hedges
|
Current Assets
|
Assets, Net
|
Liabilities
|
Liabilities
|
||||||||||||
|
Foreign
exchange forward contracts
|
$ | 2,455 | $ | 21 | $ | 1,139 | $ | 135 | ||||||||
|
Commodity
contracts
|
88 | - | - | - | ||||||||||||
|
Interest
rate swaps
|
- | - | 4,213 | 871 | ||||||||||||
|
Cross
currency basis swaps
|
- | - | 21,516 | 147,589 | ||||||||||||
|
Total
|
$ | 2,543 | $ | 21 | $ | 26,868 | $ | 148,595 | ||||||||
|
Not Designated as Hedges
|
||||||||||||||||
|
Foreign
exchange forward contracts
|
$ | 821 | $ | - | $ | 600 | $ | - | ||||||||
|
Interest
rate swaps
|
- | - | 104 | 556 | ||||||||||||
|
Total
|
$ | 821 | $ | - | $ | 704 | $ | 556 | ||||||||
|
December 31, 2009
|
||||||||||||||||
|
Prepaid
|
||||||||||||||||
|
(in thousands)
|
Expenses
|
Other
|
Other
|
|||||||||||||
|
and Other
|
Noncurrent
|
Accrued
|
Noncurrent
|
|||||||||||||
|
Designated as Hedges
|
Current Assets
|
Assets, Net
|
Liabilities
|
Liabilities
|
||||||||||||
|
Foreign
exchange forward contracts
|
$ | 598 | $ | 5 | $ | 1,010 | $ | 16 | ||||||||
|
Commodity
contracts
|
293 | - | - | - | ||||||||||||
|
Interest
rate swaps
|
- | - | 6,130 | 2,775 | ||||||||||||
|
Cross
currency basis swaps
|
- | - | 52,411 | 124,210 | ||||||||||||
|
Total
|
$ | 891 | $ | 5 | $ | 59,551 | $ | 127,001 | ||||||||
|
Not
Designated as Hedges
|
||||||||||||||||
|
Foreign
exchange forward contracts
|
$ | 556 | $ | - | $ | 409 | $ | - | ||||||||
|
Interest
rate swaps
|
- | - | - | 882 | ||||||||||||
|
Total
|
$ | 556 | $ | - | $ | 409 | $ | 882 | ||||||||
- 89
- -
The
following tables summarize the statements of operations impact of the Company’s
cash flow hedges for the years ended December 31, 2010 and 2009:
|
December 31, 2010
|
|||||||||
|
Derivatives in Cash Flow Hedging
|
Effective Portion
|
||||||||
|
Gain (Loss)
|
Classification
|
Reclassified from
|
|||||||
|
(in thousands)
|
in AOCI
|
of Gains (Losses)
|
AOCI into Income
|
||||||
|
Interest
rate contracts
|
$ | (1,978 | ) |
Interest
expense
|
$ | (5,636 | ) | ||
|
Foreign
exchange forward contracts
|
2,314 |
Cost
of products sold
|
665 | ||||||
|
Foreign
exchange forward contracts
|
670 |
SG&A
expenses
|
630 | ||||||
|
Commodity
contracts
|
324 |
Cost
of products sold
|
662 | ||||||
|
Total
|
$ | 1,330 | $ | (3,679 | ) | ||||
|
Derivatives in Cash Flow Hedging
|
Ineffective portion
|
|||||
|
Classification
|
Recognized
|
|||||
|
(in thousands)
|
of Gains (Losses)
|
in Income
|
||||
|
Interest
rate contracts
|
Other
expense, net
|
$ | 232 | |||
|
Foreign
exchange forward contracts
|
Interest
expense
|
(658 | ) | |||
|
Foreign
exchange forward contracts
|
Interest
expense
|
(14 | ) | |||
|
Commodity
contracts
|
Interest
expense
|
(14 | ) | |||
|
Total
|
$ | (454 | ) | |||
|
December 31, 2009
|
|||||||||
|
Derivatives in Cash Flow Hedging
|
Effective Portion
|
||||||||
|
Gain (Loss)
|
Classification
|
Reclassified from
|
|||||||
|
(in thousands)
|
in AOCI
|
of Gains (Losses)
|
AOCI into Income
|
||||||
|
Interest
rate contracts
|
$ | (4,186 | ) |
Interest
expense
|
$ | (8,035 | ) | ||
|
Foreign
exchange forward contracts
|
(999 | ) |
Cost
of products sold
|
905 | |||||
|
Foreign
exchange forward contracts
|
660 |
SG&A
expenses
|
459 | ||||||
|
Commodity
contracts
|
1,655 |
Cost
of products sold
|
(1,149 | ) | |||||
|
Total
|
$ | (2,870 | ) | $ | (7,820 | ) | |||
|
Derivatives in Cash Flow Hedging
|
Ineffective portion
|
|||||
|
Classification
|
Recognized
|
|||||
|
(in thousands)
|
of Gains (Losses)
|
in Income
|
||||
|
Interest
rate contracts
|
Other
expense, net
|
$ | (168 | ) | ||
|
Foreign
exchange forward contracts
|
Interest
expense
|
(330 | ) | |||
|
Foreign
exchange forward contracts
|
Interest
expense
|
(40 | ) | |||
|
Commodity
contracts
|
Interest
expense
|
(48 | ) | |||
|
Total
|
$ | (586 | ) | |||
- 90
- -
The
following tables summarize the statement of operations impact of the Company’s
hedges of net investments for the years ended December 31, 2010 and
2009:
|
December 31, 2010
|
|||||||||
|
Derivatives in Net Investment Hedging
|
Gain (Loss)
|
||||||||
|
Gain (Loss)
|
Classification
|
Recognized
|
|||||||
|
(in thousands)
|
in AOCI
|
of Gains (Losses)
|
in Income
|
||||||
|
Cross
currency interest rate swaps
|
$ | (61,211 | ) |
Interest
income
|
$ | 869 | |||
|
Interest
expense
|
(105 | ) | |||||||
|
Cross
currency interest rate swaps
|
34,862 |
Interest
expense
|
(2,508 | ) | |||||
|
Total
|
$ | (26,349 | ) | $ | (1,744 | ) | |||
|
December 31, 2009
|
|||||||||
|
Derivatives in Net Investment Hedging
|
Gain (Loss)
|
||||||||
|
Gain (Loss)
|
Classification
|
Recognized
|
|||||||
|
(in thousands)
|
in AOCI
|
of Gains (Losses)
|
in Income
|
||||||
|
Cross
currency interest rate swaps
|
$ | (13,877 | ) |
Interest
income
|
$ | 1,420 | |||
|
Interest
expense
|
(85 | ) | |||||||
|
Cross
currency interest rate swaps
|
(13,868 | ) |
Interest
expense
|
(4,098 | ) | ||||
|
Total
|
$ | (27,745 | ) | $ | (2,763 | ) | |||
The
following table summarizes the statement of operations impact of the Company’s
hedges not designated as hedging for the years ended December 31, 2010 and
2009:
|
Derivatives Not Designated as Hedging
|
||||||||||
|
Classification
|
December 31,
|
|||||||||
|
(in thousands)
|
of Gains (Losses)
|
2010
|
2009
|
|||||||
|
Foreign
exchange forward contracts
|
Other
expense, net
|
$ | 1,181 | $ | (14,984 | ) | ||||
|
Interest
rate contracts
|
Other
expense, net
|
- | (2 | ) | ||||||
|
Interest
rate contracts
|
Interest
expense
|
(155 | ) | (514 | ) | |||||
|
Total
|
$ | 1,026 | $ | (15,500 | ) | |||||
Amounts
recorded in AOCI related to cash flow hedging instruments at:
|
December 31,
|
||||||||
|
(in thousands, net of tax)
|
2010
|
2009
|
||||||
|
Beginning
balance
|
$ | (4,799 | ) | $ | (7,874 | ) | ||
|
Changes
in fair value of derivatives
|
1,248 | (1,627 | ) | |||||
|
Reclassifications
to earnings from equity
|
2,083 | 4,702 | ||||||
|
Total
activity
|
3,331 | 3,075 | ||||||
|
Ending
balance
|
$ | (1,468 | ) | $ | (4,799 | ) | ||
- 91
- -
Amounts
recorded in AOCI related to hedges of net investments in foreign operations
at:
|
December 31,
|
||||||||
|
(in thousands, net of tax)
|
2010
|
2009
|
||||||
|
Beginning
balance
|
$ | 111,115 | $ | 77,584 | ||||
|
Foreign
currency translation adjustment
|
(33,208 | ) | 49,685 | |||||
|
Changes
in fair value of:
|
||||||||
|
foreign
currency debt
|
(16,311 | ) | 881 | |||||
|
derivative
hedge instruments
|
(16,179 | ) | (17,035 | ) | ||||
|
Total
activity
|
(65,698 | ) | 33,531 | |||||
|
Ending
balance
|
$ | 45,417 | $ | 111,115 | ||||
NOTE
16 – FAIR VALUE MEASUREMENT
The
Company records financial instruments at fair value with unrealized gains and
losses related to certain financial instruments reflected in AOCI on the
consolidated balance sheets. In addition, the Company recognizes
certain liabilities at fair value.
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 approximate fair
value due to the short-term nature of these instruments. The Company
estimates the fair value and carrying value of its total long-term debt,
including current portion, was $611.2 million and $606.5 million, respectively,
as of December 31, 2010. As of December 31, 2009, the fair
value approximated the carrying value, which was $453.7 million. The
interest rate on the $250.0 million Private Placement Note is a fixed rate of
4.1%, and the fair value is based on the interest rates as of December 31,
2010. The interest rates on term loan debt and commercial paper are
variable, and therefore the fair value of these instruments approximates their
carrying values.
The
following tables set forth by level within the fair value hierarchy the
Company’s financial assets and liabilities that were accounted for at fair value
on a recurring basis as of December 31, 2010 and December 31, 2009, which are
classified as “Cash and cash equivalents,” “Prepaid expenses and other current
assets,” “Long-Term investments,” “Other noncurrent assets, net,” “Accrued
liabilities,” and “Other noncurrent liabilities.” Financial assets
and liabilities that are recorded at fair value as of the balance sheet date are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
|
|
December 31, 2010
|
|||||||||||||||
|
(in thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
|
||||||||||||||||
|
Assets
|
||||||||||||||||
|
Money
market funds
|
$ | 380,593 | $ | 380,593 | $ | - | $ | - | ||||||||
|
Commodity
forward purchase contracts
|
88 | - | 88 | - | ||||||||||||
|
Foreign
exchange forward contracts
|
3,297 | - | 3,297 | - | ||||||||||||
|
Corporate
convertible bonds
|
66,024 | - | - | 66,024 | ||||||||||||
|
Total
assets
|
$ | 450,002 | $ | 380,593 | $ | 3,385 | $ | 66,024 | ||||||||
|
Liabilities
|
||||||||||||||||
|
Interest
rate swaps
|
$ | 5,744 | $ | - | $ | 5,744 | $ | - | ||||||||
|
Cross
currency interest rate swaps
|
169,105 | - | 169,105 | - | ||||||||||||
|
Foreign
exchange forward contracts
|
1,874 | - | 1,874 | - | ||||||||||||
|
Total
liabilities
|
$ | 176,723 | $ | - | $ | 176,723 | $ | - | ||||||||
- 92
- -
|
December 31, 2009
|
||||||||||||||||
|
(in thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Assets
|
||||||||||||||||
|
Money
market funds
|
$ | 364,765 | $ | 364,765 | $ | - | $ | - | ||||||||
|
Interest
rate swaps
|
293 | - | 293 | - | ||||||||||||
|
Foreign
exchange forward contracts
|
1,159 | - | 1,159 | - | ||||||||||||
|
Total
assets
|
$ | 366,217 | $ | 364,765 | $ | 1,452 | $ | - | ||||||||
|
Liabilities
|
||||||||||||||||
|
Interest
rate swaps
|
$ | 9,787 | $ | - | $ | 9,787 | $ | - | ||||||||
|
Cross
currency interest rate swaps
|
176,621 | - | 176,621 | - | ||||||||||||
|
Commodity
forward purchase contracts
|
1,435 | - | 1,435 | - | ||||||||||||
|
Total
liabilities
|
$ | 187,843 | $ | - | $ | 187,843 | $ | - | ||||||||
Derivative
valuations are based on observable inputs to the valuation model including
interest rates, foreign currency exchange rates, future commodities prices and
credit risks.
The
commodity forward purchase contracts, interest rate swaps and foreign exchange
forward contracts are considered cash flow hedges and cross currency interest
rate swaps are considered hedge of net investments in foreign operations as
discussed in Note 15, Financial Instruments and Derivatives.
The
Company’s investment in corporate convertible bonds relates specifically to
convertible bonds issued by DIO Corporation, as discussed in Note 3, Business
Acquisitions and Investments in Affiliates, and is reported in “Other noncurrent
assets, net,” on the consolidated balance sheets. The Company has
designated the corporate bond investment as an available-for-sale security and
therefore records the changes in fair value of the investment through
AOCI. The income method valuation technique is used by the Company to
fair value the corporate bonds. The significant unobservable inputs
for valuing the corporate bonds are DIO Corporation’s stock volatility factor
and corporate bond rating. Significant other observable inputs used
to value the corporate bonds include foreign exchange rates and DIO
Corporation’s period-ending market stock price.
The
following table presents a reconciliation of the Company’s assets measured at
fair value on a recurring basis using unobservable inputs (Level
3):
|
(in thousands)
|
||||
|
Level 3
|
||||
|
Balance,
December 31, 2009
|
$ | - | ||
|
Purchases,
gross
|
49,654 | |||
|
Sales,
gross
|
- | |||
|
Gains
and (losses):
|
||||
|
Reported
in AOCI - corporate convertible bonds
|
16,370 | |||
|
Balance,
December 31, 2010
|
$ | 66,024 | ||
NOTE
17 - COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases automobiles and machinery and equipment and certain office,
warehouse and manufacturing facilities under non-cancellable leases. The leases
generally require the Company to pay insurance, taxes and other expenses related
to the leased property. Total rental expense for all operating leases was $34.9
million for 2010, $32.2 million for 2009 and $29.5 million for
2008.
- 93
- -
Rental
commitments, principally for real estate (exclusive of taxes, insurance and
maintenance), automobiles and office equipment are as
follows:
|
(in thousands)
|
||||
|
2011
|
$ | 25,778 | ||
|
2012
|
17,295 | |||
|
2013
|
10,262 | |||
|
2014
|
7,259 | |||
|
2015
|
4,848 | |||
|
2016
and thereafter
|
9,072 | |||
| $ | 74,514 | |||
Litigation
On June
18, 2004, Marvin Weinstat, DDS and Richard Nathan, DDS filed a class action suit
in San Francisco County, California alleging that the Company misrepresented
that its Cavitron® ultrasonic scalers are suitable for use in oral surgical
procedures. The Complaint seeks a recall of the product and refund of
its purchase price to dentists who have purchased it for use in oral
surgery. The Court certified the case as a class action in June 2006
with respect to the breach of warranty and unfair business practices
claims. The class is defined as California dental professionals who
purchased and used one or more Cavitron® ultrasonic scalers for the performance
of oral surgical procedures. The Company filed a motion for
decertification of the class and this motion was granted. Plaintiffs
appealed the decertification of the class to the California Court of Appeals and
the Court of Appeals reversed the decertification decision of the trial
Court. This case has been remanded to and is pending in the San
Francisco County Court.
On
December 12, 2006, a Complaint was filed by Carole Hildebrand, DDS and Robert
Jaffin, DDS in the Eastern District of Pennsylvania (the Plaintiffs subsequently
added Dr. Mitchell Goldman as a named class representative). The case
was filed by the same law firm that filed the Weinstat case in
California. The Complaint asserts putative class action claims on
behalf of dentists located in New Jersey and Pennsylvania. The
Complaint seeks damages and asserts that the Company’s Cavitron® ultrasonic
scaler was negligently designed and sold in breach of contract and warranty
arising from misrepresentations about the potential uses of the product because
it cannot assure the delivery of potable or sterile water. Plaintiffs
have filed their Motion for class certification to which the Company has filed
its response. The Company also filed other motions, including a
Motion to dismiss the claims of Drs. Hildebrand and Jaffin for lack of
standing. The Court granted this Motion for lack of standing of the
individuals and did not allow the plaintiffs to amend the complaint to
substitute their corporate practices, leaving Dr. Goldman as a putative class
representative in Pennsylvania, raising a question of jurisdiction of the U.S.
District Court. The plaintiffs have now filed another complaint in
which they named the corporate practices of Drs. Hildebrand and Jaffin as class
representatives. The Company has moved to dismiss this
complaint.
On
November 21, 2008, Guidance Endodontics LLC filed a complaint in the U.S.
District Court of New Mexico asserting claims against DENTSPLY arising
principally out of a breach of a manufacturing and supply contract between the
parties. Prior to trial, Guidance had claimed its damages were $1.2
million. The case went to trial in late September and early October
2009. On October 9, 2009, a jury returned a verdict against DENTSPLY, in the
amount of approximately $4.0 million for past and future compensatory damages
and $40.0 million in punitive damages. In April 2010, the District
Court Judge formally entered the verdict that was reached in October
2009. The Company believes that this decision is not supported by the
facts in the case or the applicable law and intends to vigorously pursue all
available options to challenge it. The Company has filed a number of
separate post-trial motions with the District Court to overturn various aspects
of the verdict, including the punitive and future damages, or in the alternative
to be granted a new trial, because of the inappropriateness of such
verdicts. The Court has denied the Company’s post-trial Motions on
which it has ruled. The Company has two remaining Motions pending
which the Court has not yet ruled on.
As of
December 31, 2010, a reasonable estimate of a possible range of loss related to
the above litigation cannot be made except as reflected in the preceding
paragraph. DENTSPLY does not believe the outcome of any of these
matters will have a material adverse effect on its financial
position. In the event that one or more of these matters is
unfavorably resolved, it is possible the Company’s results from operations could
be materially impacted.
- 94
- -
Other
The
Company has no material non-cancelable purchase commitments.
The
Company has employment agreements with its executive officers. 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 in the agreements, the
Company's liability would be approximately $13.4 million at December 31,
2010.
- 95
- -
QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)
Quarterly
Financial Information (Unaudited)
(in
thousands, except per share amounts)
|
First
|
Second
|
Third
|
Fourth
|
Total
|
||||||||||||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Rounding
|
Year
|
|||||||||||||||||||
|
2010
|
||||||||||||||||||||||||
|
Net
sales
|
$ | 545,944 | $ | 565,086 | $ | 541,815 | $ | 568,169 | $ | - | $ | 2,221,014 | ||||||||||||
|
Gross
profit
|
282,038 | 287,595 | 272,814 | 287,711 | - | 1,130,158 | ||||||||||||||||||
|
Operating
income
|
89,324 | 104,969 | 90,419 | 95,561 | - | 380,273 | ||||||||||||||||||
|
Net
income attributable to
|
||||||||||||||||||||||||
|
DENTSPLY
International
|
61,843 | 72,386 | 63,653 | 67,826 | - | 265,708 | ||||||||||||||||||
|
Earnings
per common share - basic
|
$ | 0.42 | $ | 0.50 | $ | 0.45 | $ | 0.48 | $ | - | $ | 1.85 | ||||||||||||
|
Earnings
per common share - diluted
|
$ | 0.41 | $ | 0.49 | $ | 0.44 | $ | 0.47 | $ | 0.01 | $ | 1.82 | ||||||||||||
|
Cash
dividends declared per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | - | $ | 0.20 | ||||||||||||
|
2009
|
||||||||||||||||||||||||
|
Net
sales
|
$ | 506,949 | $ | 552,832 | $ | 531,203 | $ | 568,394 | $ | - | $ | 2,159,378 | ||||||||||||
|
Gross
profit
|
265,732 | 285,668 | 271,730 | 283,233 | - | 1,106,363 | ||||||||||||||||||
|
Operating
income
|
86,175 | 98,726 | 92,941 | 103,401 | - | 381,243 | ||||||||||||||||||
|
Net
income attributable to
|
||||||||||||||||||||||||
|
DENTSPLY
International
|
61,743 | 70,199 | 67,483 | 74,833 | 274,258 | |||||||||||||||||||
|
Earnings
per common share - basic
|
$ | 0.42 | $ | 0.47 | $ | 0.45 | $ | 0.50 | $ | 0.01 | $ | 1.85 | ||||||||||||
|
Earnings
per common share - diluted
|
$ | 0.41 | $ | 0.47 | $ | 0.45 | $ | 0.50 | $ | - | $ | 1.83 | ||||||||||||
|
Cash
dividends declared per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | - | $ | 0.20 | ||||||||||||
Net
sales, excluding precious metal content, were $497.5 million, $519.3 million,
$494.3 million and $520.7 million, respectively, for the first, second, third
and fourth quarters of 2010. Net sales, excluding precious metal
content, were $465.6 million, $511.5 million, $493.8 million
and $519.8 million, respectively, for the first, second, third and fourth
quarters of 2009. This measurement should be considered a non-US GAAP measure as
discussed further in Management's Discussion and Analysis of Financial Condition
and Results of Operations.
- 96
- -
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, low and closing sale prices
of the Company's common stock for the periods indicated as reported on the
NASDAQ National Market:
|
Market Range of Common Stock
|
Period-end
|
Cash
|
||||||||||||||
|
Closing
|
Dividend
|
|||||||||||||||
|
High
|
Low
|
Price
|
Declared
|
|||||||||||||
|
2010
|
||||||||||||||||
|
First
Quarter
|
$ | 36.82 | $ | 32.10 | $ | 34.88 | $ | 0.050 | ||||||||
|
Second
Quarter
|
38.15 | 29.91 | 30.17 | 0.050 | ||||||||||||
|
Third
Quarter
|
32.44 | 27.76 | 31.97 | 0.050 | ||||||||||||
|
Fourth
Quarter
|
34.89 | 30.52 | 34.17 | 0.050 | ||||||||||||
|
2009
|
||||||||||||||||
|
First
Quarter
|
$ | 29.19 | $ | 21.80 | $ | 26.85 | $ | 0.050 | ||||||||
|
Second
Quarter
|
30.99 | 25.20 | 30.57 | 0.050 | ||||||||||||
|
Third
Quarter
|
36.08 | 27.79 | 34.54 | 0.050 | ||||||||||||
|
Fourth
Quarter
|
36.80 | 32.30 | 35.17 | 0.050 | ||||||||||||
|
2008
|
||||||||||||||||
|
First
Quarter
|
$ | 47.06 | $ | 36.07 | $ | 38.60 | $ | 0.045 | ||||||||
|
Second
Quarter
|
42.58 | 35.21 | 36.80 | 0.045 | ||||||||||||
|
Third
Quarter
|
42.05 | 36.21 | 37.54 | 0.045 | ||||||||||||
|
Fourth
Quarter
|
39.22 | 22.85 | 28.24 | 0.050 | ||||||||||||
The
Company estimates, based on information supplied by its transfer agent, that
there are 421 holders of record of the Company’s common stock. Approximately
73,800 holders of the Company’s common stock are “street name” or beneficial
holders, whose shares are held of record by banks, brokers and other financial
institutions.
- 97
- -
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/
|
Bret W. Wise
|
||
|
Bret
W. Wise
|
||||
|
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/
|
Bret W. Wise
|
February 18, 2011
|
||
|
Bret
W. Wise
|
Date
|
|||
|
Chairman
of the Board and
|
||||
|
Chief
Executive Officer
|
||||
|
(Principal
Executive Officer)
|
||||
|
/s/
|
William R. Jellison
|
February 18, 2011
|
||
|
William
R. Jellison
|
Date
|
|||
|
Senior
Vice President and
|
||||
|
Chief
Financial Officer
|
||||
|
(Principal
Financial and Accounting Officer)
|
||||
|
/s/
|
John C. Miles II
|
February 18, 2011
|
||
|
John
C. Miles II
|
Date
|
|||
|
Director
|
||||
|
/s/
|
Dr. Michael C. Alfano
|
February 18, 2011
|
||
|
Dr.
Michael C. Alfano
|
Date
|
|||
|
Director
|
||||
|
/s/
|
Eric K. Brandt
|
February 18, 2011
|
||
|
Eric
K. Brandt
|
Date
|
|||
|
Director
|
||||
|
/s/
|
Paula H. Cholmondeley
|
February 18, 2011
|
||
|
Paula
H. Cholmondeley
|
Date
|
|||
|
Director
|
||||
|
/s/
|
Michael J. Coleman
|
February 18, 2011
|
||
|
Michael
J. Coleman
|
Date
|
|||
|
Director
|
- 98
- -
|
/s/
|
William
F. Hecht
|
February
18, 2011
|
||
|
William
F. Hecht
|
Date
|
|||
|
Director
|
|
/s/
|
Leslie
A. Jones
|
February
18, 2011
|
||
|
Leslie
A. Jones
|
Date
|
|||
|
Director
|
||||
|
/s/
|
Francis
J. Lunger
|
February
18, 2011
|
||
|
Francis
J. Lunger
|
Date
|
|||
|
Director
|
||||
|
/s/
|
John
L. Miclot
|
February
18, 2011
|
||
|
John
L. Miclot
|
Date
|
|||
|
Director
|
- 99
- -
DENTSPLY
International Inc.
AMENDED
AND RESTATED BY-LAWS
BY-LAWS
INDEX
|
Page
|
||
|
ARTICLE
I STOCKHOLDERS' MEETINGS
|
1
|
|
|
Section
1.
|
Annual
Meetings
|
1
|
|
Section
2.
|
Special
Meetings
|
1
|
|
Section
3.
|
Place
of Meeting
|
1
|
|
Section
4.
|
Notice
of Meeting
|
1
|
|
Section
5.
|
Fixing
of Record Date
|
1
|
|
Section
6.
|
Quorum
|
2
|
|
Section
7.
|
Proxies
|
2
|
|
Section
8.
|
Voting
of Shares
|
2
|
|
Section
9.
|
List
of Stockholders
|
3
|
|
Section
10.
|
Waiver
of Notice by Stockholders
|
3
|
|
Section
11.
|
Advance
Notice of Stockholder-Proposed Business at Annual Meetings
|
3
|
|
Section
12.
|
Procedure
for Nomination of Directors
|
4
|
|
Section
13.
|
Election
of Directors
|
6
|
|
ARTICLE
II BOARD OF DIRECTORS
|
6
|
|
|
Section
1.
|
General
Powers
|
6
|
|
Section
2.
|
Number
of Directors, Tenure and Qualifications
|
6
|
|
Section
3.
|
Regular
Meetings
|
7
|
|
Section
4.
|
Special
Meetings
|
7
|
|
Section
5.
|
Notice
|
7
|
|
Section
6.
|
Quorum
|
7
|
|
Section
7.
|
Manner
of Acting
|
7
|
|
Section
8.
|
Vacancies
|
8
|
|
Section
9.
|
Compensation
|
8
|
|
Section
10.
|
Presumption
of Assent
|
8
|
|
Section
11.
|
Committees
|
8 |
|
Section
12.
|
Removal
of Directors
|
8
|
|
Section
13.
|
Action
of the Board by Written Consent
|
9
|
|
Section
14.
|
Conferences
|
9
|
|
ARTICLE
III OFFICERS
|
9
|
|
|
Section
1.
|
Number
|
9
|
|
Section
2.
|
Election
and Term of Office
|
9
|
|
Section
3.
|
Removal
|
9
|
|
Section
4.
|
Chairman
of the Board
|
9
|
|
Section
5.
|
Vice
Chairman of the Board
|
9
|
|
Section
6.
|
Chief
Executive Officer
|
10
|
|
Section
7.
|
President
|
10
|
|
Section
8.
|
Senior
Vice President and Vice Presidents
|
10
|
|
Section
9.
|
Secretary
and Assistant Secretaries
|
10
|
|
Section
10.
|
Treasurer
and Assistant Treasurer
|
11
|
|
Section
11.
|
Salaries
|
11
|
|
Section
12.
|
Representation
in Other Companies
|
11
|
|
ARTICLE
IV STOCK AND TRANSFER OF STOCK
|
11
|
|
|
Section
1.
|
Shares
of Stock
|
11
|
|
Section
2.
|
Transfer
of Shares
|
12
|
|
ARTICLE
V INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS
|
12
|
|
|
Section
1.
|
Indemnification
Generally
|
12
|
|
Section
2.
|
Indemnification
in Actions By or In the Right Of the Corporation
|
13
|
|
Section
3.
|
Success
on the Merits; Indemnification Against Expenses
|
13
|
|
Section
4.
|
Determination
that Indemnification is Proper
|
13
|
|
Section
5.
|
Insurance;
Indemnification Agreements
|
13
|
|
Section
6.
|
Advancement
of Expenses
|
13
|
|
Section
7.
|
Rights
Not Exclusive
|
14
|
|
Section
8.
|
Severability
|
14
|
|
Section
9.
|
Modification
|
14
|
ii
AMENDED
AND RESTATED BY-LAWS
OF
DENTSPLY
INTERNATIONAL INC.
(Formerly
GENDEX Corporation)
ARTICLE
I
STOCKHOLDERS'
MEETINGS
Section
1. Annual Meetings. 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, shall be held on such date and at such time as shall be designated from
time to time by the Board of Directors.
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, date 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.
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, any meeting of the stockholders may be adjourned 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.
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
corporation'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.
2
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. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof), or (c) otherwise properly brought before the
annual meeting by any stockholder of the corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 11
and on the record date for the determination of stockholders entitled to notice
of and to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 11.
In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a stockholder, such stockholder must have
given timely notice thereof in proper written form to the Secretary of the
corporation.
To be
timely, a stockholder's notice to the Secretary must be delivered to or mailed
and received at the principal executive offices of the corporation not less than
ninety (90) days nor more than one hundred twenty (120) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within twenty-five (25) days before or after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first
occurs.
3
To be in
proper written form, a stockholder's notice to the Secretary must set forth as
to each matter such stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual
meeting, the reasons for conducting such business at the annual meeting and any
material interest in such business of such stockholder and any Stockholder
Associated Person (as defined below), individually or in the aggregate,
including any anticipated benefit to the stockholder or the Stockholder
Associated Person therefrom, (ii) the name and record address of such
stockholder, (iii) as to the stockholder giving the notice and any Stockholder
Associated Person, (A) the class, series and number of all shares of stock of
the corporation which are owned by such stockholder and by such Stockholder
Associated Person, if any, (B) the nominee holder for, and number of, shares
owned beneficially but not of record by such stockholder and by any such
Stockholder Associated Person, and (C) any derivative positions held or
beneficially held by the stockholder and by any such Stockholder Associated
Person and whether and the extent to which any hedging or other transaction or
series of transactions has been entered into by or on behalf of, or any other
agreement, arrangement or understanding (including any short position or any
borrowing or lending of shares) has been made, the effect or intent of which is
to mitigate loss to or manage risk or benefit of share price changes for, or to
increase or decrease the voting power of, such stockholder or any such
Stockholder Associated Person with respect to any share of stock of the
corporation; (iv) as to the stockholder giving the notice and any Stockholder
Associated Person covered by clause (iii) of this paragraph, the name and
address of such stockholder, as they appear on the corporation’s stock ledger,
and current name and address, if different, and of such Stockholder Associated
Person; (v) a description of all proxy, contract, arrangement, understanding, or
relationship between such stockholder and any other person or persons (including
their names) in connection with the proposal of such business by such
stockholder; and (vi) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at the
annual meeting except business brought before the annual meeting in accordance
with the procedures set forth in this Section 11; provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 11 shall be deemed to preclude
discussion by any stockholder of any such business. If the chairman
of an annual meeting determines that business was not properly brought before
the annual meeting in accordance with the foregoing procedures, the chairman
shall declare to the meeting that the business was not properly brought before
the meeting and such business shall not be transacted.
For
purposes of this Section 11 and of Section 12 of this Article I, “Stockholder
Associated Person” of any stockholder shall mean (i) any person controlling,
directly or indirectly, or acting in concert with, such stockholder, (ii) any
beneficial owner of shares of stock of the corporation owned of record or
beneficially by such stockholder and (iii) any person controlling, controlled by
or under common control with such Stockholder Associated Person.
Section
12. Procedure for Nomination of Directors. Only
persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the corporation, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called for the purpose of electing directors,
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 12 and on the record date for the determination of stockholders
entitled to notice of and to vote at such meeting and (ii) who complies with the
notice procedures set forth in this Section 12.
4
In
addition to any other applicable requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the Secretary of the corporation.
To be
timely, a stockholder's notice to the Secretary must be delivered to or mailed
and received at the principal executive offices of the corporation (a) in the
case of an annual meeting, not less than ninety (90) days nor more than one
hundred twenty (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that is not within
twenty-five (25) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever first
occurs.
To be in
proper written form, a stockholder's notice to the Secretary must set forth (a)
as to each person whom the stockholder proposes to nominate for election as a
director (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class or series and number of shares of capital stock of the corporation which
are owned beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice and any
Stockholder Associated Person, (i) the name and record address of such
stockholder, (ii) the class, series and number of all shares of stock of the
corporation which are owned by such stockholder and by such Stockholder
Associated Person, if any, (iii) the nominee holder for, and number of, shares
owned beneficially but not of record by such stockholder and by any such
Stockholder Associated Person, (iv) any derivative positions held or
beneficially held by the stockholder and by any such Stockholder Associated
Person and whether and the extent to which any hedging or other transaction or
series of transactions has been entered into by or on behalf of, or any other
agreement, arrangement or understanding (including any short position or any
borrowing or lending of shares) has been made, the effect or intent of which is
to mitigate loss to or manage risk or benefit of share price changes for, or to
increase or decrease the voting power of, such stockholder or any such
Stockholder Associated Person with respect to any share of stock of the
corporation, (v) a description of all arrangements or understandings between
such stockholder or any such Stockholder Associated Person and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (vi) as to the
stockholder giving the notice, a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
notice and (vii) any other information relating to the stockholder giving the
notice that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must be
accompanied by a written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
5
No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this Section 12. If
the Chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
Section
13. Election of
Directors. Except as provided in
Section 8 of Article II of these bylaws, a nominee for director shall be elected
to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast
against such nominee’s election; provided,
however, that directors shall be elected by a plurality of the votes cast at any
meeting of stockholders for which (i) the Secretary of the Corporation receives
a notice that a stockholder has nominated a person for
election to the Board of Directors in compliance with the advance notice
requirements for stockholder nominees for director set forth in Article I,
Section 12 of these bylaws and (ii) such nomination has not been withdrawn by
such stockholder on or prior to
the fourteenth day before the date the Corporation first mails to the
stockholders its notice of such meeting. If directors are to be
elected by a plurality of the votes cast, stockholders shall not be permitted to
vote against a nominee, but only to
withhold their vote.
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
thirteen (13), 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.
6
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.
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.
7
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.
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.
8
Section
13. Action of the Board by Written
Consent. Any
action required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a 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 Section 14 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.
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.
9
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
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.
10
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
STOCK AND TRANSFER OF
STOCK
Section
1. Shares of
Stock. The
shares of capital stock of the corporation shall be represented by a
certificate, unless and until the Board of Directors of the corporation adopts a
resolution permitting shares to be uncertificated. Notwithstanding
the adoption of any such resolution providing for uncertificated shares, every
holder of capital stock of the corporation theretofore represented by
certificates and, upon request, every holder of uncertificated shares, shall be
entitled to have a certificate for shares of capital stock of the corporation
signed by the Chief Executive Officer or the President and by the
Secretary. To the extent that shares are represented by certificates,
the certificates shall be in such form as shall be determined by the Board of
Directors and 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. With respect to certificated
shares of stock, all certificates surrendered to the corporation for transfer
shall be canceled and no new certificate or uncertificated shares 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 certificate or uncertificated shares may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
11
Section
2. Transfer of Shares. Stock
of the corporation shall be transferable in the manner prescribed by applicable
law and in these By-Laws. Transfers of stock shall be made on the
books of the corporation, and in the case of certificated shares of stock, only
by the person named in the certificate or by such person's attorney lawfully
constituted in writing and upon the surrender of the certificate therefor,
properly endorsed for transfer and payment of all necessary transfer taxes; or,
in the case of uncertificated shares of stock, upon receipt of proper transfer
instructions from the registered holder of the shares or by such person's
attorney lawfully constituted in writing, and upon payment of all necessary
transfer taxes and compliance with appropriate procedures for transferring
shares in uncertificated form; provided, however, that such surrender and
endorsement, compliance or payment of taxes shall not be required in any case in
which the officers of the corporation shall determine to waive such
requirement. Prior to due presentment for registration of transfer of
a certificate representing shares of capital stock of the corporation or of
proper transfer instructions with respect to uncertificated shares, 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.
12
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 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 indemnitees, 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.
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.
13
Section
7. Rights Not Exclusive. The
indemnification and advancement of expenses 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.
14
EXECUTION
COPY
|
|
CREDIT
AGREEMENT
dated as
of
May 7,
2010
among
DENTSPLY
INTERNATIONAL INC.
The
Subsidiary Borrowers Party Hereto
The
Lenders Party Hereto
JPMORGAN
CHASE BANK, N.A.
as
Administrative Agent
WELLS
FARGO BANK, NATIONAL ASSOCIATION
as
Syndication Agent
and
CITIBANK,
N.A., BANK OF TOKYO-MITSUBISHI UFJ TRUST COMPANY
and
COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
as
Co-Documentation Agents
J.P.
MORGAN SECURITIES INC. and WELLS FARGO SECURITIES, LLC
as Joint
Bookrunners and Joint Lead Arrangers
|
|
TABLE OF
CONTENTS
|
Page
|
|
|
ARTICLE
I Definitions
|
1
|
|
SECTION
1.01. Defined Terms
|
1
|
|
SECTION
1.02. Classification of Loans and Borrowings
|
15
|
|
SECTION
1.03. Terms Generally
|
16
|
|
SECTION
1.04. Accounting Terms; GAAP
|
16
|
|
SECTION
1.05. Status of Obligations
|
16
|
|
ARTICLE
II The Credits
|
17
|
|
SECTION
2.01. Commitments
|
17
|
|
SECTION
2.02. Loans and Borrowings
|
17
|
|
SECTION
2.03. Requests for Revolving Borrowings
|
18
|
|
SECTION
2.04. Determination of Dollar Amounts
|
18
|
|
SECTION
2.05. Swingline Loans
|
19
|
|
SECTION
2.06. Letters of Credit
|
20
|
|
SECTION
2.07. Funding of Borrowings
|
23
|
|
SECTION
2.08. Interest Elections
|
24
|
|
SECTION
2.09. Termination and Reduction of Commitments
|
25
|
|
SECTION
2.10. Repayment of Loans; Evidence of Debt
|
26
|
|
SECTION
2.11. Prepayment of Loans.
|
27
|
|
SECTION
2.12. Fees
|
27
|
|
SECTION
2.13. Interest
|
28
|
|
SECTION
2.14. Alternate Rate of Interest
|
29
|
|
SECTION
2.15. Increased Costs
|
29
|
|
SECTION
2.16. Break Funding Payments
|
30
|
|
SECTION
2.17. Taxes
|
31
|
|
SECTION
2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs
|
32
|
|
SECTION
2.19. Mitigation Obligations; Replacement of Lenders
|
34
|
|
SECTION
2.20. Expansion Option
|
35
|
|
SECTION
2.21. [Intentionally Omitted].
|
36
|
|
SECTION
2.22. Judgment Currency
|
36
|
|
SECTION
2.23. Designation of Subsidiary Borrowers
|
36
|
|
SECTION
2.24. Defaulting Lenders
|
36
|
|
ARTICLE
III Representations and Warranties
|
38
|
|
SECTION
3.01. Representations and Warranties of the Company
|
38
|
|
ARTICLE
IV Conditions
|
39
|
|
SECTION
4.01. Effective Date
|
39
|
|
SECTION
4.02. Each Credit Event
|
40
|
|
SECTION
4.03. Designation of a Subsidiary Borrower
|
40
|
Table of
Contents
(continued)
|
Page
|
|
|
ARTICLE
V Affirmative Covenants
|
41
|
|
SECTION
5.01. Compliance with Laws, Etc
|
41
|
|
SECTION
5.02. Payment of Taxes, Etc
|
41
|
|
SECTION
5.03. Maintenance of Insurance
|
41
|
|
SECTION
5.04. Preservation of Corporate Existence, Etc
|
42
|
|
SECTION
5.05. Visitation Rights
|
42
|
|
SECTION
5.06. Keeping of Books
|
42
|
|
SECTION
5.07. Maintenance of Properties, Etc
|
42
|
|
SECTION
5.08. Transactions with Affiliates
|
42
|
|
SECTION
5.09. Reporting Requirements
|
42
|
|
ARTICLE
VI Negative Covenants
|
43
|
|
SECTION
6.01. Liens, Etc
|
43
|
|
SECTION
6.02. Mergers, Etc
|
44
|
|
SECTION
6.03. Accounting Changes
|
44
|
|
SECTION
6.04. Subsidiary Debt
|
44
|
|
SECTION
6.05. Change in Nature of Business
|
45
|
|
SECTION
6.06. Financial Covenants
|
45
|
|
ARTICLE
VII Events of Default
|
45
|
|
SECTION
7.01.Events of Default
|
45
|
|
SECTION
7.02. Actions in Respect of the Letters of Credit upon
Default
|
47
|
|
ARTICLE
VIII The Administrative Agent
|
47
|
|
ARTICLE
IX Miscellaneous
|
49
|
|
SECTION
9.01. Notices
|
49
|
|
SECTION
9.02. Waivers; Amendments
|
50
|
|
SECTION
9.03. Expenses; Indemnity; Damage Waiver
|
52
|
|
SECTION
9.04. Successors and Assigns
|
53
|
|
SECTION
9.05. Survival
|
56
|
|
SECTION
9.06. Counterparts; Integration; Effectiveness
|
56
|
|
SECTION
9.07. Severability
|
56
|
|
SECTION
9.08. Right of Setoff
|
56
|
|
SECTION
9.09. Governing Law; Jurisdiction; Consent to Service of
Process
|
56
|
|
SECTION
9.10. WAIVER OF JURY TRIAL
|
58
|
|
SECTION
9.11. Headings
|
58
|
|
SECTION
9.12. Confidentiality
|
58
|
|
SECTION
9.13. USA PATRIOT Act
|
59
|
|
ARTICLE
X Company Guarantee
|
59
|
ii
Table of
Contents
(continued)
|
Page
|
||||
|
SCHEDULES:
|
||||
|
Schedule
2.01
|
—
Commitments
|
|||
|
Schedule
2.02
|
—
Mandatory Cost
|
|||
|
Schedule
6.01
|
—
Existing Liens
|
|||
|
Schedule
6.04
|
—
Existing Debt
|
|||
|
EXHIBITS:
|
||||
|
Exhibit
A
|
—
|
Form
of Assignment and Assumption
|
||
|
Exhibit
B
|
—
|
Form
of Opinion of Borrowers’ Counsel
|
||
|
Exhibit
C
|
—
|
Form
of Increasing Lender Supplement
|
||
|
Exhibit
D
|
—
|
Form
of Augmenting Lender Supplement
|
||
|
Exhibit
E
|
—
|
List
of Closing Documents
|
||
|
Exhibit
F-1
|
—
|
Form
of Borrowing Subsidiary Agreement
|
||
|
Exhibit
F-2
|
—
|
Form
of Borrowing Subsidiary Termination
|
||
iii
CREDIT
AGREEMENT (this “Agreement”) dated as
of May 7, 2010 among DENTSPLY INTERNATIONAL INC., the SUBSIDIARY BORROWERS from
time to time party hereto, the LENDERS from time to time party hereto, JPMORGAN
CHASE BANK, N.A., as Administrative Agent, WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Syndication Agent, and CITIBANK, N.A., BANK OF TOKYO-MITSUBISHI
UFJ TRUST COMPANY and COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as
Co-Documentation Agents.
The
parties hereto agree as follows:
ARTICLE
I
Definitions
SECTION 1.01. Defined
Terms. As used in this Agreement, the following terms have the
meanings specified below:
“ABR”, when used in
reference to any Loan or Borrowing, refers to a Loan, or the Loans comprising
such Borrowing, bearing interest at a rate determined by reference to the
Alternate Base Rate.
“Adjusted LIBO Rate”
means, with respect to any Eurocurrency Borrowing for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the sum of (i) (a) the LIBO Rate for such Interest Period multiplied by
(b) the Statutory Reserve Rate plus, without
duplication and (ii) in the case of Loans by a Lender from its office or branch
in the United Kingdom, the Mandatory Cost.
“Administrative Agent”
means JPMorgan Chase Bank, N.A. (including its branches and affiliates), in its
capacity as administrative agent for the Lenders hereunder.
“Administrative
Questionnaire” means an Administrative Questionnaire in a form supplied
by the Administrative Agent.
“Affiliate” means,
with respect to a specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.
“Aggregate Commitment”
means the aggregate of the Commitments of all of the Lenders, as reduced or
increased from time to time pursuant to the terms and conditions
hereof. As of the Effective Date, the Aggregate Commitment is
$200,000,000.
“Agreed Currencies”
means (i) Dollars, (ii) euro, (iii) Swiss Francs, (iv) Japanese Yen and (v) any
other Foreign Currency agreed to by the Administrative Agent and each of the
Lenders.
“Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Federal Funds Effective Rate in effect
on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%, provided that, for
the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the
rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute
page of such page) at approximately 11:00 a.m. London time on such
day. Any change in the Alternate Base Rate due to a change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate,
respectively.
“Applicable
Percentage” means, with respect to any Lender, the percentage of the
Aggregate Commitment represented by such Lender’s Commitment; provided that, in the
case of Section 2.24 when a Defaulting Lender shall exist, “Applicable
Percentage” shall mean the percentage of the Aggregate Commitment (disregarding
any Defaulting Lender’s Commitment) represented by such Lender's
Commitment. If the Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Commitments most
recently in effect, giving effect to any assignments and to any Lender’s status
as a Defaulting Lender at the time of determination.
“Applicable Rate”
means, for any day, with respect to any Eurocurrency Revolving Loan or any ABR
Revolving Loan or with respect to the facility fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“Eurocurrency Spread”, “ABR Spread” or “Facility Fee Rate”, as the case may be,
based upon the Index Debt Rating applicable on such date:
|
Index Debt Ratings
(Moody’s/S&P):
|
Eurocurrency
Spread
|
ABR
Spread
|
Facility
Fee Rate
|
||||||||||||
|
Category 1:
|
A2/A
or higher
|
1.05 | % | 0.05 | % | 0.20 | % | ||||||||
|
Category 2:
|
A3/A-
|
1.25 | % | 0.25 | % | 0.25 | % | ||||||||
|
Category 3:
|
Baa1/BBB+
|
1.45 | % | 0.45 | % | 0.30 | % | ||||||||
|
Category 4:
|
Baa2/BBB
|
1.65 | % | 0.65 | % | 0.35 | % | ||||||||
|
Category 5:
|
Baa3/BBB-
|
1.85 | % | 0.85 | % | 0.40 | % | ||||||||
|
Category 6:
|
Ba1/BB+
or lower
|
2.25 | % | 1.25 | % | 0.50 | % | ||||||||
For
purposes of the foregoing, (i) if either Moody’s or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in Category 6; (ii) if the ratings
established or deemed to have been established by Moody’s and S&P for the
Index Debt shall fall within different Categories, the Applicable Rate shall be
based on the higher of the two ratings unless one of the two ratings is two or
more Categories lower than the other, in which case the Applicable Rate shall be
determined by reference to the Category next below that of the higher of the two
ratings; and (iii) if the ratings established or deemed to have been established
by Moody’s and S&P for the Index Debt shall be changed (other than as a
result of a change in the rating system of Moody’s or S&P), such change
shall be effective as of the date on which it is first announced by the
applicable rating agency, irrespective of when notice of such change shall have
been furnished by the Company to the Administrative Agent and the Lenders
pursuant to Section 5.09 or otherwise. Each change in the Applicable
Rate 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 Moody’s or S&P shall
change, or if either such rating agency shall cease to be in the business of
rating corporate debt obligations, the Company and the Lenders 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 Applicable Rate shall be determined by
reference to the rating most recently in effect prior to such change or
cessation.
2
“Approved Fund” has
the meaning assigned to such term in Section 9.04.
“Assignment and
Assumption” means an assignment and assumption agreement entered into by
a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or
any other form approved by the Administrative Agent.
“Augmenting Lender”
has the meaning assigned to such term in Section 2.20.
“Availability Period”
means the period from and including the Effective Date to but excluding the
earlier of the Maturity Date and the date of termination of the
Commitments.
“Banking Services”
means each and any of the following bank services provided to the Company or any
Subsidiary by any Lender or any of its Affiliates: (a) credit cards for
commercial customers (including, without limitation, commercial credit cards and
purchasing cards), (b) stored value cards and (c) treasury management services
(including, without limitation, controlled disbursement, automated clearinghouse
transactions, return items, overdrafts and interstate depository network
services).
“Banking Services
Agreement” means any agreement entered into by the Company or any
Subsidiary in connection with Banking Services.
“Board” means the
Board of Governors of the Federal Reserve System of the United States of
America.
“Borrower” means the
Company or any Subsidiary Borrower.
“Borrowing” means (a)
Revolving Loans of the same Type, made, converted or continued on the same date
and, in the case of Eurocurrency Loans, as to which a single Interest Period is
in effect or (b) a Swingline Loan.
“Borrowing Request”
means a request by any Borrower for a Revolving Borrowing in accordance with
Section 2.03.
“Borrowing Subsidiary
Agreement” means a Borrowing Subsidiary Agreement substantially in the
form of Exhibit F-1.
“Borrowing Subsidiary
Termination” means a Borrowing Subsidiary Termination substantially in
the form of Exhibit F-2.
“Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks in
New York City are authorized or required by law to remain closed; provided that, when
used in connection with a Eurocurrency Loan, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in the relevant
Agreed Currency in the London interbank market or the principal financial center
of such Agreed Currency (and, if the Borrowings or LC Disbursements which are
the subject of a borrowing, drawing, payment, reimbursement or rate selection
are denominated in euro, the term “Business Day” shall also exclude any day on
which the TARGET payment system is not open for the settlement of payments in
euro).
3
“Change in Law” means
(a) the adoption of any law, rule or regulation after the date of this
Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 2.15(b), by any lending office of such Lender or by such
Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this
Agreement.
“Class”, when used in
reference to any Loan or Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are Revolving Loans or Swingline Loans.
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Co-Documentation
Agent” means each of Citibank, N.A., Bank of Tokyo-Mitsubishi UFJ Trust
Company and Commerzbank AG, New York and Grand Cayman Branches in its capacity
as co-documentation agent for the credit facility evidenced by this
Agreement.
“Commitment” means,
with respect to each Lender, the commitment of such Lender to make Revolving
Loans and to acquire participations in Letters of Credit and Swingline Loans
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced or terminated from time to time pursuant to Section 2.09, (b) increased
from time to time pursuant to Section 2.20 and (c) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of each Lender’s Commitment is set forth on
Schedule 2.01,
or in the Assignment and Assumption or other documentation contemplated hereby
pursuant to which such Lender shall have assumed its Commitment, as
applicable.
“Company” means
DENTSPLY International Inc., a Delaware corporation.
“Computation Date” is
defined in Section 2.04.
“Consignment
Agreements” means, collectively, (i) that certain Consignment Agreement
dated as of February 15, 2002 by and between OMG AG & Co. KG and the
Company, (ii) that certain Consignment Agreement dated as of December 15, 2005
by and between ABN Amro Bank N.V., Australian Branch and the Company, (iii) that
certain Consignment and Forward Contracts Agreement dated as of December 20,
2001 by and between The Bank of Nova Scotia and the Company, (iv) that certain
Consignment Agreement dated as of January 30, 2002 by and between Dresdner Bank
AG, Frankfurt and the Company, (v) that certain Consignment Agreement dated as
of December 20, 2001 by and between JPMorgan Chase Bank and the Company and (vi)
that certain Consignment Agreement dated as of December 20, 2001 by and between
Mitsui & Co., Precious Metals Inc. and the Company, in each case as each may
be amended, restated, supplemented or otherwise modified from time to
time.
“Consolidated” refers
to the consolidation of accounts in accordance with GAAP.
“Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled” have meanings correlative thereto.
“Credit Event” means a
Borrowing, the issuance of a Letter of Credit, an LC Disbursement or any of the
foregoing.
4
“Debt” of any Person
means, without duplication, (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person for the deferred
purchase price of property or services (other than trade payables not overdue by
more than 60 days incurred in the ordinary course of such Person’s
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations
of such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit, (g) all obligations of such Person in respect
of Swap Agreements, (h) all Debt of others referred to in clauses (a)
through (g) above or clause (i) below and other payment obligations
(collectively, “Guaranteed Debt”)
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement
(1) to pay or purchase such Guaranteed Debt or to advance or supply funds
for the payment or purchase of such Guaranteed Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Guaranteed Debt or to assure the holder of such Guaranteed Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective of whether
such property is received or such services are rendered) or (4) otherwise
to assure a creditor against loss, and (i) all Debt referred to in
clauses (a) through (h) above (including Guaranteed Debt) secured by (or
for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Debt.
“Debt for Borrowed
Money” of any Person means all items that, in accordance with GAAP, would
be classified as indebtedness on a Consolidated balance sheet of such Person,
provided that Debt for Borrowed Money of the Company and its Subsidiaries shall
not include Debt incurred in connection with the Consignment Agreements relating
to the consignment of precious metals between the Company and certain
counterparties.
“Default” means any
Event of Default or any event that would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
“Defaulting Lender”
means any Lender, as determined by the Administrative Agent, that has (a) failed
to fund any portion of its Loans or participations in Letters of Credit or
Swingline Loans within three (3) Business Days of the date required to be funded
by it hereunder, (b) notified the Company, the Administrative Agent, the Issuing
Bank, the Swingline Lender or any Lender in writing that it does not intend to
comply with any of its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under other agreements in which it
commits to extend credit, (c) failed, within three (3) Business Days after
request by the Administrative Agent, to confirm that it will comply with the
terms of this Agreement relating to its obligations to fund prospective Loans
and participations in then outstanding Letters of Credit and Swingline Loans,
(d) otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within three (3) Business
Days of the date when due, unless the subject of a good faith dispute, or (e)
(i) become or is insolvent or has a parent company that has become or is
insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding,
or has had a receiver, conservator, trustee, administrator, assignee for the
benefit of creditors or similar Person charged with reorganization or
liquidation of its business or custodian, appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or custodian appointed for it, or has taken any action in furtherance
of, or indicating its consent to, approval of or acquiescence in any such
proceeding or appointment.
5
“Dollar Amount” of any
currency at any date shall mean (i) the amount of such currency if such currency
is Dollars or (ii) the equivalent in such currency of Dollars if such currency
is a Foreign Currency, calculated on the basis of the Exchange Rate for such
currency, on or as of the most recent Computation Date provided for in Section
2.04.
“Dollars” or “$” refers to lawful
money of the United States of America.
“Domestic Subsidiary”
means a Subsidiary organized under the laws of a jurisdiction located in the
United States of America.
“Domestic Subsidiary
Borrower” means any Eligible Domestic Subsidiary that becomes a Domestic
Subsidiary Borrower pursuant to Section 2.23 and that has not ceased to be a
Domestic Subsidiary Borrower pursuant to such Section.
“EBITDA” means, for
any period, net income (or net loss) plus the sum of (a) interest expense,
(b) income tax expense, (c) depreciation expense and
(d) amortization expense, in each case determined in accordance with GAAP
for such period.
“Effective Date” means
the date on which the conditions specified in Section 4.01 are satisfied (or
waived in accordance with Section 9.02).
“Eligible Domestic
Subsidiary” means any direct or indirect wholly-owned Domestic Subsidiary
that is approved from time to time by the Administrative Agent.
“Eligible Foreign
Subsidiary” means any direct or indirect wholly-owned Foreign Subsidiary
that is approved from time to time by the Administrative Agent.
“Environmental Action”
means any action, suit, demand, demand letter, claim, notice of non-compliance
or violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages and (b) by any governmental or regulatory authority or any third
party for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
“Environmental Law”
means any federal, state, local or foreign statute, law, ordinance, rule,
regulation, code, order, judgment, decree or judicial or agency interpretation,
policy or guidance relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of the Company or any Subsidiary directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
6
“Environmental Permit”
means any permit, approval, identification number, license or other
authorization required under any Environmental Law.
“Equivalent Amount” of
any currency with respect to any amount of Dollars at any date shall mean the
equivalent in such currency of such amount of Dollars, calculated on the basis
of the Exchange Rate for such other currency at 11:00 a.m., London time, on the
date on or as of which such amount is to be determined.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated and rulings issued thereunder.
“ERISA Affiliate”
means any Person that for purposes of Title IV of ERISA is a member of the
Company’s controlled group, or under common control with the Company, within the
meaning of Section 414 of the Code.
“ERISA Event” means
(a) (i) the occurrence of a reportable event, within the meaning of
Section 4043 of ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by the PBGC, or
(ii) the requirements of subsection (1) of Section 4043(b) of
ERISA (without regard to subsection (2) of such Section) are met with
respect to a contributing sponsor, as defined in Section 4001(a)(13) of
ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12)
or (13) of Section 4043(c) of ERISA is reasonably expected to occur with
respect to such Plan within the following 30 days; (b) the application
for a minimum funding waiver with respect to a Plan; (c) the provision by
the administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA);
(d) the cessation of operations at a facility of the Company or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Company or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (f) the conditions for the
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, a
Plan.
“EU” means the
European Union.
“euro” and/or “EUR” means the single
currency of the participating member states of the EU.
“Eurocurrency”, when
used in reference to a currency means an Agreed Currency and when used in
reference to any Loan or Borrowing, means that such Loan, or the Loans
comprising such Borrowing, bears interest at a rate determined by reference to
the Adjusted LIBO Rate.
“Eurocurrency Payment
Office” of the Administrative Agent shall mean, for each Foreign
Currency, the office, branch, affiliate or correspondent bank of the
Administrative Agent for such currency as specified from time to time by the
Administrative Agent to the Company and each Lender.
“Event of Default” has
the meaning specified in Section 7.01.
7
“Exchange Rate” means,
on any day, with respect to any Foreign Currency, the rate at which such Foreign
Currency may be exchanged into Dollars, as set forth at approximately 11:00
a.m., Local Time, on such date on the Reuters World Currency Page for such
Foreign Currency. In the event that such rate does not appear
on any Reuters World Currency Page, the Exchange Rate with respect to such
Foreign Currency shall be determined by reference to such other publicly
available service for displaying exchange rates as may be reasonably selected by
the Administrative Agent or, in the event no such service is selected, such
Exchange Rate shall instead be calculated on the basis of the arithmetical mean
of the buy and sell spot rates of exchange of the Administrative Agent for such
Foreign Currency on the London market at 11:00 a.m., Local Time, on such date
for the purchase of Dollars with such Foreign Currency, for delivery two
Business Days later; provided, that if at
the time of any such determination, for any reason, no such spot rate is being
quoted, the Administrative Agent, after consultation with the Company, may use
any reasonable method it deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.
“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, the Issuing Bank or
any other recipient of any payment to be made by or on account of any obligation
of the Company hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Company is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Company under
Section 2.19(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.17(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Company with respect to such withholding tax pursuant to Section
2.17(a).
“Existing Credit
Agreement” means the Credit Agreement, dated May 9, 2005, among the
Company, the lenders party thereto and Citibank, N.A., as administrative agent,
as amended, restated, supplemented or otherwise modified prior to the Effective
Date.
“Federal Funds Effective
Rate” means, for any day, the weighted average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next 1/100
of 1%) of the quotations for such day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
“Financial Officer”
means the chief financial officer, principal accounting officer, treasurer or
controller of the Company.
“Foreign Currencies”
means Agreed Currencies other than Dollars.
“Foreign Currency LC
Exposure” means, at any time, the sum of (a) the Dollar Amount of the
aggregate undrawn and unexpired amount of all outstanding Foreign Currency
Letters of Credit at such time plus (b) the aggregate principal Dollar Amount of
all LC Disbursements in respect of Foreign Currency Letters of Credit that have
not yet been reimbursed at such time.
“Foreign Currency Letter of
Credit” means a Letter of Credit denominated in a Foreign
Currency.
8
“Foreign Lender” means
any Lender that is organized under the laws of a jurisdiction other than that in
which the Company is located. For purposes of this definition, the
United States of America, each State thereof and the District of Columbia shall
be deemed to constitute a single jurisdiction.
“Foreign Subsidiary”
means any Subsidiary which is not a Domestic Subsidiary.
“Foreign Subsidiary
Borrower” means any Eligible Foreign Subsidiary that becomes a Foreign
Subsidiary Borrower pursuant to Section 2.23 and that has not ceased to be a
Foreign Subsidiary Borrower pursuant to such Section.
“GAAP” has the meaning
specified in Section 1.04.
“Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
“Hazardous Materials”
means (a) petroleum and petroleum products, byproducts or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated
biphenyls and radon gas and (b) any other chemicals, materials or
substances designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.
“Increasing Lender”
has the meaning assigned to such term in Section 2.20.
“Incremental Term
Loan” has the meaning assigned to such term in Section 2.20.
“Incremental Term Loan
Amendment” has the meaning assigned to such term in Section
2.20.
“Indemnified Taxes”
means Taxes other than Excluded Taxes.
“Index Debt” means
senior, unsecured, long-term indebtedness for borrowed money of the Company that
is not guaranteed by any other Person or subject to any other credit
enhancement.
“Information
Memorandum” means the Confidential Information Memorandum dated April
2010 relating to the Company and the Transactions.
“Interest Election
Request” means a request by the applicable Borrower to convert or
continue a Revolving Borrowing in accordance with Section 2.08.
“Interest Payment
Date” means (a) with respect to any ABR Loan (other than a Swingline
Loan), the last day of each March, June, September and December and the Maturity
Date, (b) with respect to any Eurocurrency Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurocurrency Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
and the Maturity Date and (c) with respect to any Swingline Loan, the day that
such Loan is required to be repaid and the Maturity Date.
9
“Interest Period”
means with respect to any Eurocurrency Borrowing, the period commencing on the
date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the
applicable Borrower (or the Company on behalf of the applicable Borrower) may
elect; provided, that (i) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurocurrency Borrowing only, such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurocurrency Borrowing that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be
the effective date of the most recent conversion or continuation of such
Borrowing.
“Issuing Bank” means
JPMorgan Chase Bank, N.A., in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section
2.06(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
“Japanese Yen” means
the lawful currency of Japan.
“LC Collateral
Account” has the meaning assigned to such term in Section
2.06(j).
“LC Disbursement”
means a payment made by the Issuing Bank pursuant to a Letter of
Credit.
“LC Exposure” means,
at any time, the sum of (a) the aggregate undrawn Dollar Amount of all
outstanding Letters of Credit at such time plus (b) the aggregate Dollar Amount
of all LC Disbursements that have not yet been reimbursed by or on behalf of the
Company at such time. The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the total LC Exposure at such time.
“Lenders” means the
Persons listed on Schedule 2.01 and any
other Person that shall have become a Lender hereunder pursuant to Section 2.20
or pursuant to an Assignment and Assumption, other than any such Person that
ceases to be a party hereto pursuant to an Assignment and
Assumption. Unless the context otherwise requires, the term “Lenders”
includes the Swingline Lender.
“Letter of Credit”
means any letter of credit issued pursuant to this Agreement.
“LIBO Rate” means,
with respect to any Eurocurrency Borrowing for any Interest Period, the rate
appearing on, in the case of Dollars, Reuters Screen LIBOR01 Page and, in the
case of any Foreign Currency, the appropriate page of such service which
displays British Bankers Association Interest Settlement Rates for deposits in
such Foreign Currency (or, in each case, on any successor or substitute page of
such service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of such service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to deposits in the relevant
Agreed Currency in the London interbank market) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to (or, in the case of Loans
denominated in Pounds Sterling, on the day of) the commencement of such Interest
Period, as the rate for deposits in the relevant Agreed Currency with a maturity
comparable to such Interest Period. In the event that such rate is
not available at such time for any reason, then the “LIBO Rate” with
respect to such Eurocurrency Borrowing for such Interest Period shall be the
rate at which deposits in the relevant Agreed Currency in an Equivalent Amount
of $5,000,000 and for a maturity comparable to such Interest Period are offered
by the principal London office of the Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00 a.m.,
London time, two (2) Business Days prior to (or, in the case of Loans
denominated in Pounds Sterling, on the day of) the commencement of such Interest
Period.
10
“Lien” means any lien,
security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property.
“Loan Documents” means
this Agreement, each Borrowing Subsidiary Agreement, each Borrowing Subsidiary
Termination, any Notes, any Letter of Credit applications and any and all other
agreements, instruments, documents and certificates identified in Section 4.01
executed and delivered to, or in favor of, the Administrative Agent or any
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, letter of credit agreements and all other
written matter whether heretofore, now or hereafter executed by or on behalf of
any Borrower, or any employee of any Borrower, and delivered to the
Administrative Agent or any Lender in connection with the Agreement or the
transactions contemplated thereby. Any reference in the Agreement or
any other Loan Document to a Loan Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supplements or
other modifications thereto, and shall refer to the Agreement or such Loan
Document as the same may be in effect at any and all times such reference
becomes operative.
“Loans” means the
loans made by the Lenders to the Borrowers pursuant to this
Agreement.
“Local Time” means (i)
New York City time in the case of a Loan, Borrowing or LC Disbursement
denominated in Dollars and (ii) local time in the case of a Loan, Borrowing or
LC Disbursement denominated in a Foreign Currency (it being understood that such
local time shall mean London, England time unless otherwise notified by the
Administrative Agent).
“Mandatory Cost” is
described in Schedule
2.02.
“Material Adverse
Change” means any material adverse change in the business, financial
condition or operations of the Company or the Company and its Subsidiaries taken
as a whole.
“Material Adverse
Effect” means a material adverse effect on (a) the business, financial
condition or operations of the Company and the Subsidiaries taken as a whole or
(b) the validity or enforceability of this Agreement or any and all other Loan
Documents or the rights or remedies of the Administrative Agent and the Lenders
thereunder.
“Maturity Date” means
May 7, 2013.
“Moody’s” means
Moody’s Investors Service, Inc.
“Multiemployer Plan”
means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Company or any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
“Multiple Employer
Plan” means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Company or any ERISA Affiliate and at least one Person other than the
Company and the ERISA Affiliates or (b) was so maintained and in respect of
which the Company or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
11
“Note” means a
promissory note of a Borrower payable to the order of any Lender, delivered
pursuant to a request made under Section 2.10(e), evidencing the aggregate
indebtedness of such Borrower to such Lender resulting from the Loans made by
such Lender.
“Obligations” means
all unpaid principal of and accrued and unpaid interest on the Loans, all LC
Exposure, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations and indebtedness (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding),
obligations and liabilities of any of the Company and its Subsidiaries to any of
the Lenders, the Administrative Agent, the Issuing Bank or any indemnified
party, individually or collectively, existing on the Effective Date or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any of the other Loan Documents or to the Lenders or any of their
Affiliates under any Swap Agreement or any Banking Services Agreement or in
respect of any of the Loans made or reimbursement or other obligations incurred
or any of the Letters of Credit or other instruments at any time evidencing any
thereof.
“Other Taxes” means
any and all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.
“Overnight Foreign Currency
Rate” means, for any amount payable in a Foreign Currency, the rate of
interest per annum as determined by the Administrative Agent at which overnight
or weekend deposits in the relevant currency (or if such amount due remains
unpaid for more than three (3) Business Days, then for such other period of time
as the Administrative Agent may elect) for delivery in immediately available and
freely transferable funds would be offered by the Administrative Agent to major
banks in the interbank market upon request of such major banks for the relevant
currency as determined above and in an amount comparable to the unpaid principal
amount of the related Credit Event, plus any taxes, levies, imposts, duties,
deductions, charges or withholdings imposed upon, or charged to, the
Administrative Agent by any relevant correspondent bank in respect of such
amount in such relevant currency.
“Participant” has the
meaning set forth in Section 9.04.
“Patriot Act” means
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law
October 26, 2001, as amended.
“PBGC” means the
Pension Benefit Guaranty Corporation (or any successor).
“Permitted Liens”
means such of the following as to which no enforcement, collection, execution,
levy or foreclosure proceeding shall have been
commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section 5.02
hereof; (b) Liens imposed by law, such as materialmen’s, mechanics’,
carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in
the ordinary course of business securing obligations that are not overdue for a
period of more than 30 days; (c) pledges or deposits to secure
obligations under workers’ compensation laws or similar legislation or to secure
public or statutory obligations; and (d) easements, rights of way and other
encumbrances on title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect the use of such
property for its present purposes.
12
“Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other
entity.
“Plan” means a Single
Employer Plan or a Multiple Employer Plan.
“Pounds Sterling”
means the lawful currency of the United Kingdom.
“Prime Rate” means the
rate of interest per annum publicly announced from time to time by JPMorgan
Chase Bank, N.A. as its prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective from and including the
date such change is publicly announced as being effective.
“Pro Forma Basis”
means, with respect to any event, that the Company is in compliance on a pro forma basis with the
applicable covenant, calculation or requirement herein recomputed as if the
event with respect to which compliance on a Pro Forma Basis is being tested had
occurred on the first day of the four fiscal quarter period most recently ended
on or prior to such date for which financial statements have been delivered
pursuant to Section 5.09.
“Register” has the
meaning set forth in Section 9.04.
“Related Parties”
means, with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.
“Required Lenders”
means, at any time, Lenders having Revolving Credit Exposures and unused
Commitments representing more than 50% of the sum of the total Revolving Credit
Exposures and unused Commitments at such time.
“Revolving Credit
Exposure” means, with respect to any Lender at any time, the sum of the
outstanding principal amount of such Lender’s Revolving Loans and its LC
Exposure and Swingline Exposure at such time.
“Revolving Loan” means
a Loan made pursuant to Section 2.01.
“S&P” means
Standard & Poor’s.
“SEC” means the United
States Securities and Exchange Commission.
“Single Employer Plan”
means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Company or any ERISA Affiliate
and no Person other than the Company and the ERISA Affiliates or (b) was so
maintained and in respect of which the Company or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
13
“Solvent” and “Solvency” mean, with
respect to any Person on a particular date, that on such date (a) the fair
value of the property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as
they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small
capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
“Statutory Reserve
Rate” means, with respect to any currency, a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve, liquid asset, fees
or similar requirements (including any marginal, special, emergency or
supplemental reserves or other requirements) established by any central bank,
monetary authority, the Board, the Financial Services Authority, the European
Central Bank or other Governmental Authority for any category of deposits or
liabilities customarily used to fund loans in such currency, expressed in the
case of each such requirement as a decimal. Such reserve, liquid
asset, fees or similar requirements shall, in the case of Dollar denominated
Loans, include those imposed pursuant to Regulation D of the
Board. Eurocurrency Loans shall be deemed to be subject to such
reserve, liquid asset, fee or similar requirements without benefit of or credit
for proration, exemptions or offsets that may be available from time to time to
any Lender under any applicable law, rule or regulation, including
Regulation D of the Board. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve, liquid asset or similar requirement.
“Subordinated
Indebtedness” means any Debt of the Company or any Subsidiary the payment
of which is subordinated to payment of the obligations under the Loan
Documents.
“subsidiary” of any
Person means any corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of (a) the issued
and outstanding capital stock having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such limited liability company,
partnership or joint venture or (c) the beneficial interest in such trust
or estate is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or
more of such Person’s other subsidiaries.
“Subsidiary” means any
subsidiary of the Company.
“Subsidiary Borrower”
means any Domestic Subsidiary Borrower or any Foreign Subsidiary
Borrower.
“Swap Agreement” means
any agreement with respect to any swap, forward, future or derivative
transaction or option or similar agreement involving, or settled by reference
to, one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no
phantom stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Company or the Subsidiaries shall be a Swap Agreement.
14
“Swingline Exposure”
means, at any time, the aggregate principal amount of all Swingline Loans
outstanding at such time. The Swingline Exposure of any Lender at any
time shall be its Applicable Percentage of the total Swingline
Exposure at such time.
“Swingline Lender”
means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans
hereunder.
“Swingline Loan” means
a Loan made pursuant to Section 2.05.
“Swiss Francs” means
the lawful currency of Switzerland.
“Syndication Agent”
means Wells Fargo Bank, National Association in its capacity as syndication
agent for the credit facility evidenced by this Agreement.
“TARGET” means the
Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET)
payment system (or, if such payment system ceases to be operative, such other
payment system (if any) reasonably determined by the Administrative Agent
to be a suitable replacement) for the settlement of payments in
euro.
“Taxes” means any and
all present or future taxes, levies, imposts, duties, deductions, charges or
withholdings imposed by any Governmental Authority.
“Transactions” means
the execution, delivery and performance by the Borrowers of this Agreement and
the other Loan Documents, the borrowing of Loans and other credit extensions,
the use of the proceeds thereof and the issuance of Letters of Credit
hereunder.
“Type”, when used in
reference to any Loan or Borrowing, refers to whether the rate of interest on
such Loan, or on the Loans comprising such Borrowing, is determined by reference
to the Adjusted LIBO Rate or the Alternate Base Rate.
“Voting Stock” means
capital stock issued by a corporation, or equivalent interests in any other
Person, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended by
the happening of such a contingency.
“Withdrawal Liability”
means liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification
of Loans and Borrowings. For purposes of this Agreement, Loans
may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurocurrency
Loan”) or by Class and Type (e.g., a “Eurocurrency
Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g.,
a “Revolving Borrowing”) or by Type (e.g., a “Eurocurrency
Borrowing”) or by Class and Type (e.g., a “Eurocurrency
Revolving Borrowing”).
15
SECTION 1.03. Terms
Generally. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. The word “law” shall be
construed as referring to all statutes, rules, regulations, codes and other laws
(including official rulings and interpretations thereunder having the force of
law or with which affected Persons customarily comply), and all judgments,
orders and decrees, of all Governmental Authorities. Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended, restated,
supplemented or otherwise modified (subject to any restrictions on such
amendments, restatements, supplements or modifications set forth herein), (b)
any definition of or reference to any statute, rule or regulation shall be
construed as referring thereto as from time to time amended, supplemented or
otherwise modified (including by succession of comparable successor laws), (c)
any reference herein to any Person shall be construed to include such Person’s
successors and assigns (subject to any restrictions on assignment set forth
herein) and, in the case of any Governmental Authority, any other Governmental
Authority that shall have succeeded to any or all functions thereof, (d) the
words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (e) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (f) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.04. Accounting
Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with generally accepted accounting principles consistent with those applied in
the preparation of the financial statements referred to in Section 3.01(e)
(“GAAP”); provided that, if the
Company notifies the Administrative Agent that the Company requests an amendment
to any provision hereof to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Company that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith. Notwithstanding
any other provision contained herein, all terms of an accounting or financial
nature used herein shall be construed, and all computations of amounts and
ratios referred to herein shall be made, without giving effect to any election
under Accounting Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other Accounting
Standards Codification or Financial Accounting Standard having a similar result
or effect) to value any Debt or other liabilities of the Company or any
Subsidiary at “fair value”, as defined therein.
SECTION 1.05. Status of
Obligations. In the event that the Company or any other
Borrower shall at any time issue or have outstanding any other Subordinated
Indebtedness, the Company shall take or cause such other Borrower to take all
such actions as shall be necessary to cause the Obligations to constitute senior
indebtedness (however denominated) in respect of such Subordinated Indebtedness
and to enable the Administrative Agent and the Lenders to have and exercise any
payment blockage or other remedies available or potentially available to holders
of senior indebtedness under the terms of such Subordinated
Indebtedness. Without limiting the foregoing, the Obligations are
hereby designated as “senior indebtedness” and as “designated senior
indebtedness” and words of similar import under and in respect of any indenture
or other agreement or instrument under which such other Subordinated
Indebtedness is outstanding and are further given all such other designations as
shall be required under the terms of any such Subordinated Indebtedness in order
that the Lenders may have and exercise any payment blockage or other remedies
available or potentially available to holders of senior indebtedness under the
terms of such Subordinated Indebtedness.
16
ARTICLE
II
The
Credits
SECTION 2.01. Commitments. Subject
to the terms and conditions set forth herein, each Lender agrees to make
Revolving Loans to the Borrowers in Agreed Currencies from time to time during
the Availability Period in an aggregate principal amount that will not result in
(a) subject to Sections 2.04 and 2.11(b), the Dollar Amount of such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) subject to
Sections 2.04 and 2.11(b), the sum of the Dollar Amount of the total Revolving
Credit Exposures exceeding the Aggregate Commitment. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrowers may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and
Borrowings. (a) Each Revolving Loan (other than a
Swingline Loan) shall be made as part of a Borrowing consisting of Revolving
Loans made by the Lenders ratably in accordance with their respective
Commitments. The failure of any Lender to make any Loan required to
be made by it shall not relieve any other Lender of its obligations hereunder;
provided that
the Commitments of the Lenders are several and no Lender shall be responsible
for any other Lender’s failure to make Loans as required. Any
Swingline Loan shall be made in accordance with the procedures set forth in
Section 2.05.
(b) Subject
to Section 2.14, each Revolving Borrowing shall be comprised entirely of ABR
Loans or Eurocurrency Loans as the relevant Borrower may request in accordance
herewith; provided that each
ABR Loan shall only be made in Dollars and shall only be made to the
Company. Each Swingline Loan shall be an ABR Loan. Each
Lender at its option may make any Eurocurrency Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan (and in the case of
an Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply
to such Affiliate to the same extent as to such Lender); provided that any
exercise of such option shall not affect the obligation of the relevant Borrower
to repay such Loan in accordance with the terms of this Agreement.
(c) At
the commencement of each Interest Period for any Eurocurrency Revolving
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 (or, if such Borrowing is denominated in (i) Japanese
Yen, JPY 100,000,000 or (ii) a Foreign Currency other than Japanese Yen,
1,000,000 units of such currency) and not less than $5,000,000 (or, if such
Borrowing is denominated in (i) Japanese Yen, JPY 500,000,000 or (ii) a Foreign
Currency other than Japanese Yen, 5,000,000 units of such
currency). At the time that each ABR Revolving Borrowing is made,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $5,000,000; provided that an ABR
Revolving Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the Aggregate Commitment or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section
2.06(e). Each Swingline Loan shall be in an amount that is an
integral multiple of $1,000,000 and not less than
$1,000,000. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there
shall not at any time be more than a total of ten (10) Eurocurrency Revolving
Borrowings outstanding.
(d) Notwithstanding
any other provision of this Agreement, no Borrower shall be entitled to request,
or to elect to convert or continue, any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity
Date.
17
SECTION 2.03. Requests
for Revolving Borrowings. To request a Revolving Borrowing,
the applicable Borrower, or the Company on behalf of the applicable Borrower,
shall notify the Administrative Agent of such request (a) by irrevocable written
notice (via a written Borrowing Request in a form approved by the Administrative
Agent and signed by the applicable Borrower, or the Company on behalf of the
applicable Borrower, promptly followed by telephonic confirmation of such
request) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m.,
Local Time, three (3) Business Days (in the case of a Eurocurrency Borrowing
denominated in Dollars to the Company) or by irrevocable written notice (via a
written Borrowing Request in a form approved by the Administrative Agent and
signed by such Borrower, or the Company on its behalf) not later than
four (4) Business Days (in the case of a Eurocurrency Borrowing denominated in a
Foreign Currency or a Eurocurrency Borrowing to a Foreign Subsidiary Borrower),
in each case before the date of the proposed Borrowing or (b) by telephone in
the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one
(1) Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.06(e) may be given not later than
10:00 a.m., New York City time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the applicable Borrower, or the Company on
behalf of the applicable Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:
(i) the
aggregate amount of the requested Borrowing;
(ii) the
date of such Borrowing, which shall be a Business Day;
(iii) whether
such Borrowing is to be an ABR Borrowing or a Eurocurrency
Borrowing;
(iv) in
the case of a Eurocurrency Borrowing, the Agreed Currency and initial Interest
Period to be applicable thereto, which shall be a period contemplated by the
definition of the term “Interest Period”; and
(v) the
location and number of the applicable Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section
2.07.
If no
election as to the Type of Revolving Borrowing is specified, then, in the case
of a Borrowing denominated in Dollars to the Company, the requested Revolving
Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurocurrency Revolving Borrowing, then
the relevant Borrower shall be deemed to have selected an Interest Period of one
month’s duration. Promptly following receipt of a Borrowing Request
in accordance with this Section, the Administrative Agent shall advise each
Lender of the details thereof and of the amount of such Lender’s Loan to be made
as part of the requested Borrowing.
SECTION 2.04. Determination
of Dollar Amounts. The Administrative Agent will determine the
Dollar Amount of:
(a) each
Eurocurrency Borrowing as of the date two (2) Business Days prior to the date of
such Borrowing or, if applicable, the date of conversion/continuation of any
Borrowing as a Eurocurrency Borrowing,
(b) the
LC Exposure as of the date of each request for the issuance, amendment, renewal
or extension of any Letter of Credit, and
18
(c) all
outstanding Credit Events on and as of the last Business Day of each calendar
quarter and, during the continuation of an Event of Default, on any other
Business Day elected by the Administrative Agent in its discretion or upon
instruction by the Required Lenders.
Each day
upon or as of which the Administrative Agent determines Dollar Amounts as
described in the preceding clauses (a), (b) and (c) is herein described as a
“Computation Date” with respect to each Credit Event for which a Dollar Amount
is determined on or as of such day.
SECTION 2.05. Swingline
Loans. (a) Subject to the terms and conditions set
forth herein, the Swingline Lender agrees to make Swingline Loans in Dollars to
the Company from time to time during the Availability Period, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000
or (ii) the Dollar Amount of the total Revolving Credit Exposures exceeding the
Aggregate Commitment; provided that the
Swingline Lender shall not be required to make a Swingline Loan to refinance an
outstanding Swingline Loan. Within the foregoing limits and subject
to the terms and conditions set forth herein, the Company may borrow, prepay and
reborrow Swingline Loans.
(b) To
request a Swingline Loan, the Company shall notify the Administrative Agent of
such request by telephone (confirmed by telecopy), not later than 12:00 noon,
New York City time, on the day of a proposed Swingline Loan. Each
such notice shall be irrevocable and shall specify the requested date (which
shall be a Business Day) and amount of the requested Swingline
Loan. The Administrative Agent will promptly advise the Swingline
Lender of any such notice received from the Company. The Swingline
Lender shall make each Swingline Loan available to the Company by means of a
credit to the general deposit account of the Company with the Swingline Lender
(or, in the case of a Swingline Loan made to finance the reimbursement of an LC
Disbursement as provided in Section 2.06(e), by remittance to the Issuing Bank)
by 3:00 p.m., New York City time, on the requested date of such Swingline
Loan.
(c) The
Swingline Lender may by written notice given to the Administrative Agent not
later than 10:00 a.m., New York City time, on any Business Day require the
Lenders to acquire participations on such Business Day in all or a portion of
the Swingline Loans outstanding. Such notice shall specify the
aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative
Agent will give notice thereof to each Lender, specifying in such
notice such Lender’s Applicable Percentage of such Swingline Loan or
Loans. Each Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the
account of the Swingline Lender, such Lender’s Applicable Percentage of such
Swingline Loan or Loans. Each Lender acknowledges and agrees that its
obligation to acquire participations in Swingline Loans pursuant to this
paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and Section
2.07 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Swingline Lender the amounts so received by it from the
Lenders. The Administrative Agent shall notify the Company of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts
received by the Swingline Lender from the Company (or other party on behalf of
the Company) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear; provided that any
such payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Company for any reason. The purchase
of participations in a Swingline Loan pursuant to this paragraph shall not
relieve the Company of any default in the payment thereof.
19
SECTION 2.06. Letters of
Credit. (a) General. Subject
to the terms and conditions set forth herein, the Company may request the
issuance of Letters of Credit denominated in Agreed Currencies for its own
account, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time during the Availability
Period. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Company to, or entered
into by the Company with, the Issuing Bank relating to any Letter of Credit, the
terms and conditions of this Agreement shall control.
(b) Notice of Issuance,
Amendment, Renewal, Extension; Certain Conditions. To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Company shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such Letter of Credit is to expire (which
shall comply with paragraph (c) of this Section), the amount of such Letter of
Credit, the Agreed Currency applicable thereto, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the Company also shall submit a letter of credit application on
the Issuing Bank’s standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Company shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i)
subject to Sections 2.04 and 2.11(b), the Dollar Amount of the LC Exposure shall
not exceed $50,000,000 and (ii) subject to Sections 2.04 and 2.11(b), the sum of
the Dollar Amount of the total Revolving Credit Exposures shall not exceed the
Aggregate Commitment.
(c) Expiration
Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five (5) Business Days prior to the Maturity Date.
(d) Participations. By
the issuance of a Letter of Credit (or an amendment to a Letter of Credit
increasing the amount thereof) and without any further action on the part of the
Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and
each Lender hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate
Dollar Amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement
made by the Issuing Bank and not reimbursed by the Company on the date due as
provided in paragraph (e) of this Section, or of any reimbursement payment
required to be refunded to the Company for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
20
(e) Reimbursement. If
the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Company shall reimburse such LC Disbursement by paying to the
Administrative Agent in Dollars the Dollar Amount equal to such LC Disbursement,
calculated as of the date the Issuing Bank made such LC Disbursement (or if the
Issuing Bank shall so elect in its sole discretion by notice to the Company, in
such other Agreed Currency which was paid by the Issuing Bank pursuant to such
LC Disbursement in an amount equal to such LC Disbursement) not later than 12:00
noon, Local Time, on the date that such LC Disbursement is made, if the Company
shall have received notice of such LC Disbursement prior to 10:00 a.m., Local
Time, on such date, or, if such notice has not been received by the Company
prior to such time on such date, then not later than 12:00 noon, Local Time, on
the Business Day immediately following the day that the Company receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that,
if such LC Disbursement is not less than the Dollar Amount of $1,000,000, the
Company may, subject to the conditions to borrowing set forth herein, request in
accordance with Section 2.03 or 2.05 that such payment be financed with an ABR
Revolving Borrowing or Swingline Loan in an equivalent Dollar Amount of such LC
Disbursement and, to the extent so financed, the Company’s obligation to make
such payment shall be discharged and replaced by the resulting ABR Revolving
Borrowing or Swingline Loan. If the Company fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Company in respect
thereof and such Lender’s Applicable Percentage thereof. Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Company, in the
same manner as provided in Section 2.07 with respect to Loans made by such
Lender (and Section 2.07 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of
any payment from the Company pursuant to this paragraph, the Administrative
Agent shall distribute such payment to the Issuing Bank or, to the extent that
Lenders have made payments pursuant to this paragraph to reimburse the Issuing
Bank, then to such Lenders and the Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this paragraph to
reimburse the Issuing Bank for any LC Disbursement (other than the funding of
ABR Revolving Loans or a Swingline Loan as contemplated above) shall not
constitute a Loan and shall not relieve the Company of its obligation to
reimburse such LC Disbursement. If the Company’s reimbursement of, or
obligation to reimburse, any amounts in any Foreign Currency would subject the
Administrative Agent, the Issuing Bank or any Lender to any stamp duty, ad
valorem charge or similar tax that would not be payable if such reimbursement
were made or required to be made in Dollars, the Company shall, at its option,
either (x) pay the amount of any such tax requested by the Administrative
Agent, the Issuing Bank or the relevant Lender or (y) reimburse each LC
Disbursement made in such Foreign Currency in Dollars, in an amount equal to the
Equivalent Amount, calculated using the applicable exchange rates, on the date
such LC Disbursement is made, of such LC Disbursement.
21
(f) Obligations
Absolute. The Company’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Company’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor the
Issuing Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Issuing Bank; provided that the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Company to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Company to the
extent permitted by applicable law) suffered by the Company that are caused by
the Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of
gross negligence or willful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such determination. In
furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) Disbursement
Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Company by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Company of
its obligation to reimburse the Issuing Bank and the Lenders with respect to any
such LC Disbursement.
(h) Interim
Interest. If the Issuing Bank shall make any LC Disbursement,
then, unless the Company shall reimburse such LC Disbursement in full on the
date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that the Company reimburses such LC Disbursement, at
the rate per annum then applicable to ABR Revolving Loans (or in the case such
LC Disbursement is denominated in a Foreign Currency, at the Overnight Foreign
Currency Rate for such Agreed Currency plus the then
effective Applicable Rate with respect to Eurocurrency Revolving Loans); provided that, if the
Company fails to reimburse such LC Disbursement when due pursuant to paragraph
(e) of this Section, then Section 2.13(c) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such Lender to the extent of such payment.
(i) Replacement of the Issuing
Bank. The Issuing Bank may be replaced at any time by written
agreement among the Company, the Administrative Agent, the replaced Issuing Bank
and the successor Issuing Bank. The Administrative Agent shall notify
the Lenders of any such replacement of the Issuing Bank. At the time
any such replacement shall become effective, the Company shall pay all unpaid
fees accrued for the account of the replaced Issuing Bank pursuant to Section
2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After
the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of an Issuing Bank under this Agreement with respect to Letters of Credit then
outstanding and issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
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(j) Cash
Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Company receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Company shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders (the “LC
Collateral Account”), an amount in cash equal to 105% of the Dollar
Amount of the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that (i) the
portions of such amount attributable to undrawn Foreign Currency Letters of
Credit or LC Disbursements in a Foreign Currency that the Company is not late in
reimbursing shall be deposited in the applicable Foreign Currencies in the
actual amounts of such undrawn Letters of Credit and LC Disbursements and (ii)
the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Company described in Section 7.01(e). For the
purposes of this paragraph, the Foreign Currency LC Exposure shall be calculated
using the applicable Exchange Rate on the date notice demanding cash
collateralization is delivered to the Company. The Company also shall
deposit cash collateral pursuant to this paragraph as and to the extent required
by Section 2.11(b). Such deposit shall be held by the Administrative
Agent as collateral for the payment and performance of the
Obligations. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Company’s risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Company for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be
applied to satisfy other Obligations. If the Company is required to
provide an amount of cash collateral hereunder as a result of the occurrence of
an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Company within three (3) Business Days after all Events of
Default have been cured or waived.
SECTION 2.07. Funding of
Borrowings. (a) Each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds (i) in the case of Loans denominated in Dollars to
the Company, by 12:00 noon, New York City time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders and (ii) in the case of each Loan denominated in a Foreign
Currency or to a Foreign Subsidiary Borrower, by 12:00 noon, Local Time, in the
city of the Administrative Agent’s Eurocurrency Payment Office for such currency
and Borrower and at such Eurocurrency Payment Office for such currency and
Borrower; provided that
Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the relevant Borrower by
promptly crediting the amounts so received, in like funds, to (x) an account of
the Company maintained with the Administrative Agent in New York City or Chicago
and designated by the Company in the applicable Borrowing Request, in the case
of Loans denominated in Dollars to the Company and (y) an account of such
Borrower in the relevant jurisdiction and designated by such Borrower in the
applicable Borrowing Request, in the case of Loans denominated in a Foreign
Currency or to a Foreign Subsidiary Borrower; provided that ABR
Revolving Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.06(e) shall be remitted by the Administrative Agent to the
Issuing Bank.
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(b) Unless
the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance upon such
assumption, make available to the relevant Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of
the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and such Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to such
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation (including without limitation the
Overnight Foreign Currency Rate in the case of Loans denominated in a Foreign
Currency) or (ii) in the case of such Borrower, the interest rate applicable to
ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.
SECTION 2.08. Interest
Elections. (a) Each Revolving Borrowing initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurocurrency Revolving Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the
relevant Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurocurrency Revolving Borrowing,
may elect Interest Periods therefor, all as provided in this
Section. A Borrower may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing. This Section shall not apply to Swingline
Borrowings, which may not be converted or continued.
(b) To
make an election pursuant to this Section, a Borrower, or the Company on its
behalf, shall notify the Administrative Agent of such election (by telephone or
irrevocable written notice in the case of a Borrowing denominated in Dollars or
by irrevocable written notice (via an Interest Election Request in a form
approved by the Administrative Agent and signed by such Borrower, or the Company
on its behalf) in the case of a Borrowing denominated in a Foreign Currency by
the time that a Borrowing Request would be required under Section 2.03 if such
Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Interest Election Request in a form approved by the Administrative Agent and
signed by the relevant Borrower, or the Company on its
behalf. Notwithstanding any contrary provision herein, this Section
shall not be construed to permit any Borrower to (i) change the currency of
any Borrowing, (ii) elect an Interest Period for Eurocurrency Loans that
does not comply with Section 2.02(d) or (iii) convert any Borrowing to
a Borrowing of a Type not available under such Borrowing.
(c) Each
telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:
(i) the
Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);
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(ii) the
effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;
(iii) whether
the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
and
(iv) if
the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period and
Agreed Currency to be applicable thereto after giving effect to such election,
which Interest Period shall be a period contemplated by the definition of the
term “Interest Period”.
If any
such Interest Election Request requests a Eurocurrency Borrowing but does not
specify an Interest Period, then the applicable Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
(d) Promptly
following receipt of an Interest Election Request, the Administrative Agent
shall advise each Lender of the details thereof and of such Lender’s portion of
each resulting Borrowing.
(e) If
the relevant Borrower fails to deliver a timely Interest Election Request with
respect to a Eurocurrency Revolving Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period (i) in the case of a Borrowing
denominated in Dollars borrowed by the Company, such Borrowing shall be
converted to an ABR Borrowing and (ii) in the case of a Borrowing denominated in
a Foreign Currency (or in Dollars by a Foreign Subsidiary Borrower) in respect
of which the applicable Borrower shall have failed to deliver an Interest
Election Request prior to the third (3rd)
Business Day preceding the end of such Interest Period, such Borrowing shall
automatically continue as a Eurocurrency Borrowing in the same Agreed Currency
with an Interest Period of one month unless such Eurocurrency Borrowing is or
was repaid in accordance with Section 2.11. Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the Administrative Agent, at the request of the Required Lenders, so
notifies the Company, then, so long as an Event of Default is continuing (i) no
outstanding Revolving Borrowing borrowed by the Company or a Domestic Subsidiary
Borrower may be converted to or continued as a Eurocurrency Borrowing, (ii)
unless repaid, each Eurocurrency Revolving Borrowing borrowed by the Company or
a Domestic Subsidiary Borrower shall be converted to an ABR Borrowing (and any
such Eurocurrency Revolving Borrowing in a Foreign Currency shall be
redenominated in Dollars at the time of such conversion) at the end of the
Interest Period applicable thereto and (iii) unless repaid, each Eurocurrency
Revolving Borrowing by a Foreign Subsidiary Borrower shall automatically be
continued as a Eurocurrency Borrowing with an Interest Period of one
month.
SECTION 2.09. Termination
and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Maturity Date.
(b) The
Company may at any time terminate, or from time to time reduce, the Commitments;
provided that
(i) each reduction of the Commitments shall be in an amount that is an integral
multiple of $1,000,000 and not less than $10,000,000 and (ii) the Company shall
not terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11, the Dollar
Amount of the sum of the Revolving Credit Exposures would exceed the Aggregate
Commitment.
25
(c) The
Company shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under paragraph (b) of this Section at least three (3)
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Company
pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Commitments delivered by the Company may state that
such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Company (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments
shall be made ratably among the Lenders in accordance with their respective
Commitments.
SECTION 2.10. Repayment
of Loans; Evidence of Debt. (a) Each Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Revolving Loan made to
such Borrower on the Maturity Date in the currency of such Loan and
(ii) in the case of the Company, to the Swingline Lender the then unpaid
principal amount of each Swingline Loan on the earlier of the Maturity Date and
the first date after such Swingline Loan is made that is the 15th or last
day of a calendar month and is at least two (2) Business Days after such
Swingline Loan is made; provided that on each
date that a Revolving Borrowing is made, the Company shall repay all Swingline
Loans then outstanding.
(b) Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of each Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time
hereunder.
(c) The
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class, Agreed Currency and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from each Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share
thereof.
(d) The
entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of any Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any
Lender may request that Loans made by it to any Borrower be evidenced by a
promissory note. In such event, the relevant Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative
Agent. Thereafter, the Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 9.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if any such promissory note
is a registered note, to such payee and its registered
assigns).
26
SECTION
2.11. Prepayment of
Loans.
(a) Any
Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole or in part, subject to prior notice in accordance with the
provisions of this Section 2.11(a). The applicable Borrower, or the
Company on behalf of the applicable Borrower, shall notify the Administrative
Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender)
by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m.,
Local Time, three (3) Business Days (in the case of a Eurocurrency Borrowing
denominated in Dollars) or four (4) Business Days (in the case of a Eurocurrency
Borrowing denominated in a Foreign Currency), in each case before the date of
prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing, not
later than 11:00 a.m., New York City time, one (1) Business Day before the date
of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later
than 12:00 noon, New York City time, on the date of prepayment. Each
such notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.09, then such notice
of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. Promptly following receipt of any such
notice relating to a Revolving Borrowing, the Administrative Agent shall advise
the Lenders of the contents thereof. Each partial prepayment of any
Revolving Borrowing shall be in an amount that would be permitted in the case of
an advance of a Revolving Borrowing of the same Type as provided in Section
2.02. Each prepayment of a Revolving Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by (i) accrued interest to the extent required by Section
2.13 and (ii) break funding payments pursuant to Section 2.16.
(b) If
at any time, (i) other than as a result of fluctuations in currency exchange
rates, the sum of the aggregate principal Dollar Amount of all of the Revolving
Credit Exposures (calculated, with respect to those Credit Events denominated in
Foreign Currencies, as of the most recent Computation Date with respect to each
such Credit Event) exceeds the Aggregate Commitment or (ii) solely as a result
of fluctuations in currency exchange rates, the sum of the aggregate principal
Dollar Amount of all of the outstanding Revolving Credit Exposures (so
calculated), as of the most recent Computation Date with respect to each such
Credit Event, exceeds 105% of the Aggregate Commitment, the Borrowers shall in
each case immediately repay Borrowings or cash collateralize LC Exposure in an
account with the Administrative Agent pursuant to Section 2.06(j), as
applicable, in an aggregate principal amount sufficient to cause the aggregate
Dollar Amount of all Revolving Credit Exposures (so calculated) to be less than
or equal to the Aggregate Commitment.
SECTION 2.12. Fees. (a) The
Company agrees to pay to the Administrative Agent for the account of each Lender
a facility fee, which shall accrue at the Applicable Rate on the daily amount of
the Commitment of such Lender (whether used or unused) during the period from
and including the Effective Date to but excluding the date on which such
Commitment terminates; provided that, if
such Lender continues to have any Revolving Credit Exposure after its Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of such Lender’s Revolving Credit Exposure from and including the date on which
its Commitment terminates to but excluding the date on which such Lender ceases
to have any Revolving Credit Exposure. Accrued facility fees shall be
payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof; provided that any
facility fees accruing after the date on which the Commitments terminate shall
be payable on demand. All facility 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).
27
(b) The
Company agrees to pay (i) to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurocurrency Revolving Loans on the average daily
Dollar Amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which
such Lender’s Commitment terminates and the date on which such Lender ceases to
have any LC Exposure, and (ii) to the Issuing Bank for its own account a
fronting fee, which shall accrue at the rate of 0.25% per annum on the average
daily Dollar Amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) attributable to Letters of Credit
issued by the Issuing Bank during the period from and including the Effective
Date to but excluding the later of the date of termination of the Commitments
and the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank’s standard fees and commissions with respect to the issuance, amendment,
cancellation, negotiation, transfer, presentment, renewal or extension of any
Letter of Credit or processing of drawings thereunder. Unless
otherwise specified above, participation fees and fronting fees accrued through
and including the last day of March, June, September and December of each year
shall be payable on the third (3rd)
Business Day following such last day, commencing on the first such date to occur
after the Effective Date; provided that all
such fees shall be payable on the date on which the Commitments terminate and
any such fees accruing after the date on which the Commitments terminate shall
be payable on demand. Any other fees payable to the Issuing Bank
pursuant to this paragraph shall be payable within ten (10) days after
demand. All participation fees and fronting 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).
(c) The
Company agrees to pay to the Administrative Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon between the
Company and the Administrative Agent.
(d) All
fees payable hereunder shall be paid on the dates due, in Dollars (except as
otherwise expressly provided in this Section 2.12) and immediately available
funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees
payable to it) for distribution, in the case of facility fees and participation
fees, to the Lenders. Fees paid shall not be refundable under any
circumstances.
SECTION 2.13. Interest. (a) The
Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear
interest at the Alternate Base Rate plus the Applicable Rate.
(b) The
Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted
LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Rate.
(c) Notwithstanding
the foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by any Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, 2% plus the rate applicable to ABR Loans as
provided in paragraph (a) of this Section.
(d) Accrued
interest on each Revolving Loan shall be payable in arrears on each Interest
Payment Date for such Revolving Loan and upon termination of the Commitments;
provided that
(i) interest accrued pursuant to paragraph (c) of this Section shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than a prepayment of an ABR Revolving Loan prior to the end of the Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurocurrency Revolving Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.
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(e) All
interest hereunder shall be computed on the basis of a year of 360 days, except
that interest (i) computed by reference to the Alternate Base Rate at times when
the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year) and (ii) for Borrowings
denominated in Pounds Sterling shall be computed on the basis of a year of 365
days, and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable
Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.14. Alternate
Rate of Interest. If prior to the commencement of any Interest
Period for a Eurocurrency Borrowing:
(a) the
Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or
(b) the
Administrative Agent is advised by the Required Lenders that the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the
Administrative Agent shall give notice thereof to the applicable Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the applicable Borrower and the Lenders
that the circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any Revolving
Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency
Borrowing shall be ineffective and any such Eurocurrency Borrowing shall be
repaid on the last day of the then current Interest Period applicable thereto,
(ii) any Eurocurrency Borrowing by a Foreign Subsidiary Borrower that is
requested to be continued shall be repaid on the last day of the then current
Interest Period applicable thereto and (iii) if any Borrowing Request by the
Company or a Domestic Subsidiary Borrower requests a Eurocurrency Revolving
Borrowing in Dollars, such Borrowing shall be made as an ABR Borrowing (and if
any Borrowing Request requests a Eurocurrency Revolving Borrowing by
a Foreign Subsidiary Borrower or denominated in a Foreign Currency, such
Borrowing Request shall be ineffective); provided that if the
circumstances giving rise to such notice affect only one Type of Borrowings,
then the other Type of Borrowings shall be permitted.
SECTION 2.15. Increased
Costs. (a) If any Change in Law shall:
(i) impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank;
or
(ii) impose
on any Lender or the Issuing Bank or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurocurrency Loans made
by such Lender or any Letter of Credit or participation
therein;
29
and the
result of any of the foregoing shall be to increase the cost to such Lender of
making or maintaining any Eurocurrency Loan or of maintaining its obligation to
make any such Loan (including, without limitation, pursuant to any conversion of
any Borrowing denominated in an Agreed Currency into a Borrowing denominated in
any other Agreed Currency) or to increase the cost to such Lender or the Issuing
Bank of participating in, issuing or maintaining any Letter of Credit
(including, without limitation, pursuant to any conversion of any Borrowing
denominated in an Agreed Currency into a Borrowing denominated in any other
Agreed Currency) or to reduce the amount of any sum received or receivable by
such Lender or the Issuing Bank hereunder, whether of principal, interest or
otherwise (including, without limitation, pursuant to any conversion of any
Borrowing denominated in an Agreed Currency into a Borrowing denominated in any
other Agreed Currency), then the applicable Borrower will pay to such Lender or
the Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If
any Lender or the Issuing Bank determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender’s or the Issuing Bank’s capital or on the capital of such
Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this
Agreement or the Loans made by, or participations in Letters of Credit held by,
such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or the Issuing Bank’s policies and the policies
of such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the applicable Borrower will pay to such
Lender or the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank or such Lender’s or
the Issuing Bank’s holding company for any such reduction suffered.
(c) A
certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Bank or its holding company,
as the case may be, as specified in paragraph (a) or (b) of this Section shall
be delivered to the Company and shall be conclusive absent manifest
error. The Company shall pay, or cause the other Borrowers to pay,
such Lender or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within ten (10) days after receipt thereof.
(d) Failure
or delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or the
Issuing Bank’s right to demand such compensation; provided that the
Company shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 270 days prior to the date that such Lender or the Issuing Bank, as the
case may be, notifies the Company of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or the Issuing Bank’s
intention to claim compensation therefor; provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 270-day period referred to above shall be extended to include the
period of retroactive effect thereof.
SECTION 2.16. Break
Funding Payments. In the event of (a) the payment of any
principal of any Eurocurrency Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default or as a
result of any prepayment pursuant to Section 2.11), (b) the conversion of any
Eurocurrency Loan other than on the last day of the Interest Period applicable
thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency
Loan on the date specified in any notice delivered pursuant hereto (regardless
of whether such notice may be revoked under Section 2.11(a) and is revoked in
accordance therewith) or (d) the assignment of any Eurocurrency Loan other than
on the last day of the Interest Period applicable thereto as a result of a
request by the Company pursuant to Section 2.19, then, in any such event, the
Borrowers shall compensate each Lender for the loss, cost and expense
attributable to such event. Such loss, cost or expense to any Lender
shall be deemed to include an amount determined by such Lender to be the excess,
if any, of (i) the amount of interest which would have accrued on the principal
amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Loan), over (ii) the amount of interest which
would accrue on such principal amount for such period at the interest rate which
such Lender would bid were it to bid, at the commencement of such period, for
deposits in the relevant currency of a comparable amount and period from other
banks in the eurocurrency market. A certificate of any Lender setting
forth any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the applicable Borrower and shall be
conclusive absent manifest error. The applicable Borrower shall pay
such Lender the amount shown as due on any such certificate within ten (10) days
after receipt thereof.
30
SECTION 2.17. Taxes. (a) Any
and all payments by or on account of any obligation of each Borrower hereunder
shall be made free and clear of and without deduction for any Indemnified Taxes
or Other Taxes; provided that if any
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall make
such deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable
law.
(b) In
addition, each Borrower shall pay any Other Taxes related to such Borrower and
imposed on or incurred by the Administrative Agent, a Lender or the Issuing Bank
to the relevant Governmental Authority in accordance with applicable
law.
(c) The
relevant Borrower shall indemnify the Administrative Agent, each Lender and the
Issuing Bank, within ten (10) days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of such Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability delivered to the Company by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest
error.
(d) As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by any
Borrower to a Governmental Authority, such Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any
Foreign Lender that is entitled to an exemption from or reduction of withholding
tax under the law of the jurisdiction in which a Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under
this Agreement shall deliver to such Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable law, such properly
completed and executed documentation prescribed by applicable law or reasonably
requested by such Borrower as will permit such payments to be made without
withholding or at a reduced rate.
(f) If
the Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which a Borrower has paid
additional amounts pursuant to this Section 2.17, it shall pay over such refund
to such Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.17 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that such
Borrower, upon the request of the Administrative Agent or such Lender, agrees to
repay the amount paid over to such Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to any Borrower or any other
Person.
31
SECTION
2.18. Payments
Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Each
Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to (i) in the case
of payments denominated in Dollars by the Company, 12:00 noon, New York City
time and (ii) in the case of payments denominated in a Foreign Currency or by a
Foreign Subsidiary Borrower, 12:00 noon, Local Time, in the city of the
Administrative Agent’s Eurocurrency Payment Office for such currency, in each
case on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may,
in the discretion of the Administrative Agent, be deemed to have been received
on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made (i) in the same currency in
which the applicable Credit Event was made (or where such currency has been
converted to euro, in euro) and (ii) to the Administrative Agent at its offices
at 10 South Dearborn Street, Chicago, Illinois 60603 or, in the case of a Credit
Event denominated in a Foreign Currency or to a Foreign Subsidiary Borrower, the
Administrative Agent’s Eurocurrency Payment Office for such currency, except
payments to be made directly to the Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Sections 2.15,
2.16, 2.17 and 9.03 shall be made directly to the Persons entitled
thereto. The Administrative Agent shall distribute any such payments
denominated in the same currency received by it for the account of any other
Person to the appropriate recipient promptly following receipt
thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such
extension. Notwithstanding the foregoing provisions of this Section,
if, after the making of any Credit Event in any Foreign Currency, currency
control or exchange regulations are imposed in the country which issues such
currency with the result that the type of currency in which the Credit Event was
made (the “Original
Currency”) no longer exists or any Borrower is not able to make payment
to the Administrative Agent for the account of the Lenders in such Original
Currency, then all payments to be made by such Borrower hereunder in such
currency shall instead be made when due in Dollars in an amount equal to the
Dollar Amount (as of the date of repayment) of such payment due, it being the
intention of the parties hereto that the Borrowers take all risks of the
imposition of any such currency control or exchange regulations.
(b) If
at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.
32
(c) At
the election of the Administrative Agent, all payments of principal, interest,
LC Disbursements, fees, premiums, reimbursable expenses (including, without
limitation, all reimbursement for fees and expenses pursuant to Section 9.03),
and other sums payable under the Loan Documents, may be paid from the proceeds
of Borrowings made hereunder whether made following a request by a Borrower (or
the Company on behalf of a Borrower) pursuant to Section 2.03 or a deemed
request as provided in this Section or may be deducted from any deposit account
of such Borrower maintained with the Administrative Agent. Each
Borrower hereby irrevocably authorizes (i) the Administrative Agent to make a
Borrowing for the purpose of paying each payment of principal, interest and fees
as it becomes due hereunder or any other amount due under the Loan Documents and
agrees that all such amounts charged shall constitute Loans (including Swingline
Loans) and that all such Borrowings shall be deemed to have been requested
pursuant to Sections 2.03, 2.04 or 2.05, as applicable and (ii) the
Administrative Agent to charge any deposit account of the relevant Borrower
maintained with the Administrative Agent for each payment of principal, interest
and fees as it becomes due hereunder or any other amount due under the Loan
Documents.
(d) If
any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Revolving Loans or participations in LC Disbursements or Swingline Loans
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and participations in LC Disbursements
and Swingline Loans and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Revolving Loans and
participations in LC Disbursements and Swingline Loans of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if
any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by any Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or participations in LC Disbursements and Swingline Loans to any
assignee or participant, other than to the Company or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall
apply). Each Borrower consents to the foregoing and agrees, to the
extent it may effectively do so under applicable law, that any Lender acquiring
a participation pursuant to the foregoing arrangements may exercise against such
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Borrower in the amount
of such participation.
(e) Unless
the Administrative Agent shall have received notice from the relevant Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders or the Issuing Bank hereunder that such Borrower will
not make such payment, the Administrative Agent may assume that such Borrower
has made such payment on such date in accordance herewith and may, in reliance
upon such assumption, distribute to the Lenders or the Issuing Bank, as the case
may be, the amount due. In such event, if such Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation (including without limitation the Overnight Foreign Currency Rate
in the case of Loans denominated in a Foreign Currency).
33
(f) If
any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), (i) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender and for the benefit of the
Administrative Agent, the Swingline Lender or the Issuing bank to satisfy such
Lender’s obligations under such Sections until all such unsatisfied obligations
are fully paid and/or (ii) hold any such amounts in a segregated account as cash
collateral for, and application to, any future funding obligations of such
Lender under such Sections; in the case of each of (i) and (ii) above, in any
order as determined by the Administrative Agent in its discretion.
SECTION 2.19. Mitigation
Obligations; Replacement of Lenders. (a) If (i) any
Lender requests compensation under Section 2.15, or (ii) if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, or (iii) any
Lender becomes a Defaulting Lender, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Company hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
(b) If
any Lender requests compensation under Section 2.15, or if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, or if any
Lender becomes a Defaulting Lender, then the Company may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all its interests,
rights and obligations under the Loan Documents to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the
Company shall have received the prior written consent of the Administrative
Agent (and if a Commitment is being assigned, the Issuing Bank), which consent
shall not unreasonably be withheld, (ii) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans and participations
in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder, from the assignee (to the extent
of such outstanding principal and accrued interest and fees) or the Company (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
to be made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to
make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Company to
require such assignment and delegation cease to
apply.
34
SECTION 2.20. Expansion
Option. The Company may from time to time elect to increase
the Commitments or enter into one or more tranches of term loans (each an “Incremental Term
Loan”), in each case in minimum increments of $15,000,000 so long as,
after giving effect thereto, the aggregate amount of such increases and all such
Incremental Term Loans does not exceed $200,000,000. The Company may
arrange for any such increase or tranche to be provided by one or more Lenders
(each Lender so agreeing to an increase in its Commitment, or to participate in
such Incremental Term Loans, an “Increasing Lender”),
or by one or more new banks, financial institutions or other entities (each such
new bank, financial institution or other entity, an “Augmenting Lender”),
to increase their existing Commitments, or to participate in such Incremental
Term Loans, or extend Commitments, as the case may be; provided that (i)
each Augmenting Lender, shall be subject to the approval of the Company and the
Administrative Agent and (ii) (x) in the case of an Increasing Lender, the
Company and such Increasing Lender execute an agreement substantially in the
form of Exhibit
C hereto, and (y) in the case of an Augmenting Lender, the Company and
such Augmenting Lender execute an agreement substantially in the form of Exhibit D
hereto. No consent of any Lender (other than the Lenders
participating in the increase or any Incremental Term Loan) shall be required
for any increase in Commitments or Incremental Term Loan pursuant to this
Section 2.20. Increases and new Commitments and Incremental Term
Loans created pursuant to this Section 2.20 shall become effective on the date
agreed by the Company, the Administrative Agent and the relevant Increasing
Lenders or Augmenting Lenders and the Administrative Agent shall notify each
Lender thereof. Notwithstanding the foregoing, no increase in the
Commitments (or in the Commitment of any Lender) or tranche of Incremental Term
Loans shall become effective under this paragraph unless, (i) on the proposed
date of the effectiveness of such increase or Incremental Term Loans, (A) the
conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be
satisfied or waived by the Required Lenders and the Administrative Agent shall
have received a certificate to that effect dated such date and executed by a
Financial Officer of the Company and (B) the Company shall be in compliance (on
a Pro Forma Basis reasonably acceptable to the Administrative Agent) with the
covenants contained in Section 6.06 and (ii) the Administrative Agent shall have
received documents consistent with those delivered on the Effective Date as to
the corporate power and authority of the Borrowers to borrow hereunder after
giving effect to such increase. On the effective date of any increase
in the Commitments or any Incremental Term Loans being made, (i) each relevant
Increasing Lender and Augmenting Lender shall make available to the
Administrative Agent such amounts in immediately available funds as the
Administrative Agent shall determine, for the benefit of the other Lenders, as
being required in order to cause, after giving effect to such increase and the
use of such amounts to make payments to such other Lenders, each Lender’s
portion of the outstanding Revolving Loans of all the Lenders to equal its
Applicable Percentage of such outstanding Revolving Loans, and (ii) except in
the case of any Incremental Term Loans, the Borrowers shall be deemed to have
repaid and reborrowed all outstanding Revolving Loans as of the date of any
increase in the Commitments (with such reborrowing to consist of the Types of
Revolving Loans, with related Interest Periods if applicable, specified in a
notice delivered by the applicable Borrower, or the Company on behalf of the
applicable Borrower, in accordance with the requirements of Section
2.03). The deemed payments made pursuant to clause (ii) of the
immediately preceding sentence shall be accompanied by payment of all accrued
interest on the amount prepaid and, in respect of each Eurocurrency Loan, shall
be subject to indemnification by the Borrowers pursuant to the provisions of
Section 2.16 if the deemed payment occurs other than on the last day of the
related Interest Periods. The Incremental Term Loans (a) shall rank
pari passu in right of payment with the Revolving Loans, (b) shall not mature
earlier than the Maturity Date (but may have amortization prior to such date)
and (c) shall be treated substantially the same as (and in any event no more
favorably than) the Revolving Loans; provided that (i) the
terms and conditions applicable to any tranche of Incremental Term Loans
maturing after the Maturity Date may provide for material additional or
different financial or other covenants or prepayment requirements applicable
only during periods after the Maturity Date and (ii) the Incremental Term Loans
may be priced differently than the Revolving Loans. Incremental Term
Loans may be made hereunder pursuant to an amendment or restatement (an “Incremental Term Loan
Amendment”) of this Agreement and, as appropriate, the other Loan
Documents, executed by the Borrowers, each Augmenting Lender participating in
such tranche, if any, and the Administrative Agent. The Incremental
Term Loan Amendment may, without the consent of any other Lenders, effect such
amendments to this Agreement and the other Loan Documents as may be necessary or
appropriate, in the reasonable opinion of the Administrative Agent, to effect
the provisions of this Section 2.20.
35
SECTION
2.21. [Intentionally
Omitted].
SECTION 2.22. Judgment
Currency. If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due from any Borrower hereunder in the
currency expressed to be payable herein (the “specified currency”)
into another currency, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the specified currency with such other currency at the Administrative
Agent’s main New York City office on the Business Day preceding that on which
final, non-appealable judgment is given. The obligations of each
Borrower in respect of any sum due to any Lender or the Administrative Agent
hereunder shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Administrative Agent (as the case may
be) of any sum adjudged to be so due in such other currency such Lender or the
Administrative Agent (as the case may be) may in accordance with normal,
reasonable banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is
less than the sum originally due to such Lender or the Administrative Agent, as
the case may be, in the specified currency, each Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 2.18, such Lender or the Administrative Agent, as the case may be,
agrees to remit such excess to such Borrower.
SECTION 2.23. Designation
of Subsidiary Borrowers. The Company may at any time and from
time to time designate any Eligible Domestic Subsidiary as a Domestic Subsidiary
Borrower or any Eligible Foreign Subsidiary as a Foreign Subsidiary Borrower by
delivery to the Administrative Agent of a Borrowing Subsidiary Agreement
executed by such Subsidiary and the Company and the satisfaction of the other
conditions precedent set forth in Section 4.03, and upon such delivery and
satisfaction such Subsidiary shall for all purposes of this Agreement be a
Subsidiary Borrower and a party to this Agreement until the Company shall have
executed and delivered to the Administrative Agent a Borrowing Subsidiary
Termination with respect to such Subsidiary, whereupon such Subsidiary shall
cease to be a Subsidiary Borrower and a party to this
Agreement. Notwithstanding the preceding sentence, no Borrowing
Subsidiary Termination will become effective as to any Subsidiary Borrower at a
time when any principal of or interest on any Loan to such Borrower shall be
outstanding hereunder, provided that such
Borrowing Subsidiary Termination shall be effective to terminate the right of
such Subsidiary Borrower to make further Borrowings under this
Agreement. As soon as practicable upon receipt of a Borrowing
Subsidiary Agreement, the Administrative Agent shall furnish a copy thereof to
each Lender.
SECTION 2.24. Defaulting
Lenders. Notwithstanding any provision of this Agreement to
the contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting
Lender:
(a) fees
shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.12(a);
(b) the
Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be
included in determining whether all Lenders or the Required Lenders have taken
or may take any action hereunder (including any consent to any amendment or
waiver pursuant to Section 9.02); provided that any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender which
affects such Defaulting Lender differently than other affected Lenders shall
require the consent of such Defaulting Lender;
36
(c) if
any Swingline Exposure or LC Exposure exists at the time a Lender becomes a
Defaulting Lender then:
(i) all
or any part of such Swingline Exposure and LC Exposure shall be reallocated
among the non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (x) the sum of all non-Defaulting
Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s Swingline
Exposure and LC Exposure does not exceed the total of all non-Defaulting
Lenders’ Commitments and (y) the conditions set forth in Section 4.02 are
satisfied at such time;
(ii) if
the reallocation described in clause (i) above cannot, or can only partially, be
effected, the Company shall within one (1) Business Day following notice by the
Administrative Agent (x) first, prepay such
Swingline Exposure and (y) second, cash
collateralize such Defaulting Lender’s LC Exposure (after giving effect to any
partial reallocation pursuant to clause (i) above) in accordance with the
procedures set forth in Section 2.06(j) for so long as such LC Exposure is
outstanding;
(iii) if
the Company cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to Section 2.24(c), the Company shall not be required to pay
any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to
such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s
LC Exposure is cash collateralized;
(iv) if
the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to Section
2.24(c), then the fees payable to the Lenders pursuant to Section 2.12(b) shall
be adjusted in accordance with such non-Defaulting Lenders’ Applicable
Percentages; or
(v) if
any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to Section 2.24(c), then, without prejudice to any rights
or remedies of the Issuing Bank or any Lender hereunder, all facility fees that
otherwise would have been payable to such Defaulting Lender (solely with respect
to the portion of such Defaulting Lender’s Commitment that was utilized by such
LC Exposure) and letter of credit fees payable under Section 2.12(b) with
respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing
Bank until such LC Exposure is cash collateralized and/or reallocated;
and
(d) so
long as any Lender is a Defaulting Lender, the Swingline Lender shall not be
required to fund any Swingline Loan and the Issuing Bank shall not be required
to issue, amend or increase any Letter of Credit, unless it is satisfied that
the related exposure will be 100% covered by the Commitments of the
non-Defaulting Lenders and/or cash collateral will be provided by the Company in
accordance with Section 2.24(c), and participating interests in any such newly
issued or increased Letter of Credit or newly made Swingline Loan shall be
allocated among non-Defaulting Lenders in a manner consistent with Section
2.24(c)(i) (and Defaulting Lenders shall not participate therein).
In the
event that the Administrative Agent, the Company, the Issuing Bank and the
Swingline Lender each agrees that a Defaulting Lender has adequately remedied
all matters that caused such Lender to be a Defaulting Lender, then the
Swingline Exposure and LC Exposure of the Lenders shall be readjusted to reflect
the inclusion of such Lender’s Commitment and on such date such Lender shall
purchase at par such of the Loans of the other Lenders (other than Swingline
Loans) as the Administrative Agent shall determine may be necessary in order for
such Lender to hold such Loans in accordance with its Applicable
Percentage.
37
ARTICLE
III
Representations and
Warranties
SECTION
3.01. Representations and
Warranties of the Company. The Company represents and warrants
as follows:
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The
execution, delivery and performance by the Company of this Agreement and the
Notes to be delivered by it, and the consummation of the transactions
contemplated hereby, are within the Company’s corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Company’s charter or by-laws or (ii) law or any contractual restriction
binding on or affecting the Company.
(c) No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or any other third party is
required for the due execution, delivery and performance by the Company of this
Agreement or the Notes to be delivered by it.
(d) This
Agreement has been, and each of the Notes to be delivered by it when delivered
hereunder will have been, duly executed and delivered by the
Company. This Agreement is, and each of the Notes when delivered
hereunder will be, the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with their respective terms,
except as the enforceability thereof may be limited by the effect of any
applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and by general principles of equity.
(e) The
Consolidated balance sheet of the Company and its Subsidiaries as at
December 31, 2009, and the related Consolidated statements of income and
cash flows of the Company and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of PricewaterhouseCoopers LLC, independent public
accountants, and the Consolidated balance sheet of the Company and its
Subsidiaries as at March 31, 2010, and the related Consolidated statements
of income and cash flows of the Company and its Subsidiaries for the three
months then ended, duly certified by the chief financial officer, treasurer or
controller of the Company, copies of which have been furnished to each Lender,
fairly present, subject, in the case of said balance sheet as at March 31,
2010, and said statements of income and cash flows for the three months then
ended, to year-end audit adjustments, the Consolidated financial condition of
the Company and its Subsidiaries as at such dates and the Consolidated results
of the operations of the Company and its Subsidiaries for the periods ended on
such dates, all in accordance with generally accepted accounting principles
consistently applied. Since December 31, 2009, there has been no
Material Adverse Change.
(f) There
is no pending or, to the knowledge of the Company, threatened action, suit,
investigation, litigation or proceeding, including, without limitation, any
Environmental Action, affecting the Company or any of its Subsidiaries before
any court, governmental agency or arbitrator that (i) could be reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement or any Note or the
consummation of the transactions contemplated hereby.
(g) No
Borrower is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any Loan will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin
stock.
38
(h) No
Borrower is an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as
amended.
(i) Neither
the Information Memorandum nor any other information, exhibit or report
furnished by or on behalf of the Company or any other Borrower to the
Administrative Agent or any Lender in connection with the negotiation and
syndication of this Agreement or pursuant to the terms of this Agreement
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements made therein not misleading.
(j) Each
Borrower is, individually and together with its subsidiaries,
Solvent.
ARTICLE
IV
Conditions
SECTION 4.01. Effective
Date. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 9.02):
(a) The
Administrative Agent (or its counsel) shall have received from each party hereto
either (A) a counterpart of this Agreement signed on behalf of such party or (B)
written evidence satisfactory to the Administrative Agent (which may include
telecopy or electronic transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this
Agreement.
(b) The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Brian M. Addison, general counsel for the initial Borrowers, substantially in
the form of Exhibit
B, and covering such other matters relating to the initial Borrowers, the
Loan Documents or the Transactions as the Administrative Agent shall reasonably
request. The Company hereby requests such counsel to deliver such
opinion.
(c) The
Lenders shall have received (i) satisfactory audited consolidated financial
statements of the Company for the two most recent fiscal years ended prior to
the Effective Date as to which such financial statements are available and (ii)
satisfactory unaudited interim consolidated financial statements of the Company
for each quarterly period ended subsequent to the date of the latest financial
statements delivered pursuant to clause (i) of this paragraph as to which such
financial statements are publicly available.
(d) The
Administrative Agent shall have received (i) such documents and certificates as
the Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the initial Borrowers, the
authorization of the Transactions and any other legal matters relating to such
Borrowers, the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel and as further
described in the list of closing documents attached as Exhibit E and (ii) to
the extent requested by any of the Lenders, all documentation and other
information required by bank regulatory authorities under applicable
“know-your-customer” and anti-money laundering rules and regulations, including
the Patriot Act.
39
(e) The
Administrative Agent shall have received a certificate, dated the Effective Date
and signed by the President, a Vice President or a Financial Officer of the
Company, confirming compliance with the conditions set forth in paragraphs (a)
and (b) of Section 4.02.
(f) The
Administrative Agent shall have received evidence satisfactory to it that the
Existing Credit Agreement shall have been terminated and cancelled and all
indebtedness thereunder shall have been fully repaid (except to the extent being
so repaid with the initial Revolving Loans) and any and all liens thereunder
shall have been terminated.
(g) The
Administrative Agent shall have received evidence reasonably satisfactory to it
that all governmental and third party approvals necessary or, in the discretion
of the Administrative Agent, advisable in connection with the Transactions and
the continuing operations of the Company and its Subsidiaries have been obtained
and are in full force and effect.
(h) The
Administrative Agent shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Company hereunder.
The
Administrative Agent shall notify the Company and the Lenders of the Effective
Date, and such notice shall be conclusive and binding.
SECTION 4.02. Each Credit
Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:
(a) The
representations and warranties of the Borrowers set forth in this
Agreement (except those representations and warranties set forth in the last
sentence of Section 3.01(e)) shall be true and correct on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable.
(b) At
the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
(c) No
law or regulation shall prohibit, and no order, judgment or decree of any
Governmental Authority shall enjoin, prohibit or restrain, any Lender from
making the requested Loan or the Issuing Bank or any Lender from issuing,
renewing, extending or increasing the face amount of or participating in the
Letter of Credit requested to be issued, renewed, extended or
increased.
Each
Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrowers on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
SECTION 4.03. Designation
of a Subsidiary Borrower. The designation of a Subsidiary
Borrower pursuant to Section 2.23 is subject to the condition precedent that the
Company or such proposed Subsidiary Borrower shall have furnished or caused to
be furnished to the Administrative Agent:
40
(a) Copies,
certified by the Secretary or Assistant Secretary of such Subsidiary, of its
Board of Directors’ resolutions (and resolutions of other bodies, if any are
deemed necessary by counsel for the Administrative Agent) approving the
Borrowing Subsidiary Agreement and any other Loan Documents to which such
Subsidiary is becoming a party and such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of such Subsidiary;
(b) An
incumbency certificate, executed by the Secretary or Assistant Secretary of such
Subsidiary, which shall identify by name and title and bear the signature of the
officers of such Subsidiary authorized to request Borrowings hereunder and sign
the Borrowing Subsidiary Agreement and the other Loan Documents to which such
Subsidiary is becoming a party, upon which certificate the Administrative Agent
and the Lenders shall be entitled to rely until informed of any change in
writing by the Company or such Subsidiary;
(c) Opinions
of counsel to such Subsidiary, in form and substance reasonably satisfactory to
the Administrative Agent and its counsel, with respect to the laws of its
jurisdiction of organization and such other matters as are reasonably requested
by counsel to the Administrative Agent and addressed to the Administrative Agent
and the Lenders; and
(d) Any
promissory notes requested by any Lender, and any other instruments and
documents reasonably requested by the Administrative Agent.
ARTICLE
V
Affirmative
Covenants
So long
as any Loan shall remain unpaid, and any Letter of Credit is outstanding or any
Lender shall have any Commitment hereunder, the Company will:
SECTION 5.01. Compliance
with Laws, Etc. Comply, and cause each of its Subsidiaries to
comply, in all material respects, with all applicable laws, rules, regulations
and orders, such compliance to include, without limitation, compliance with
ERISA, Environmental Laws and the Patriot Act.
SECTION 5.02. Payment of
Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property; provided, however, that neither the
Company nor any of its Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being maintained,
unless and until any Lien resulting therefrom attaches to its property and
becomes enforceable against its other creditors.
SECTION 5.03. Maintenance
of Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates; provided,
however, that the Company and its Subsidiaries may self-insure to the same
extent as other companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company or such Subsidiary
operates and to the extent consistent with prudent business
practice.
41
SECTION 5.04. Preservation
of Corporate Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate existence,
rights (charter and statutory) and franchises; provided, however, that the
Company and its Subsidiaries may consummate any merger or consolidation
permitted under Section 6.02 and provided further that neither the Company
nor any of its Subsidiaries shall be required to maintain corporate existence of
any subsidiary or preserve any right or franchise if the Board of Directors of
the Company or such Subsidiary shall determine that the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company or such Subsidiary, as the case may be, and that the loss thereof is
not disadvantageous in any material respect to the Company, such Subsidiary or
the Lenders.
SECTION 5.05. Visitation
Rights. At any reasonable time and from time to time, permit
the Administrative Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and books
of account of, and visit the properties of, the Company and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the Company
and any of its Subsidiaries with any of their officers or directors and with
their independent certified public accountants.
SECTION 5.06. Keeping of
Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Company
and each such Subsidiary in accordance with generally accepted accounting
principles in effect from time to time.
SECTION 5.07. Maintenance
of Properties, Etc. Maintain and preserve, and cause each of
its Subsidiaries to maintain and preserve, all of its properties that are used
or useful in the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.08. Transactions
with Affiliates. Conduct, and cause each of its Subsidiaries
to conduct, all transactions otherwise permitted under this Agreement with any
of their Affiliates on terms that are fair and reasonable and not materially
less favorable to the Company or such Subsidiary than it would obtain in a
comparable arm’s-length transaction with a Person not an Affiliate.
SECTION
5.09. Reporting
Requirements. Furnish to the Lenders:
(a) as
soon as available and in any event within 45 days after the end of each of
the first three quarters of each fiscal year of the Company, the Consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and Consolidated statements of income and cash flows of the Company and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, duly certified (subject to year-end
audit adjustments) by the chief financial officer, treasurer or controller of
the Company as having been prepared in accordance with generally accepted
accounting principles and certificates of the chief financial officer, treasurer
or controller of the Company as to compliance with the terms of this Agreement
and setting forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 6.06, provided that in the event of any change in
generally accepted accounting principles used in the preparation of such
financial statements, the Company shall also provide, if necessary for the
determination of compliance with Section 6.06, a statement of
reconciliation conforming such financial statements to GAAP;
42
(b) as
soon as available and in any event within 90 days after the end of each
fiscal year of the Company, a copy of the annual audit report for such year for
the Company and its Subsidiaries, containing the Consolidated balance sheet of
the Company and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, in each case accompanied by an opinion
acceptable to the Required Lenders by PricewaterhouseCoopers LLC or other
independent public accountants acceptable to the Required Lenders and
certificates of the chief financial officer, treasurer or controller of the
Company as to compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate compliance with
Section 6.06, provided that in the event of any change in generally
accepted accounting principles used in the preparation of such financial
statements, the Company shall also provide, if necessary for the determination
of compliance with Section 6.06, a statement of reconciliation conforming
such financial statements to GAAP;
(c) as
soon as possible and in any event within five days after the occurrence of each
Default continuing on the date of such statement, a statement of the chief
financial officer, treasurer or controller of the Company setting forth details
of such Default and the action that the Company has taken and proposes to take
with respect thereto;
(d) promptly
after the sending or filing thereof, copies of all reports that the Company
sends to any of its securityholders, and copies of all reports and registration
statements that the Company or any Subsidiary files with the SEC or any national
securities exchange;
(e) promptly
after the commencement thereof, notice of all actions and proceedings before any
court, governmental agency or arbitrator affecting the Company or any of its
Subsidiaries of the type described in Section 3.01(f); and
(f) such
other information respecting the Company or any of its Subsidiaries as any
Lender through the Administrative Agent may from time to time reasonably
request.
ARTICLE
VI
Negative
Covenants
So long
as any Loan shall remain unpaid, and any Letter of Credit is outstanding or any
Lender shall have any Commitment hereunder, the Company will not:
SECTION 6.01. Liens,
Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien on or with respect to any of
its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to assign, any right to receive income, other
than:
(a) Permitted
Liens;
(b) purchase
money Liens upon or in any real property or equipment acquired or held by the
Company or any Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt incurred solely
for the purpose of financing the acquisition of such property or equipment, or
Liens existing on such property or equipment at the time of its acquisition
(other than any such Liens created in contemplation of such acquisition that
were not incurred to finance the acquisition of such property) or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
amount, provided, however, that no such Lien shall extend to or cover any
properties of any character other than the real property or equipment being
acquired, and no such extension, renewal or replacement shall extend to or cover
any properties not theretofore subject to the Lien being extended, renewed or
replaced, provided further that the aggregate principal amount of the
indebtedness secured by the Liens referred to in this clause (b) shall not
exceed the amount specified therefor in Section 6.04(c) at any time
outstanding;
43
(c) the
Liens existing on the Effective Date and described on Schedule 6.01
hereto;
(d) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; provided that such Liens were not created in
contemplation of such merger, consolidation or acquisition and do not extend to
any assets other than those of the Person so merged into or consolidated with
the Company or such Subsidiary or acquired by the Company or such
Subsidiary;
(e) other
Liens securing Debt in an aggregate principal amount not to exceed the amount
specified therefor in Section 6.04(d) at any time outstanding;
and
(f) the
replacement, extension or renewal of any Lien permitted by clauses (c) or
(d) above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the Debt secured thereby.
SECTION 6.02. Mergers,
Etc. Merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so,
except that any Subsidiary of the Company may merge or consolidate with or into,
or dispose of assets to, any other Subsidiary of the Company, and except that
any Subsidiary of the Company may merge into or dispose of assets to the
Company, provided, in each case, that no Default shall have occurred and be
continuing at the time of such proposed transaction or would result
therefrom.
SECTION 6.03. Accounting
Changes. Make or permit, or permit any of its Subsidiaries to
make or permit, any change in accounting policies or reporting practices, except
as required or permitted by generally accepted accounting
principles.
SECTION 6.04. Subsidiary
Debt. Permit any of its Subsidiaries to create or suffer to
exist, any Debt other than:
(a) Debt
owed to the Company or to a wholly owned Subsidiary of the Company or Debt under
this Agreement or the Notes;
(b) Debt
existing on the Effective Date and described on Schedule 6.04
hereto (the “Existing
Debt”), and any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, the Existing Debt, provided that the principal
amount of such Existing Debt shall not be increased above the principal amount
thereof outstanding immediately prior to such extension, refunding or
refinancing, and the direct and contingent obligors therefor shall not be
changed, as a result of or in connection with such extension, refunding or
refinancing;
(c) Debt
secured by Liens permitted by Section 6.01(b) aggregating for all of the
Company’s Subsidiaries not more than $50,000,000 at any one time
outstanding;
(d) Debt
that, in aggregate with all Debt secured by Liens permitted by
Section 6.01(e), does not exceed an amount equal to 15% of Consolidated net
worth of the Company and its Subsidiaries at any one time outstanding;
and
(e) endorsement
of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
44
SECTION 6.05. Change in
Nature of Business. Make, or permit any of its Subsidiaries to
make, any material change in the nature of the business as carried on by the
Company and its Subsidiaries at the date hereof.
SECTION 6.06. Financial
Covenants. So long as any Loan shall remain unpaid, and any
Letter of Credit is outstanding or any Lender shall have any Commitment
hereunder, the Company will:
(a) Leverage
Ratio. Maintain a ratio of Consolidated Debt for
Borrowed Money to the sum of Consolidated Debt for Borrowed Money plus
Consolidated net worth of the Company and its Subsidiaries of not greater than
0.55 to 1.00.
(b) Interest Coverage
Ratio. Maintain a ratio of Consolidated EBITDA for the period
of four fiscal quarters then ended of the Company and its Subsidiaries to the
sum of interest payable on, and amortization of debt discount in respect of, all
Debt during such period by the Company and its Subsidiaries of not less than 3.5
to 1.0.
ARTICLE
VII
Events of
Default
SECTION
7.01. If any of the following events (each an “Event of Default”)
shall occur and be continuing:
(a) The
Company or any other Borrower shall fail to pay any principal of any Loan when
the same becomes due and payable; or the Company or any other Borrower shall
fail to pay any interest on any Loan or make any other payment of fees or other
amounts payable under this Agreement or any Note within five Business Days after
the same becomes due and payable; or
(b) Any
representation or warranty made by any Borrower herein or by any Borrower (or
any of its officers) in connection with this Agreement or by any Subsidiary
Borrower in the Borrowing Subsidiary Agreement pursuant to which such Subsidiary
Borrower became a Borrower hereunder shall prove to have been incorrect in any
material respect when made; or
(c) (i)
The Company shall fail to perform or observe any term, covenant or agreement
contained in Sections 5.04, 5.05, 5.08 or 5.09 or Article VI, or
(ii) the Company shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement on its part to be performed or observed
if such failure shall remain unremedied for 10 days after written notice
thereof shall have been given to the Company by the Administrative Agent or any
Lender; or
(d) The
Company or any of its Subsidiaries shall fail to pay any principal of or premium
or interest on any Debt that is outstanding in a principal or notional amount of
at least $50,000,000 in the aggregate (but excluding Debt outstanding hereunder)
of the Company or such Subsidiary (as the case may be), when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid or redeemed (other
than by a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
or
45
(e) The
Company or any of its Subsidiaries shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Company or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of
30 days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Company or any of its
Subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this clause (e); or
(f) one
or more judgments for the payment of money in an aggregate amount in excess of
$50,000,000 shall be rendered against the Company, any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of
thirty (30) consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Company or any Subsidiary to enforce any such
judgment; or
(g) (i)
Any Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of Voting
Stock of the Company (or other securities convertible into such Voting Stock)
representing 30% or more of the combined voting power of all Voting Stock of the
Company; or (ii) during any period of up to 24 consecutive months,
commencing after the date of this Agreement, individuals who at the beginning of
such 24-month period were directors of the Company shall cease for any reason
(other than due to death or disability) to constitute a majority of the board of
directors of the Company (except to the extent that individuals who at the
beginning of such 24-month period were replaced by individuals (x) elected
by a majority of the remaining members of the board of directors of the Company
or (y) nominated for election by a majority of the remaining members of the
board of directors of the Company and thereafter elected as directors by the
shareholders of the Company); or
(h) The
Company or any of its ERISA Affiliates shall incur, or shall be reasonably
likely to incur liability in excess of $50,000,000 in the aggregate as a result
of one or more of the following:
(i) the
occurrence of any ERISA Event;
(ii) the
partial or complete withdrawal of the Company or any of its ERISA Affiliates
from a Multiemployer Plan; or
(iii) the
reorganization or termination of a Multiemployer Plan; (1) so long as any
Subsidiary of the Company is a Subsidiary Borrower, any provision of
Article X shall for any reason cease to be valid and binding on or
enforceable against the Company, or the Company shall so state in writing; then,
and in any such event, the Administrative Agent (x) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrowers,
declare the obligation of each Lender to make Loans (other than Loans made
pursuant to Section 2.06(e)) and of the Issuing Bank to issue Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, and
(ii) shall at the request, or may with the consent, of the Required
Lenders, by notice to the Borrowers, declare the Loans, all interest thereon and
all other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Loans, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by each Borrower;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to the Company or any other Borrower under the Federal
Bankruptcy Code, (A) the obligation of each Lender to make Loans (other
than Loans made pursuant to Section 2.06(e)) and of the Issuing Bank to
issue Letters of Credit shall automatically be terminated and (B) the
Loans, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by each Borrower.
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SECTION
7.02. Actions in Respect of the
Letters of Credit upon Default. If any Event of Default shall
have occurred and be continuing, the Administrative Agent may with the consent,
or shall at the request, of the Required Lenders, irrespective of whether it is
taking any of the actions described in Section 7.01 or otherwise, make
demand upon the Borrowers to, and forthwith upon such demand the Borrowers will,
(a) pay to the Administrative Agent on behalf of the Lenders in same day
funds at the Administrative Agent’s office designated in such demand, for
deposit in the LC Collateral Account, an amount equal to the aggregate undrawn
Dollar Amount of all Letters of Credit then outstanding or (b) make such
other arrangements in respect of the outstanding Letters of Credit as shall be
acceptable to the Required Lenders and not more disadvantageous to the Borrowers
than clause (a); provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to any Borrower under the
Federal Bankruptcy Code, an amount equal to the aggregate undrawn Dollar Amount
of all outstanding Letters of Credit shall be immediately due and payable to the
Administrative Agent for the account of the Issuing Bank or the Lenders, as
applicable, without notice to or demand upon the Borrowers, which are expressly
waived by each Borrower, to be held in the LC Collateral Account. If
at any time an Event of Default is continuing the Administrative Agent
determines that any funds held in the LC Collateral Account are subject to any
right or claim of any Person other than the Administrative Agent, the Issuing
Bank or the Lenders or that the total amount of such funds is less than the
aggregate undrawn Dollar Amount of all outstanding Letters of Credit, the
Borrowers will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the LC
Collateral Account, an amount equal to the excess of (a) such aggregate undrawn
Dollar Amount over (b) the total amount of funds, if any, then held in the
LC Collateral Account that the Administrative Agent determines to be free and
clear of any such right and claim. Upon any LC Disbursement, to the
extent funds are on deposit in the LC Collateral Account, such funds shall be
applied to reimburse the Issuing Bank and the Lenders, as applicable, to the
extent permitted by applicable law. After all such Letters of Credit
shall have expired or been fully drawn upon and all other Obligations of the
Borrowers hereunder and under the Notes shall have been paid in full, the
balance, if any, in such LC Collateral Account shall be returned to the
Borrowers.
ARTICLE
VIII
The Administrative
Agent
Each of
the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf, including execution of the other Loan Documents, and
to exercise such powers as are delegated to the Administrative Agent by the
terms of the Loan Documents, together with such actions and powers as are
reasonably incidental thereto.
47
The bank
serving as the Administrative Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not the Administrative Agent, and such bank and its Affiliates
may accept deposits from, lend money to and generally engage in any kind of
business with Company or any Subsidiary or other Affiliate thereof as if it were
not the Administrative Agent hereunder.
The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing as directed by
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02), and (c)
except as expressly set forth in the Loan Documents, the Administrative Agent
shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Company or any of its Subsidiaries
that is communicated to or obtained by the bank serving as Administrative Agent
or any of its Affiliates in any capacity. The Administrative Agent
shall not be liable for any action taken or not taken by it with the consent or
at the request of the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
9.02) or in the absence of its own gross negligence or willful
misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Company or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with any Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection with any Loan Document, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document or (v) the satisfaction of any condition set forth in
Article IV or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to the Administrative
Agent.
The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may
consult with legal counsel (who may be counsel for the Company), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The
Administrative Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent
may perform any and all its duties and exercise its rights and powers through
their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative
Agent.
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Subject
to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Company. Upon any
such resignation, the Required Lenders shall have the right, in consultation
with the Company, to appoint a successor. If no successor shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Administrative
Agent which shall be a bank with an office in New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees
payable by any Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between such Borrower
and such successor. After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as Administrative
Agent.
Each
Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges
that it will, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or
thereunder.
None of
the Lenders, if any, identified in this Agreement as a Syndication Agent or
Co-Documentation Agent shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of such Lenders
shall have or be deemed to have a fiduciary relationship with any
Lender. Each Lender hereby makes the same acknowledgments with
respect to the relevant Lenders in their respective capacities as Syndication
Agent or Co-Documentation Agents, as applicable, as it makes with respect to the
Administrative Agent in the preceding paragraph.
Except
with respect to the exercise of setoff rights of any Lender, in accordance with
Section 9.08, the proceeds of which are applied in accordance with this
Agreement, each Lender agrees that it will not take any action, nor institute
any actions or proceedings, against any Borrower or with respect to any Loan
Document, without the prior written consent of the Required Lenders or, as may
be provided in this Agreement or the other Loan Documents, with the consent of
the Administrative Agent.
The
Lenders are not partners or co-venturers, and no Lender shall be liable for the
acts or omissions of, or (except as otherwise set forth herein in case of the
Administrative Agent) authorized to act for, any other Lender. The
Administrative Agent shall have the exclusive right on behalf of the Lenders to
enforce the payment of the principal of and interest on any Loan after the date
such principal or interest has become due and payable pursuant to the terms of
this Agreement.
ARTICLE
IX
Miscellaneous
SECTION 9.01. Notices. (a)
Except in the case of notices and other communications expressly permitted to be
given by telephone (and subject to paragraph (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
49
(i) if
to any Borrower, to it c/o DENTSPLY International Inc., 221 West Philadelphia
Street, York, Pennsylvania 17405, Attention of Treasurer (Telecopy No. (717)
849-4759); Telephone No. (717) 845-7511);
(ii) if
to the Administrative Agent, (A) in the case of Borrowings by the Company or any
Domestic Subsidiary Borrower denominated in Dollars, to JPMorgan Chase Bank,
N.A., 10 South Dearborn, 7th Floor,
Chicago, Illinois 60603, Attention of Nan Wilson (Telecopy No. (888) 208-7168)
and (B) in the case of Borrowings by any Foreign Subsidiary Borrower or
Borrowings denominated in Foreign Currencies, to J.P. Morgan Europe Limited, 125
London Wall, London EC2Y 5AJ, Attention of Loan and Agency Nichola Hall
(Telecopy No. 44 207 777 2360), and in each case with a copy to JPMorgan Chase
Bank, N.A., 277 Park Avenue, 23rd Floor,
New York, New York 10172, Attention of James A. Knight (Telecopy No. (646)
534-3081;
(iii) if
to the Issuing Bank, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn,
7th
Floor, Chicago, Illinois 60603, Attention of Kenyae Mosley (Telecopy No. (312)
732-2729);
(iv) if
to the Swingline Lender, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn,
7th
Floor, Chicago, Illinois 60603, Attention of Nan Wilson (Telecopy No. (888)
208-7168); and
(v) if
to any other Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
(b) Notices
and other communications to the Lenders hereunder may be delivered or furnished
by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the
foregoing shall not apply to notices pursuant to Article II unless otherwise
agreed by the Administrative Agent and the applicable Lender. The
Administrative Agent or the Company may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.
(c) Any
party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 9.02. Waivers;
Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent,
the Issuing Bank and the Lenders hereunder and under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or
consent to any departure by any Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality
of the foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.
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(b) Except
as provided in Section 2.20 with respect to an Incremental Term Loan Amendment,
neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrowers and the Required Lenders or by the Borrowers and the
Administrative Agent with the consent of the Required Lenders; provided that no such
agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender directly affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of
any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender directly affected thereby, (iv) change Section 2.18(b) or
(d) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) change any of the
provisions of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender (it being
understood that, solely with the consent of the parties prescribed by Section
2.20 to be parties to an Incremental Term Loan Amendment, Incremental Term Loans
may be included in the determination of Required Lenders on substantially the
same basis as the Commitments and the Revolving Loans are included on the
Effective Date) or (vi) release the Company from its obligations under Article X
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Issuing Bank or the Swingline Lender hereunder without
the prior written consent of the Administrative Agent, the Issuing Bank or the
Swingline Lender, as the case may be.
(c) Notwithstanding
the foregoing, this Agreement and any other Loan Document may be amended (or
amended and restated) with the written consent of the Required Lenders, the
Administrative Agent and the Borrowers to each relevant Loan Document (x) to add
one or more credit facilities (in addition to the Incremental Term Loans
pursuant to an Incremental Term Loan Amendment) to this Agreement and to permit
extensions of credit from time to time outstanding thereunder and the accrued
interest and fees in respect thereof to share ratably in the benefits of this
Agreement and the other Loan Documents with the Revolving Loans, Incremental
Term Loans and the accrued interest and fees in respect thereof and (y) to
include appropriately the Lenders holding such credit facilities in any
determination of the Required Lenders and Lenders.
(d) If,
in connection with any proposed amendment, waiver or consent requiring the
consent of “each Lender” or “each Lender directly affected thereby,” the consent
of the Required Lenders is obtained, but the consent of other necessary Lenders
is not obtained (any such Lender whose consent is necessary but not obtained
being referred to herein as a “Non-Consenting
Lender”), then the Company may elect to replace a Non-Consenting Lender
as a Lender party to this Agreement, provided that, concurrently with such
replacement, (i) another bank or other entity which is reasonably satisfactory
to the Company and the Administrative Agent shall agree, as of such date, to
purchase for cash the Loans and other Obligations due to the Non-Consenting
Lender pursuant to an Assignment and Assumption and to become a Lender for all
purposes under this Agreement and to assume all obligations of the
Non-Consenting Lender to be terminated as of such date and to comply with the
requirements of clause (b) of Section 9.04, and (ii) each Borrower shall pay to
such Non-Consenting Lender in same day funds on the day of such replacement (1)
all interest, fees and other amounts then accrued but unpaid to such
Non-Consenting Lender by such Borrower hereunder to and including the date of
termination, including without limitation payments due to such Non-Consenting
Lender under Sections 2.15 and 2.17, and (2) an amount, if any, equal to the
payment which would have been due to such Lender on the day of such replacement
under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on
such date rather than sold to the replacement Lender.
51
(e) Notwithstanding
anything to the contrary herein the Administrative Agent may, with the consent
of the Borrowers only, amend, modify or supplement this Agreement or any of the
other Loan Documents to cure any ambiguity, omission, mistake, defect or
inconsistency.
SECTION 9.03. Expenses;
Indemnity; Damage Waiver. (a) The Company shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the syndication and
distribution (including, without limitation, via the internet or through a
service such as Intralinks) of the credit facilities provided for herein, the
preparation and administration of this Agreement and the other Loan Documents or
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement and
any other Loan Document, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The
Company shall indemnify the Administrative Agent, the Issuing Bank and each
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties hereto of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Company or any of its
Subsidiaries, or any Environmental Liability related in any way to the Company
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) To
the extent that the Company fails to pay any amount required to be paid by it to
the Administrative Agent, the Issuing Bank or the Swingline Lender under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may
be, such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount (it being understood that the Company’s failure to pay any such amount
shall not relieve the Company of any default in the payment thereof); provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity
as such.
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(d) To
the extent permitted by applicable law, no Borrower shall assert, and each
Borrower hereby waives, any claim against any Indemnitee (i) for any damages
arising from the use by others of information or other materials obtained
through telecommunications, electronic or other information transmission systems
(including the Internet), or (ii) on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby or
thereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All
amounts due under this Section shall be payable not later than fifteen (15) days
after written demand therefor.
SECTION 9.04. Successors
and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that (i) no Borrower
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment
or transfer by any Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal
or equitable right, remedy or claim under or by reason of this
Agreement.
(b)(i)
Subject to the conditions set forth in paragraph (b)(ii) below, any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:
(A) the
Company, provided that no
consent of the Company shall be required for an assignment to a Lender, an
Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred
and is continuing, any other assignee;
(B) the
Administrative Agent; and
(C) the
Issuing Bank.
(ii) Assignments
shall be subject to the following additional conditions:
(A)
except in the case of an assignment to a Lender or an Affiliate of a Lender or
an Approved Fund or an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans of any Class, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Company and the Administrative Agent otherwise
consent, provided that no such
consent of the Company shall be required if an Event of Default has occurred and
is continuing;
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(B) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender’s rights and obligations under this Agreement, provided
that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;
(C) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Assumption, together with a processing and recordation fee of
$3,500, such fee to be paid by either the assigning Lender or the assignee
Lender or shared between such Lenders;
(D) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an Administrative Questionnaire in which the assignee designates one or more
credit contacts to whom all syndicate-level information (which may contain
material non-public information about the Company and its affiliates and their
Related Parties or their respective securities) will be made available and who
may receive such information in accordance with the assignee’s compliance
procedures and applicable laws, including Federal and state securities laws;
and
(E) the
assignee shall not be the Company or an Affiliate of the Company.
For the
purposes of this Section 9.04(b), the term “Approved Fund” has
the following meaning:
“Approved Fund” means
any Person (other than a natural person) that is engaged in making, purchasing,
holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.
(iii) Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.15,
2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.
(iv) The
Administrative Agent, acting for this purpose as an agent of each Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”). The
entries in the Register shall be conclusive, and the Borrowers, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the
Company, the Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.
54
(v) Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e),
2.07(b), 2.18(e) or 9.03(c), the Administrative Agent shall have no obligation
to accept such Assignment and Assumption and record the information therein in
the Register unless and until such payment shall have been made in full,
together with all accrued interest thereon. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.
(c) (i) Any
Lender may, without the consent of the Company, the Administrative Agent, the
Issuing Bank or the Swingline Lender, sell participations to one or more banks
or other entities (a “Participant”) in all
or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it); provided that (A)
such Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrowers, the Administrative Agent,
the Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such
Participant. Subject to paragraph (c)(ii) of this Section, each
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section. To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(d) as though it were a
Lender.
(ii) A
Participant shall not be entitled to receive any greater payment under Section
2.15 or 2.17 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Company’s prior written
consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.17 unless the Company
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Company, to comply with Section 2.17(e) as though
it were a Lender.
(d) Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such Lender,
including without limitation any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
55
SECTION 9.05. Survival. All
covenants, agreements, representations and warranties made by the Borrowers in
the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not expired or terminated. The provisions of
Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any other Loan Document or any provision hereof or
thereof.
SECTION 9.06. Counterparts;
Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement, the other Loan
Documents and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by facsimile or other
electronic imaging shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.07. Severability. Any
provision of any Loan Document held to be invalid, illegal or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions thereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
SECTION 9.08. Right of
Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final and in whatever currency denominated) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of any Borrower against any of and all of the Obligations held by
such Lender, irrespective of whether or not such Lender shall have made any
demand under the Loan Documents and although such obligations may be unmatured,
provided that the deposits and other indebtedness owing by any Lender to the
Company or any Borrower organized under the laws of any political subdivision of
the United States shall be set-off prior to the set-off of the deposits or other
indebtedness owed to any other Borrower. The rights of each Lender
under this Section are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
SECTION 9.09. Governing
Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in
accordance with and governed by the law of the State of New
York.
56
(b) Each
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or any other Loan Document
against any Borrower or its properties in the courts of any
jurisdiction.
(c) Each
Borrower hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Each Subsidiary Borrower
irrevocably designates and appoints the Company, as its authorized agent, to
accept and acknowledge on its behalf, service of any and all process which may
be served in any suit, action or proceeding of the nature referred to in Section
9.09(b) in any federal or New York State court sitting in New York
City. The Company hereby represents, warrants and confirms that the
Company has agreed to accept such appointment. Said designation and
appointment shall be irrevocable by each such Subsidiary Borrower until all
Loans, all reimbursement obligations, interest thereon and all other amounts
payable by such Subsidiary Borrower hereunder and under the other Loan Documents
shall have been paid in full in accordance with the provisions hereof and
thereof and such Subsidiary Borrower shall have been terminated as a Borrower
hereunder pursuant to Section 2.23. Each Subsidiary Borrower hereby
consents to process being served in any suit, action or proceeding of the nature
referred to in Section 9.09(b) in any federal or New York State court sitting in
New York City by service of process upon the Company as provided in this Section
9.09(d); provided that, to the
extent lawful and possible, notice of said service upon such agent shall be
mailed by registered or certified air mail, postage prepaid, return receipt
requested, to the Company and (if applicable to) such Subsidiary Borrower at its
address set forth in the Borrowing Subsidiary Agreement to which it is a party
or to any other address of which such Subsidiary Borrower shall have given
written notice to the Administrative Agent (with a copy thereof to the
Company). Each Subsidiary Borrower irrevocably waives, to the fullest
extent permitted by law, all claim of error by reason of any such service in
such manner and agrees that such service shall be deemed in every respect
effective service of process upon such Subsidiary Borrower in any such suit,
action or proceeding and shall, to the fullest extent permitted by law, be taken
and held to be valid and personal service upon and personal delivery to such
Subsidiary Borrower. To the extent any Subsidiary Borrower has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution of a judgment, execution or otherwise), each
Subsidiary Borrower hereby irrevocably waives such immunity in respect of its
obligations under the Loan Documents. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
57
SECTION 9.10. WAIVER OF
JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article
and Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this
Agreement.
SECTION 9.12. Confidentiality. Each
of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies under this Agreement or any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i)
any assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to any Borrower and its obligations, (g) with the consent of the
Company or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential
basis from a source other than the Company. For the purposes of this
Section, “Information” means
all information received from the Company relating to the Company or its
business, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to disclosure by the Company; provided that, in the
case of information received from the Company after the date hereof, such
information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.13. USA PATRIOT
Act. Each Lender that is subject to the requirements of the
Patriot Act hereby notifies each Borrower that pursuant to the requirements of
the Patriot Act, it is required to obtain, verify and record information that
identifies such Borrower, which information includes the name and address of
such Borrower and other information that will allow such Lender to identify such
Borrower in accordance with the Patriot Act.
58
ARTICLE
X
Company
Guarantee
In order
to induce the Lenders to extend credit to the other Borrowers hereunder, but
subject to the last sentence of this Article X, the Company hereby irrevocably
and unconditionally guarantees, as a primary obligor and not merely as a surety,
the payment when and as due of the Obligations of such other
Borrowers. The Company further agrees that the due and punctual
payment of such Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain bound upon
its guarantee hereunder notwithstanding any such extension or renewal of any
such Obligation.
The
Company waives presentment to, demand of payment from and protest to any
Borrower of any of the Obligations, and also waives notice of acceptance of its
obligations and notice of protest for nonpayment. The obligations of
the Company hereunder shall not be affected by (a) the failure of the
Administrative Agent, the Issuing Bank or any Lender to assert any claim or
demand or to enforce any right or remedy against any Borrower under the
provisions of this Agreement, any other Loan Document or otherwise; (b) any
extension or renewal of any of the Obligations; (c) any rescission, waiver,
amendment or modification of, or release from, any of the terms or provisions of
this Agreement, or any other Loan Document or agreement; (d) any default,
failure or delay, willful or otherwise, in the performance of any of the
Obligations; (e) the failure of the Administrative Agent to take any steps to
perfect and maintain any security interest in, or to preserve any rights to, any
security or collateral for the Obligations, if any; (f) any change in the
corporate, partnership or other existence, structure or ownership of any
Borrower or any other guarantor of any of the Obligations; (g) the
enforceability or validity of the Obligations or any part thereof or the
genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Obligations or any part thereof, or
any other invalidity or unenforceability relating to or against any Borrower or
any other guarantor of any of the Obligations, for any reason related to this
Agreement, any Swap Agreement, any Banking Services Agreement, any other Loan
Document, or any provision of applicable law, decree, order or regulation of any
jurisdiction purporting to prohibit the payment by the Company or any other
guarantor of the Obligations, of any of the Obligations or otherwise affecting
any term of any of the Obligations; or (h) any other act, omission or delay to
do any other act which may or might in any manner or to any extent vary the risk
of the Company or otherwise operate as a discharge of a guarantor as a matter of
law or equity or which would impair or eliminate any right of the Company to
subrogation.
The
Company further agrees that its agreement hereunder constitutes a guarantee of
payment when due (whether or not any bankruptcy or similar proceeding shall have
stayed the accrual or collection of any of the Obligations or operated as a
discharge thereof) and not merely of collection, and waives any right to require
that any resort be had by the Administrative Agent, the Issuing Bank or any
Lender to any balance of any deposit account or credit on the books of the
Administrative Agent, the Issuing Bank or any Lender in favor of any Borrower or
any other Person.
The
obligations of the Company hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, and shall not be subject
to any defense or set-off, counterclaim, recoupment or termination whatsoever,
by reason of the invalidity, illegality or unenforceability of any of the
Obligations, any impossibility in the performance of any of the Obligations or
otherwise.
The
Company further agrees that its obligations hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
the Administrative Agent, the Issuing Bank or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.
59
In
furtherance of the foregoing and not in limitation of any other right which the
Administrative Agent, the Issuing Bank or any Lender may have at law or in
equity against the Company by virtue hereof, upon the failure of any other
Borrower to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, the Company
hereby promises to and will, upon receipt of written demand by the
Administrative Agent, the Issuing Bank or any Lender, forthwith pay, or cause to
be paid, to the Administrative Agent, the Issuing Bank or any Lender in cash an
amount equal to the unpaid principal amount of such Obligations then due,
together with accrued and unpaid interest thereon. The Company
further agrees that if payment in respect of any Obligation shall be due in a
currency other than Dollars and/or at a place of payment other than
New York, Chicago or any other Eurocurrency Payment Office and if, by
reason of any Change in Law, disruption of currency or foreign exchange markets,
war or civil disturbance or other event, payment of such Obligation in such
currency or at such place of payment shall be impossible or, in the reasonable
judgment of the Administrative Agent, the Issuing Bank or any Lender,
disadvantageous to the Administrative Agent, the Issuing Bank or any Lender in
any material respect, then, at the election of the Administrative Agent, the
Company shall make payment of such Obligation in Dollars (based upon the
applicable Equivalent Amount in effect on the date of payment) and/or in
New York, Chicago or such other Eurocurrency Payment Office as is
designated by the Administrative Agent and, as a separate and independent
obligation, shall indemnify the Administrative Agent, the Issuing Bank and any
Lender against any losses or reasonable out-of-pocket expenses that it shall
sustain as a result of such alternative payment.
Upon
payment by the Company of any sums as provided above, all rights of the Company
against any Borrower arising as a result thereof by way of right of subrogation
or otherwise shall in all respects be subordinated and junior in right of
payment to the prior indefeasible payment in full in cash of all the Obligations
owed by the Company to the Administrative Agent, the Issuing Bank and the
Lenders.
Nothing
shall discharge or satisfy the liability of the Company hereunder except the
full performance and payment of the Obligations.
[Signature
Pages Follow]
60
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
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DENTSPLY
INTERNATIONAL INC., as the
Company
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By
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Name:
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Title:
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By
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Name:
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Title:
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JPMORGAN
CHASE BANK, N.A., individually
as
a Lender, as the Swingline Lender, as the
Issuing
Bank and as Administrative Agent
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By
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Name:
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Title:
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WELLS
FARGO BANK, NATIONAL
ASSOCIATION,
individually as a Lender and as
Syndication
Agent
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By
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Name:
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Title:
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[OTHER
AGENTS AND LENDERS]
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Signature
Page to Credit Agreement
DENTSPLY
International Inc.
SCHEDULE
2.01
COMMITMENTS
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LENDER
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COMMITMENT
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JPMORGAN
CHASE BANK, N.A.
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$ | 35,000,000 | ||
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WELLS
FARGO BANK, NATIONAL ASSOCIATION
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$ | 35,000,000 | ||
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BANK
OF TOKYO-MITSUBISHI UFJ TRUST COMPANY
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$ | 25,000,000 | ||
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CITIBANK,
N.A.
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$ | 25,000,000 | ||
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COMMERZBANK
AG, NEW YORK AND GRAND CAYMAN BRANCHES
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$ | 25,000,000 | ||
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BANK
OF AMERICA, N.A.
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$ | 25,000,000 | ||
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PNC
BANK, NATIONAL ASSOCIATION
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$ | 15,000,000 | ||
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THE
TORONTO-DOMINION BANK, NEW YORK BRANCH
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$ | 15,000,000 | ||
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AGGREGATE
COMMITMENT
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$ | 200,000,000 | ||
SCHEDULE
2.02
MANDATORY
COST
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1.
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The
Mandatory Cost is an addition to the interest rate to compensate Lenders
for the cost of compliance with (a) the requirements of the Bank of
England and/or the Financial Services Authority (or, in either case, any
other authority which replaces all or any of its functions) or (b) the
requirements of the European Central
Bank.
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2.
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On
the first day of each Interest Period (or as soon as possible thereafter)
the Administrative Agent shall calculate, as a percentage rate, a rate
(the “Associated
Costs Rate”) for each Lender, in accordance with the paragraphs set
out below. The Mandatory Cost will be calculated by the
Administrative Agent as a weighted average of the Lenders’ Associated
Costs Rates (weighted in proportion to the percentage participation of
each Lender in the relevant Loan) and will be expressed as a percentage
rate per annum.
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3.
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The
Associated Costs Rate for any Lender lending from a Facility Office in a
Participating Member State will be the percentage notified by that Lender
to the Administrative Agent. This percentage will be certified
by that Lender in its notice to the Administrative Agent to be its
reasonable determination of the cost (expressed as a percentage of that
Lender’s participation in all Loans made from that Facility Office) of
complying with the minimum reserve requirements of the European Central
Bank in respect of loans made from that Facility
Office.
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4.
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The
Associated Costs Rate for any Lender lending from a Facility Office in the
United Kingdom will be calculated by the Administrative Agent as
follows:
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(a)
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in
relation to a Loan in Pounds
Sterling:
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per cent. per annum|
(b)
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in
relation to a Loan in any currency other than Pounds
Sterling:
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per cent. per annum.Where:
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A
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is
the percentage of Eligible Liabilities (assuming these to be in excess of
any stated minimum) which that Lender is from time to time required to
maintain as an interest free cash ratio deposit with the Bank of England
to comply with cash ratio
requirements.
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B
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is
the percentage rate of interest (excluding the Applicable Rate and the
Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of
interest specified in Section 2.13(c)) payable for the relevant Interest
Period on the Loan.
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C
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is
the percentage (if any) of Eligible Liabilities which that Lender is
required from time to time to maintain as interest bearing Special
Deposits with the Bank of
England.
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D
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is
the percentage rate per annum payable by the Bank of England to the
Administrative Agent on interest bearing Special
Deposits.
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E
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is
designed to compensate Lenders for amounts payable under the Fees Rules
and is calculated by the Administrative Agent as being the average of the
most recent rates of charge supplied by the Reference Banks to the
Administrative Agent pursuant to paragraph 7 below and expressed in pounds
per £1,000,000.
|
|
5.
|
For
the purposes of this Schedule:
|
|
(a)
|
“Eligible
Liabilities” and “Special
Deposits” have the meanings given to them from time to time under
or pursuant to the Bank of England Act 1998 or (as may be appropriate) by
the Bank of England;
|
|
(b)
|
“Facility
Office” means the office or offices notified by a Lender to the
Administrative Agent in writing on or before the date it becomes a Lender
(or, following that date, by not less than five Business Days’ written
notice) as the office or offices through which it will perform its
obligations under this
Agreement.
|
|
|
(c)
|
“Fees
Rules” means the rules on periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force from
time to time in respect of the payment of fees for the acceptance of
deposits;
|
|
(d)
|
“Fee
Tariffs” means the fee tariffs specified in the Fees Rules under
the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero
rated fee required pursuant to the Fees Rules but taking into account any
applicable discount rate);
|
|
(e)
|
“Participating
Member State” means any member state of the European Union that
adopts or has adopted the euro as its lawful currency in accordance with
legislation of the European Union relating to economic and monetary
union.
|
|
(f)
|
“Reference
Banks” means, in relation to Mandatory Cost, the principal London
offices of JPMorgan Chase Bank,
N.A.
|
|
(g)
|
“Tariff
Base” has the meaning given to it in, and will be calculated in
accordance with, the Fees
Rules.
|
|
(h)
|
“Unpaid
Sum” means any sum due and payable but unpaid by any Borrower under
the Loan Documents.
|
|
6.
|
In
application of the above formulae, A, B, C and D will be included in the
formulae as percentages (i.e. 5 per cent. will be included in the formula
as 5 and not as 0.05). A negative result obtained by
subtracting D from B shall be taken as zero. The resulting
figures shall be rounded to four decimal
places.
|
2
|
7.
|
If
requested by the Administrative Agent, each Reference Bank shall, as soon
as practicable after publication by the Financial Services Authority,
supply to the Administrative Agent, the rate of charge payable by that
Reference Bank to the Financial Services Authority pursuant to the Fees
Rules in respect of the relevant financial year of the Financial Services
Authority (calculated for this purpose by that Reference Bank as being the
average of the Fee Tariffs applicable to that Reference Bank for that
financial year) and expressed in pounds per £1,000,000 of the Tariff Base
of that Reference Bank.
|
|
8.
|
Each
Lender shall supply any information required by the Administrative Agent
for the purpose of calculating its Associated Costs Rate. In
particular, but without limitation, each Lender shall supply the following
information on or prior to the date on which it becomes a
Lender:
|
(a) the
jurisdiction of its Facility Office; and
(b) any
other information that the Administrative Agent may reasonably require for such
purpose.
Each
Lender shall promptly notify the Administrative Agent of any change to the
information provided by it pursuant to this paragraph.
|
9.
|
The
percentages of each Lender for the purpose of A and C above and the rates
of charge of each Reference Bank for the purpose of E above shall be
determined by the Administrative Agent based upon the information supplied
to it pursuant to paragraphs 7 and 8 above and on the assumption that,
unless a Lender notifies the Administrative Agent to the contrary, each
Lender’s obligations in relation to cash ratio deposits and Special
Deposits are the same as those of a typical bank from its jurisdiction of
incorporation with a Facility Office in the same jurisdiction as its
Facility Office.
|
|
10.
|
The
Administrative Agent shall have no liability to any person if such
determination results in an Associated Costs Rate which over or under
compensates any Lender and shall be entitled to assume that the
information provided by any Lender or Reference Bank pursuant to
paragraphs 3, 7 and 8 above is true and correct in all
respects.
|
|
11.
|
The
Administrative Agent shall distribute the additional amounts received as a
result of the Mandatory Cost to the Lenders on the basis of the Associated
Costs Rate for each Lender based on the information provided by each
Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8
above.
|
|
12.
|
Any
determination by the Administrative Agent pursuant to this Schedule in
relation to a formula, the Mandatory Cost, an Associated Costs Rate or any
amount payable to a Lender shall, in the absence of manifest error, be
conclusive and binding on all parties
hereto.
|
|
13.
|
The
Administrative Agent may from time to time, after consultation with the
Company and the relevant Lenders, determine and notify to all parties
hereto any amendments which are required to be made to this Schedule 2.02
in order to comply with any change in law, regulation or any requirements
from time to time imposed by the Bank of England, the Financial Services
Authority or the European Central Bank (or, in any case, any other
authority which replaces all or any of its functions) and any such
determination shall, in the absence of manifest error, be conclusive and
binding on all parties hereto.
|
3
EXHIBIT
A
ASSIGNMENT
AND ASSUMPTION
This
Assignment and Assumption (the “Assignment and Assumption”) is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of
Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (as amended, the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment and Assumption as if set forth herein in
full.
For an
agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swingline
loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned
Interest”). Such sale and assignment is without recourse to
the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.
|
1.
|
Assignor:
|
|
|
|
2.
|
Assignee:
|
|
|
|
[and
is an Affiliate/Approved Fund of [identify Lender]1]
|
|||
|
3.
|
Borrowers:
|
DENTSPLY International Inc. and certain Subsidiary
Borrowers
|
|
|
4.
|
Administrative
Agent:
|
JPMorgan
Chase Bank, N.A., as the administrative agent under the Credit
Agreement
|
|
|
5.
|
Credit
Agreement:
|
The
Credit Agreement dated as of May 7, 2010 among DENTSPLY International
Inc., the Subsidiary Borrowers from time to time parties thereto, the
Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative
Agent, and the other agents parties thereto
|
|
|
6.
|
Assigned
Interest:
|
||
1 Select as
applicable.
|
Aggregate
Amount of
Commitment/Loans
for all
Lenders
|
Amount
of
Commitment/
Loans
Assigned
|
Percentage
Assigned
of
Commitment/Loans2
|
||||||||
| $ | $ | % | ||||||||
| $ | $ | % | ||||||||
| $ | $ | % | ||||||||
Effective
Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
The terms
set forth in this Assignment and Assumption are hereby agreed to:
|
ASSIGNOR
|
||
|
[NAME
OF ASSIGNOR]
|
||
|
By:
|
|
|
|
Title:
|
||
|
ASSIGNEE
|
||
|
[NAME
OF ASSIGNEE]
|
||
|
By:
|
|
|
|
Title:
|
||
|
Consented
to and Accepted:
|
|
|
JPMORGAN
CHASE BANK, N.A., as
Administrative
Agent and Issuing Bank
|
|
|
By:
|
|
|
Title:
|
|
|
[Consented
to:]3
|
|
|
DENTSPLY
INTERNATIONAL INC.
|
|
|
By:
|
|
|
Title:
|
|
2 Set
forth, so at least 9 decimals, as a percentage of the Commitment/Loans of all
Lenders thereunder.
3 To be
added only if the consent of the Company is required by the terms of the Credit
Agreement.
2
ANNEX
I
STANDARD
TERMS AND CONDITIONS FOR
ASSIGNMENT
AND ASSUMPTION
1. Representations and
Warranties.
1.1 Assignor. The
Assignor (a) represents and warrants that (i) it is the legal and beneficial
owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of
any lien, encumbrance or other adverse claim and (iii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated
hereby; and (b) assumes no responsibility with respect to (i) any statements,
warranties or representations made in or in connection with the Credit Agreement
or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
collateral thereunder, (iii) the financial condition of the Company, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iv) the performance or observance by the Company, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.
1.2. Assignee. The
Assignee (a) represents and warrants that (i) it has full power and authority,
and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become
a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any,
specified in the Credit Agreement that are required to be satisfied by it in
order to acquire the Assigned Interest and become a Lender, (iii) from and after
the Effective Date, it shall be bound by the provisions of the Credit Agreement
as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iv) it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 5.09 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
and Assumption is any documentation required to be delivered by it pursuant to
the terms of the Credit Agreement, duly completed and executed by the Assignee;
and (b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, 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 Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
2. Payments. From
and after the Effective Date, the Administrative Agent shall make all payments
in respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to but
excluding the Effective Date and to the Assignee for amounts which have accrued
from and after the Effective Date.
3. General Provisions.
This Assignment and Assumption shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number
of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page
of this Assignment and Assumption by telecopy shall be effective as delivery of
a manually executed counterpart of this Assignment and
Assumption. This Assignment and Assumption shall be governed by, and
construed in accordance with, the law of the State of New York.
EXHIBIT
B
OPINION
OF COUNSEL FOR THE BORROWERS
May 7,
2010
To the
Lenders and the
Administrative
Agent Referred to Below
c/o
JPMorgan Chase Bank, N.A.,
as
Administrative Agent
277 Park
Avenue
New York,
New York 10172
|
Re:
|
Credit Agreement dated
May 7, 2010
|
Ladies
and Gentlemen:
I am
General Counsel for DENTSPLY International Inc., a Delaware corporation (the
“Company”) and
the SUBSIDIARY BORROWERS from time to time party to the Credit Agreement (as
defined below) (collectively with the Company, the “Loan Parties”), in
connection with (i) the Credit Agreement dated as of May 7, 2010 (the “Credit Agreement”),
among the Company, the Subsidiary Borrowers party thereto, the banks and other
financial institutions identified therein as Lenders, and JPMorgan Chase Bank,
N.A., as Administrative Agent and (ii) any ancillary documents referenced in the
Credit Agreement (collectively with the Credit Agreement, the “Loan
Documents”). Terms defined in the Credit Agreement are used
herein with the same meanings.
I have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the
basis of the foregoing, I am of the opinion that:
1. Each
Loan Party (a) is a corporation or similar legal entity, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, (b) has all requisite power and authority to carry on its business
as now conducted and (c) except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
2. The
Transactions are within each Loan Party’s corporate/limited liability company
powers and have been duly authorized by all necessary corporate/company and, if
required, stockholder or other equity holder action. Each Loan
Document has been duly executed and delivered by each Loan Party party thereto
and constitutes a legal, valid and binding obligation of such Loan Party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
3. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Loan Party or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon any Loan Party
or any of its Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by any Loan Party or any of its Subsidiaries, and
(d) will not result in the creation or imposition of any Lien on any asset of
any Loan Party or any of its Subsidiaries.
4. There
are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to our knowledge, threatened against or affecting
any Loan Party or any of its Subsidiaries (a) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect or (b) that involve any Loan Document or the
Transactions.
5. None
of the Loan Parties is an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940.
The
opinions set forth in this letter with respect to enforceability are further
subject to the effects of laws relating to fraudulent conveyances, transfers and
obligations, including, without limitation, Section 548 of the Federal
Bankruptcy Code, the Uniform Fraudulent Conveyance Act and other laws in pari
materia. Moreover, provisions of the Credit Agreement that
permit the Lenders to take action or make determinations, or to benefit from
indemnities and similar undertakings of the Company, may be subject to a
requirement that such action be taken or such determinations be made, and that
any action or inaction by the Lenders that may give rise to a request for
payment under such an undertaking be taken or not taken, on a reasonable basis
and in good faith. The foregoing opinions with respect to
enforceability are further qualified by reference to the fact that certain of
the remedies and waivers set forth in the Credit Agreement may be rendered
unavailable or unenforceable under applicable principles of law or equity but,
in my opinion, such unavailability or unenforceability should not render other
remedies which are set forth in the Credit Agreement unenforceable or otherwise
inadequate for the practical realization of the benefits intended to be provided
by the Credit Agreement.
I express
no opinion as to the effect on the foregoing opinions of any law or regulation
applicable to the Company or the transactions contemplated by the Credit
Agreement, as a consequence of any Lender’s involvement in such transactions or
because of such Lender’s legal or regulatory status or any other facts
specifically pertaining to such Lender.
My
opinions are issued as of the date hereof and are limited to the laws now in
effect as to which my opinions relate and facts and circumstances in existence
on the date hereof, and I assume no undertaking to advise you of any changes in
the opinions expressed herein as a result of any change in any laws, facts or
circumstances which may come to my attention after the date hereof.
I am
qualified to practice law in the State of Pennsylvania and do not purport to be
expert on, or to express any opinion herein concerning, any law other than the
laws of the State of Pennsylvania, the Delaware General Corporation Law and the
federal laws of the United States of America. As the provisions of
the Credit Agreement are governed by the laws of the State of New York, I have
for the purpose of this opinion assumed that the provisions of the law of the
State of New York are substantially similar to the laws of the Commonwealth of
Pennsylvania.
2
This
letter is furnished solely for your benefit in connection with matters relating
to the Credit Agreement and may not be relied upon by any other person or for
any other purpose without my prior written consent, other than your successors
and assigns as Lenders and Persons that acquire participations in your Loans in
accordance with the terms and provisions of the Credit Agreement.
Very
truly yours,
Brian M.
Addison
Vice
President, Secretary and
General
Counsel
3
EXHIBIT
C
FORM OF
INCREASING LENDER SUPPLEMENT
INCREASING LENDER SUPPLEMENT, dated
__________, 20___ (this “Supplement”), by and
among each of the signatories hereto, to the Credit Agreement, dated as of May
7, 2010 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit
Agreement”), among DENTSPLY International Inc. (the “Company”), the
Subsidiary Borrowers from time to time party thereto, the Lenders party thereto
and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the
“Administrative
Agent”).
WITNESSETH
WHEREAS,
pursuant to Section
2.20 of the Credit Agreement, the Company has the right, subject to the
terms and conditions thereof, to effectuate from time to time an increase in the
Aggregate Commitment and/or one or more tranches of Incremental Term Loans under
the Credit Agreement by requesting one or more Lenders to increase the amount of
its Commitment and/or to participate in such a tranche;
WHEREAS,
the Company has given notice to the Administrative Agent of its intention to
[increase the Aggregate Commitment] [and] [enter into a tranche of Incremental
Term Loans] pursuant to such Section 2.20;
and
WHEREAS,
pursuant to Section
2.20 of the Credit Agreement, the undersigned Increasing Lender now
desires to [increase the amount of its Commitment] [and] [participate in a
tranche of Incremental Term Loans] under the Credit Agreement by executing and
delivering to the Company and the Administrative Agent this
Supplement;
NOW,
THEREFORE, each of the parties hereto hereby agrees as follows:
1. The
undersigned Increasing Lender agrees, subject to the terms and conditions of the
Credit Agreement, that on the date of this Supplement it shall [have its
Commitment increased by $[__________], thereby making the aggregate amount of
its total Commitments equal to $[__________]] [and] [participate in a tranche of
Incremental Term Loans with a commitment amount equal to $[__________] with
respect thereto].
2. The
Company hereby represents and warrants that no Default or Event of Default has
occurred and is continuing on and as of the date hereof.
3. Terms
defined in the Credit Agreement shall have their defined meanings when used
herein.
4. This
Supplement shall be governed by, and construed in accordance with, the laws of
the State of New York.
5. This
Supplement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same document.
IN
WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
|
[INSERT
NAME OF INCREASING LENDER]
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Accepted
and agreed to as of the date first written above:
|
|
|
DENTSPLY
INTERNATIONAL INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Acknowledged
as of the date first written above:
|
|
|
JPMORGAN
CHASE BANK, N.A.
|
|
|
as
Administrative Agent
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
2
EXHIBIT
D
FORM OF
AUGMENTING LENDER SUPPLEMENT
AUGMENTING
LENDER SUPPLEMENT, dated __________, 20___ (this “Supplement”), to the
Credit Agreement, dated as of May 7, 2010 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”),
among DENTSPLY International Inc. (the “Company”), the
Subsidiary Borrowers from time to time party thereto, the Lenders party thereto
and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the
“Administrative
Agent”).
WITNESSETH
WHEREAS,
the Credit Agreement provides in Section 2.20 thereof
that any bank, financial institution or other entity may [extend Commitments]
[and] [participate in tranches of Incremental Term Loans] under the Credit
Agreement subject to the approval of the Company and the Administrative Agent,
by executing and delivering to the Company and the Administrative Agent a
supplement to the Credit Agreement in substantially the form of this Supplement;
and
WHEREAS,
the undersigned Augmenting Lender was not an original party to the Credit
Agreement but now desires to become a party thereto;
NOW,
THEREFORE, each of the parties hereto hereby agrees as follows:
1. The
undersigned Augmenting Lender agrees to be bound by the provisions of the Credit
Agreement and agrees that it shall, on the date of this Supplement, become a
Lender for all purposes of the Credit Agreement to the same extent as if
originally a party thereto, with a [Commitment with respect to Revolving Loans
of $[__________]] [and] [a commitment with respect to Incremental Term Loans of
$[__________]].
2. The
undersigned Augmenting Lender (a) represents and warrants that it is legally
authorized to enter into this Supplement; (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 5.09 thereof,
as applicable, and has reviewed such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Supplement; (c) agrees that it will, independently and without reliance
upon the Administrative Agent or any other Lender 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
or any other instrument or document furnished pursuant hereto or thereto; (d)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Credit Agreement
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender.
3. The
undersigned’s address for notices for the purposes of the Credit Agreement is as
follows:
[___________]
4. The
Company hereby represents and warrants that no Default or Event of Default has
occurred and is continuing on and as of the date hereof.
5. Terms
defined in the Credit Agreement shall have their defined meanings when used
herein.
6. This
Supplement shall be governed by, and construed in accordance with, the laws of
the State of New York.
7. This
Supplement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same document.
[remainder
of this page intentionally left blank]
2
IN
WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
|
[INSERT
NAME OF AUGMENTING LENDER]
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Accepted
and agreed to as of the date first written above:
|
|
|
DENTSPLY
INTERNATIONAL INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Acknowledged
as of the date first written above:
|
|
|
JPMORGAN
CHASE BANK, N.A.
|
|
|
as
Administrative Agent
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
3
EXHIBIT
E
LIST OF
CLOSING DOCUMENTS
DENTSPLY
INTERNATIONAL INC.
CERTAIN
SUBSIDIARY BORROWERS
CREDIT
FACILITIES
May 7,
2010
LIST OF
CLOSING DOCUMENTS1
A. LOAN DOCUMENTS
|
1.
|
Credit
Agreement (the “Credit
Agreement”) by and among DENTSPLY International Inc., a Delaware
corporation (the “Company”), the
Subsidiary Borrowers from time to time parties thereto (collectively with
the Company, the “Borrowers”),
the institutions from time to time parties thereto as Lenders (the “Lenders”) and
JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for
itself and the other Lenders (the “Administrative
Agent”), evidencing a revolving credit facility to the Borrowers
from the Lenders in an initial aggregate principal amount of
$200,000,000.
|
SCHEDULES
|
Schedule
2.01
|
—
|
Commitments
|
|
Schedule
2.02
|
—
|
Mandatory
Cost
|
|
Schedule
6.01
|
—
|
Existing
Liens
|
|
Schedule
6.04
|
—
|
Existing
Debt
|
EXHIBITS
|
Exhibit
A
|
—
|
Form
of Assignment and Assumption
|
|
Exhibit
B
|
—
|
Form
of Opinion of Borrowers’ Counsel
|
|
Exhibit
C
|
—
|
Form
of Increasing Lender Supplement
|
|
Exhibit
D
|
—
|
Form
of Augmenting Lender Supplement
|
|
Exhibit
E
|
—
|
List
of Closing Documents
|
|
Exhibit
F-1
|
—
|
Form
of Borrowing Subsidiary Agreement
|
|
Exhibit
F-2
|
—
|
Form
of Borrowing Subsidiary
Termination
|
|
2.
|
Notes
executed by the initial Borrowers in favor of each of the Lenders, if any,
which has requested a note pursuant to Section 2.10(e) of the Credit
Agreement.
|
1 Each capitalized term used herein and not defined herein shall have the meaning assigned to such term in the above-defined Credit Agreement. Items appearing in bold and italics shall be prepared and/or provided by the Company and/or Company’s counsel.
B. CORPORATE
DOCUMENTS
|
3.
|
Certificate
of the Secretary or an Assistant Secretary of each Borrower certifying (i)
that there have been no changes in the Certificate of Incorporation or
other charter document of such Borrower, as attached thereto and as
certified as of a recent date by the Secretary of State (or analogous
governmental entity) of the jurisdiction of its organization, since the
date of the certification thereof by such governmental entity, (ii) the
By-Laws or other applicable organizational document, as attached thereto,
of such Borrower as in effect on the date of such certification, (iii)
resolutions of the Board of Directors or other governing body of such
Borrower authorizing the execution, delivery and performance of each Loan
Document to which it is a party, and (iv) the names and true signatures of
the incumbent officers of each Borrower authorized to sign the Loan
Documents to which it is a party, and (in the case of each Borrower)
authorized to request a Borrowing or the issuance of a Letter of
Credit under the Credit
Agreement.
|
|
4.
|
Good
Standing Certificate (or analogous documentation if applicable) for each
Borrower from the Secretary of State (or analogous governmental entity) of
the jurisdiction of its organization, to the extent generally available in
such jurisdiction.
|
C. OPINIONS
5. Opinion of Brian
M. Addison, general counsel for the Borrowers.
D. CLOSING CERTIFICATES AND
MISCELLANEOUS
|
6.
|
A
Certificate signed by the President, a Vice President or a Financial
Officer of the Company certifying the following: (i) all of the
representations and warranties of the Company set forth
in the Credit Agreement are true and correct and (ii) no Default has
occurred and is then
continuing.
|
|
7.
|
Payoff
documentation providing evidence satisfactory to the Administrative Agent
that the Existing Credit Agreement has been terminated and cancelled
(along with all of the agreements, documents and instruments delivered in
connection therewith) and all Debt owing thereunder has been repaid and
any and all liens thereunder have been
terminated.
|
2
EXHIBIT
F-1
[FORM
OF]
BORROWING
SUBSIDIARY AGREEMENT
BORROWING
SUBSIDIARY AGREEMENT dated as of [_____], among DENTSPLY International Inc., a
Delaware corporation (the “Company”), [Name of
Subsidiary Borrower], a [__________] (the “New Borrowing
Subsidiary”), and JPMorgan Chase Bank, N.A. as Administrative Agent (the
“Administrative
Agent”).
Reference
is hereby made to the Credit Agreement dated as of May 7, 2010 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among the Company, the Subsidiary Borrowers from time to time party thereto, the
Lenders from time to time party thereto and JPMorgan Chase Bank, N.A. as
Administrative Agent. Capitalized terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. Under the Credit Agreement, the Lenders have agreed, upon
the terms and subject to the conditions therein set forth, to make Loans to
certain Subsidiary Borrowers (collectively with the Company, the “Borrowers”), and the
Company and the New Borrowing Subsidiary desire that the New Borrowing
Subsidiary become a Subsidiary Borrower. In addition, the New
Borrowing Subsidiary hereby authorizes the Company to act on its behalf as and
to the extent provided for in Article II of the
Credit Agreement. [Notwithstanding the preceding
sentence, the New Borrowing Subsidiary hereby designates the following officers
as being authorized to request Borrowings under the Credit Agreement on behalf
of the New Subsidiary Borrower and sign this Borrowing Subsidiary Agreement and
the other Loan Documents to which the New Borrowing Subsidiary is, or may from
time to time become, a party: [______________].]
Each of
the Company and the New Borrowing Subsidiary represents and warrants that the
representations and warranties of the Company in the Credit Agreement relating
to the New Borrowing Subsidiary and this Agreement are true and correct on and
as of the date hereof, other than representations given as of a particular date,
in which case they shall be true and correct as of that date. [The
Company and the New Borrowing Subsidiary further represent and warrant that the
execution, delivery and performance by the New Borrowing Subsidiary of the
transactions contemplated under this Agreement and the use of any of the
proceeds raised in connection with this Agreement will not contravene or
conflict with the provisions of section 151 of the Companies Act 1985 of England
and Wales (as amended).]5[INSERT OTHER PROVISIONS
REASONABLY REQUESTED BY ADMINISTRATIVE AGENT OR ITS COUNSELS] The
Company agrees that the guaranty of the Company contained in Article X of the
Credit Agreement will apply to the Obligations of the New Borrowing
Subsidiary. Upon execution of this Agreement by each of the Company,
the New Borrowing Subsidiary and the Administrative Agent, the New Borrowing
Subsidiary shall be a party to the Credit Agreement and shall constitute a
“Subsidiary Borrower” for all purposes thereof, and the New Borrowing Subsidiary
hereby agrees to be bound by all provisions of the Credit
Agreement.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
[Signature
Page Follows]
5 To be
included only if a New Borrowing Subsidiary will be a Borrower organized under
the laws of England and Wales.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized officers as of the date first appearing
above.
|
DENTSPLY
INTERNATIONAL INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
[NAME
OF NEW BORROWING SUBSIDIARY]
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
JPMORGAN
CHASE BANK, N.A., as
Administrative
Agent
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
EXHIBIT
F-2
[FORM
OF]
BORROWING
SUBSIDIARY TERMINATION
JPMorgan
Chase Bank, N.A.
as
Administrative Agent
for the
Lenders referred to below
277 Park
Avenue
New York,
New York 10172
Attention: [__________]
[Date]
Ladies
and Gentlemen:
The
undersigned, DENTSPLY International Inc. (the “Company”), refers to
the Credit Agreement dated as of May 7, 2010 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”),
among the Company, the Subsidiary Borrowers from time to time party thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
The
Company hereby terminates the status of [______________] (the “Terminated Borrowing
Subsidiary”) as a Subsidiary Borrower under the Credit
Agreement. [The Company represents and warrants that no Loans made to
the Terminated Borrowing Subsidiary are outstanding as of the date hereof and
that all amounts payable by the Terminated Borrowing Subsidiary in respect of
interest and/or fees (and, to the extent notified by the Administrative Agent or
any Lender, any other amounts payable under the Credit Agreement) pursuant to
the Credit Agreement have been paid in full on or prior to the date hereof.]
[The Company acknowledges that the Terminated Borrowing Subsidiary shall
continue to be a Borrower until such time as all Loans made to the Terminated
Borrowing Subsidiary shall have been prepaid and all amounts payable by the
Terminated Borrowing Subsidiary in respect of interest and/or fees (and, to the
extent notified by the Administrative Agent or any Lender, any other amounts
payable under the Credit Agreement) pursuant to the Credit Agreement shall have
been paid in full, provided that the
Terminated Borrowing Subsidiary shall not have the right to make further
Borrowings under the Credit Agreement.]
[Signature
Page Follows]
This
instrument shall be construed in accordance with and governed by the laws of the
State of New York.
|
Very
truly yours,
|
|
|
DENTSPLY
INTERNATIONAL INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Copy to:
|
JPMorgan
Chase Bank, N.A.
|
|
270
Park Avenue
|
|
|
New
York, New York 10017
|
65,000,000
Swiss Francs
TWO
YEAR CREDIT AGREEMENT
Dated as
of February 24, 2010
Among
DENTSPLY
INTERNATIONAL INC.
as
Borrower
and
THE
INITIAL LENDERS NAMED HEREIN
as
Initial Lenders
and
PNC
BANK, NATIONAL ASSOCIATION
as Agent
|
Page
|
|
|
ARTICLE
I
|
|
|
DEFINITIONS
AND ACCOUNTING TERMS
|
|
|
SECTION
1.01 Certain Defined Terms
|
1
|
|
SECTION
1.02 Computation of Time Periods
|
9
|
|
SECTION
1.03 Accounting Terms
|
9
|
|
ARTICLE
II
|
|
|
AMOUNTS
AND TERMS OF THE TERM LOANS
|
|
|
SECTION
2.01 The Term Loans
|
9
|
|
SECTION
2.02 Procedures for Term Loans
|
10
|
|
SECTION
2.03 [Intentionally Left Blank]
|
10
|
|
SECTION
2.04 [Intentionally Left Blank]
|
10
|
|
SECTION
2.05 [Intentionally Left Blank]
|
10
|
|
SECTION
2.06 Repayment
|
11
|
|
SECTION
2.07 Interest on Term Loans
|
11
|
|
SECTION
2.08 Interest Rate Determination
|
11
|
|
SECTION
2.09 [Intentionally Left Blank]
|
12
|
|
SECTION
2.10 Prepayments of Term Loans
|
12
|
|
SECTION
2.11 Increased Costs
|
12
|
|
SECTION
2.12 Illegality
|
13
|
|
SECTION
2.13 Payments and Computations
|
13
|
|
SECTION
2.14 Taxes
|
14
|
|
SECTION
2.15 Sharing of Payments, Etc
|
16
|
|
SECTION
2.16 Evidence of Debt
|
16
|
|
SECTION
2.17 Use of Proceeds
|
17
|
|
ARTICLE
III
|
|
|
CONDITIONS
TO EFFECTIVENESS AND LENDING
|
|
|
SECTION
3.01 Conditions Precedent to Effectiveness of Section
2.01
|
17
|
|
ARTICLE
IV
|
|
|
REPRESENTATIONS
AND WARRANTIES
|
|
|
SECTION
4.01 Representations and Warranties of the
Company
|
19
|
|
ARTICLE
V
|
|
|
COVENANTS
OF THE COMPANY
|
|
|
SECTION
5.01 Affirmative Covenants
|
20
|
|
SECTION
5.02 Negative Covenants
|
23
|
|
SECTION
5.03 Financial Covenants
|
25
|
i
|
ARTICLE
VI
|
|
|
EVENTS
OF DEFAULT
|
|
|
SECTION
6.01 Events of Default
|
25
|
|
ARTICLE
VII
|
|
|
[INTENTIONALLY
LEFT BLANK]
|
|
|
ARTICLE
VIII
|
|
|
THE
AGENT
|
|
|
SECTION
8.01 Authorization and Action
|
27
|
|
SECTION
8.02 Agent’s Reliance, Etc
|
27
|
|
SECTION
8.03 PNC and Affiliates
|
28
|
|
SECTION
8.04 Lender Credit Decision
|
28
|
|
SECTION
8.05 Indemnification
|
28
|
|
SECTION
8.06 Successor Agent
|
29
|
|
ARTICLE
IX
|
|
|
MISCELLANEOUS
|
|
|
SECTION
9.01 Amendments, Etc
|
29
|
|
SECTION
9.02 Notices
|
30
|
|
SECTION
9.03 No Waiver; Remedies
|
30
|
|
SECTION
9.04 Costs and Expenses
|
30
|
|
SECTION
9.05 Right of Set-off
|
32
|
|
SECTION
9.06 Binding Effect
|
32
|
|
SECTION
9.07 Assignments and Participations
|
33
|
|
SECTION
9.08 Confidentiality
|
35
|
|
SECTION
9.09 [Intentionally Left Blank]
|
35
|
|
SECTION
9.10 Governing Law
|
35
|
|
SECTION
9.11 Execution in Counterparts
|
35
|
|
SECTION
9.12 Judgment
|
35
|
|
SECTION
9.13 Jurisdiction, Etc
|
36
|
|
SECTION
9.14 Substitution of Currency
|
36
|
|
SECTION
9.15 [Intentionally Left Blank]
|
37
|
|
SECTION
9.16 Patriot Act Notice
|
37
|
|
SECTION
9.17 Waiver of Jury Trial
|
37
|
ii
Schedules
Schedule
I - List of Lending Offices
Schedule
5.02(a) - Existing Liens
Schedule
5.02(d) - Existing Debt
Exhibits
|
Exhibit
A
|
-
|
Form
of Note
|
|
Exhibit
B
|
-
|
Form
of Notice of Borrowing
|
|
Exhibit
C
|
-
|
Form
of Assignment and Acceptance
|
|
Exhibit
D
|
-
|
Form
of Opinion of Counsel for the
Company
|
iii
TWO YEAR
CREDIT AGREEMENT
Dated as
of February 24, 2010
DENTSPLY
INTERNATIONAL INC., a Delaware corporation (the “Company”), the banks,
financial institutions and other institutional lenders (the “Initial Lenders”) and
PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent (the
“Agent”) for
the Lenders (as hereinafter defined), agree as follows:
ARTICLE
I
DEFINITIONS AND ACCOUNTING
TERMS
SECTION 1.01 Certain Defined
Terms. As used
in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
“Affiliate” means, as
to any Person, any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person or is a director or
officer of such Person. For purposes of this definition, the term
“control” (including the terms “controlling”, “controlled by” and “under common
control with”) of a Person means the possession, direct or indirect, of the
power to vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by contract or otherwise.
“Agent’s Account”
means such account of the Agent as is designated in writing from time to time by
the Agent to the Company and the Lenders for such purpose.
“Assignment and
Acceptance” means an assignment and acceptance entered into by a Lender
and an Eligible Assignee, and accepted by the Agent, in substantially the form
of Exhibit C hereto.
“Bankruptcy Law” means
any proceeding of the type referred to in Section 6.01(e) or Title 11, U.S.
Code, or any similar foreign, federal or state law for the relief of
debtors.
“Base Rate” means for
any day, a fluctuating per annum rate of interest equal to the highest of (a)
the Prime Rate in effect on such day, (b) the Federal Funds Open Rate in effect
on such day plus ½ of 1% and (c) the Daily LIBOR Rate in effect on such day plus
one hundred basis points (1.00%). If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Open Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations in
accordance with the definition of such term, the Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in
the Base Rate due to a change in the Prime Rate, the Federal Funds Open Rate or
the Daily LIBOR Rate shall be effective on the effective date of such change in
the Prime Rate, the Federal Funds Open Rate or the Daily LIBOR
Rate, respectively.
“Business Day” means a
day of the year on which banks are not required or authorized by law to close in
Philadelphia, Pennsylvania and on which dealings are carried on in the London
interbank market and banks are open for business in London and in
Switzerland.
“Company Information”
has the meaning specified in Section 9.08.
“Consolidated” refers
to the consolidation of accounts in accordance with GAAP.
“Daily LIBOR Rate”
means, for any day, the rate per annum determined by the Agent by dividing (the
resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1%)
(a) the Published Rate by (b) a number equal to 1.00 minus the Eurocurrency Rate
Reserve Percentage. The Published Rate shall be adjusted as of each
Business Day based on changes in the Published Rate or the Eurocurrency Rate
Reserve Percentage without notice to the Company, and shall be applicable from
the effective date of any such change.
“Debt” of any Person
means, without duplication, (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person for the deferred
purchase price of property or services (other than trade payables not overdue by
more than 60 days incurred in the ordinary course of such Person’s business),
(c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all obligations of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) all obligations of such
Person as lessee under leases that have been or should be, in accordance with
GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit, (g) all obligations of such Person in respect
of Hedge Agreements, (h) all Debt of others referred to in clauses (a)
through (g) above or clause (i) below and other payment obligations
(collectively, “Guaranteed Debt”)
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement
(1) to pay or purchase such Guaranteed Debt or to advance or supply funds
for the payment or purchase of such Guaranteed Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Guaranteed Debt or to assure the holder of such Guaranteed Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective of whether
such property is received or such services are rendered) or (4) otherwise
to assure a creditor against loss, and (i) all Debt referred to in
clauses (a) through (h) above (including Guaranteed Debt) secured by
(or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Debt.
“Debt for Borrowed
Money” of any Person means all items that, in accordance with GAAP, would
be classified as indebtedness on a Consolidated balance sheet of such Person,
provided that
Debt for Borrowed Money of the Company and its Subsidiaries shall not include
Debt incurred in connection with the Consignment Agreements relating to the
consignment of precious metals between the Company and certain
counterparties.
2
“Default” means any
Event of Default or any event that would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
“Dollars” and the
“$” sign each
means lawful currency of the United States of America.
“EBITDA” means, for
any period, net income (or net loss) plus the sum of
(a) interest expense, (b) income tax expense, (c) depreciation
expense and (d) amortization expense, in each case determined in accordance
with GAAP for such period.
“Effective Date” has
the meaning specified in Section 3.01.
“Eligible Assignee”
means (i) a Lender; (ii) an Affiliate of a Lender; and (iii) any
other Person approved by the Agent and, unless an Event of Default has occurred
and is continuing at the time any assignment is effected in accordance with
Section 9.07, the Company, such approval not to be unreasonably withheld or
delayed; provided, however, that neither
the Company nor an Affiliate of the Company shall qualify as an Eligible
Assignee.
“Environmental Action”
means any action, suit, demand, demand letter, claim, notice of non-compliance
or violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages and (b) by any governmental or regulatory authority or any third
party for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
“Environmental Law”
means any federal, state, local or foreign statute, law, ordinance, rule,
regulation, code, order, judgment, decree or judicial or agency interpretation,
policy or guidance relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
“Environmental Permit”
means any permit, approval, identification number, license or other
authorization required under any Environmental Law.
“Equivalent” means, at
any time, as determined by the Agent (which determination shall be conclusive
absent manifest error), with respect to an amount of any currency (the “Reference Currency”)
which is to be computed as an equivalent amount of another currency (the “Equivalent
Currency”), the amount of such Equivalent Currency converted from such
Reference Currency using the average spot rate quoted to the Agent (based on the
market rates then prevailing and available to the Agent) or the commercial
market rate of exchange, as determined by the Agent, for the sale of such
Equivalent Currency for such Reference Currency at a time determined by the
Agent on the second Business Day immediately preceding the event for which such
calculation is made.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated and rulings issued thereunder.
3
“ERISA Affiliate”
means any Person that for purposes of Title IV of ERISA is a member of the
Company’s controlled group, or under common control with the Company, within the
meaning of Section 414 of the Internal Revenue Code.
“ERISA Event” means
(a) (i) the occurrence of a reportable event, within the meaning of
Section 4043 of ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by the PBGC, or (ii) the
requirements of subsection (1) of Section 4043(b) of ERISA (without regard to
subsection (2) of such Section) are met with respect to a contributing sponsor,
as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations at a
facility of the Company or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by the Company or any
ERISA Affiliate from a Multiple Employer Plan during a plan year for which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under Section 302(f)
of ERISA shall have been met with respect to any Plan; (g) the Adjusted
Funding Target Attainment Percentage (as defined in Section 206(g)(9) of ERISA)
of any Plan is, or is deemed to be, less than 80%; or (h) the institution
by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in
Section 4042 of ERISA that constitutes grounds for the termination of, or
the appointment of a trustee to administer, a Plan.
“Eurocurrency
Liabilities” has the meaning assigned to that term in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
“Eurocurrency Rate”
means for any Interest Period, an interest rate per annum equal to the rate
obtained by dividing (a) the rate per annum (rounded upwards to the nearest
whole multiple of 1/100 of 1% per annum determined by the Agent in accordance
with its usual procedures (which determination shall be conclusive absent
manifest error) to be the average of the London interbank offered rate of
interest per annum for deposits in Swiss Francs which appears on the relevant
Bloomberg page that displays such rates (or, if no such quotation is available
on such Bloomberg page, the rate which is quoted by another source for the
London interbank offered rates of interest for deposits in Swiss Francs selected
by the Agent), at approximately 11:00 a.m., London time, two (2) Business Days
prior to the first day of such Interest Period for delivery on the first day of
such Interest Period for a period, and in an amount, comparable to such Interest
Period and the principal amount of the Term Loans outstanding by (b) a
percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage for such
Interest Period.
“Eurocurrency Rate Reserve
Percentage” for any Interest Period, means the reserve percentage
applicable two Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
advances in Swiss Francs is determined) having a term equal to such Interest
Period.
4
“Events of Default”
has the meaning specified in Section 6.01.
“Federal Funds Open
Rate” means, for any day, the rate per annum (based on a year of 360 days
and actual days elapsed) which is the daily federal funds open rate as quoted by
ICAP North America, Inc. (or any successor) as set forth on the Bloomberg
Screen BTMM for that day opposite the caption “OPEN” (or on such other
substitute Bloomberg Screen that displays such rate), or as set forth on such
other recognized electronic source used for the purpose of displaying such rate
as selected by the Agent (an “Alternate Source”)
(or if such rate for such day does not appear on the Bloomberg Screen BTMM (or
any substitute screen) or on any Alternate Source, or if there shall at any
time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute
screen) or any Alternate Source, a comparable replacement rate determined by the
Agent at such time (which determination shall be conclusive absent manifest
error); provided however, that if such day is not a Business Day, the Federal
Funds Open Rate for such day shall be the “open” rate on the immediately
preceding Business Day. The rate of interest charged shall be adjusted as
of each Business Day based on changes in the Federal Funds Open Rate without
notice to the Company.
“GAAP” has the meaning
specified in Section 1.03.
“Hazardous Materials”
means (a) petroleum and petroleum products, byproducts or breakdown products,
radioactive materials, asbestos-containing materials, polychlorinated biphenyls
and radon gas and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or contaminant
under any Environmental Law.
“Hedge Agreements”
means interest rate swap, cap or collar agreements, interest rate future or
option contracts, currency swap agreements, currency future or option contracts
and other similar agreements.
“Interest Period”
means initially the period commencing on the Term Loan Funding Date and ending
three months after such date and, thereafter, each subsequent period commencing
on the last day of the immediately preceding Interest Period and ending three
months after such date. Accordingly, the duration of each such Interest
Period shall be three months; provided, however,
that:
(a) no
Interest Period may end after the Term Loan Maturity Date;
(b) whenever
the last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period shall occur
on the next preceding Business Day; and
5
(c) whenever
the first day of any Interest Period occurs on a day of an initial calendar
month for which there is no numerically corresponding day in the calendar month
that succeeds such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period shall end on the
last Business Day of such succeeding calendar month.
(d) at
all times, all of the Term Loans shall have the same Interest
Period.
(e) notwithstanding
the foregoing, as provided in Section 2.08(c) hereof, upon the occurrence and
during the continuance of an Event of Default, unless the Agent otherwise agrees
in its sole discretion, the Interest Period for the Term Loans shall be one (1)
month.
“Internal Revenue
Code” means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued
thereunder.
“Lenders” means each
Initial Lender and each Person that shall become a party hereto pursuant to
Section 9.07.
“Lending Office”
means, with respect to any Lender, the office of such Lender specified as its
“Lending Office” opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of such
Lender as such Lender may from time to time specify in writing to the Company
and the Agent.
“Lien” means any lien,
security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property.
“Material Adverse
Change” means any material adverse change in the business, financial
condition or operations of the Company or the Company and its Subsidiaries taken
as a whole.
“Material Adverse
Effect” means a material adverse effect on (a) the business,
financial condition or operations of the Company or the Company and its
Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or
any Lender under this Agreement or any Note or (c) the ability of the
Company to perform its obligations under this Agreement or any
Note.
“Moody’s” means
Moody’s Investors Service, Inc.
“Multiemployer Plan”
means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Company or any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
“Multiple Employer
Plan” means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Company or any ERISA Affiliate and at least one Person other than the
Company and the ERISA Affiliates or (b) was so maintained and in respect of
which the Company or any ERISA Affiliate could have liability under
Section 4063, 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
6
“Note” means a
promissory note of the Company payable to the order of any Lender, delivered
pursuant to a request made under Section 2.16 in substantially the form of
Exhibit A hereto, evidencing the aggregate indebtedness of the Company to
such Lender resulting from the Term Loans made by or owed to such
Lender.
“Notice of Borrowing”
has the meaning specified in Section 2.02(a).
“OFAC” means the U.S.
Department of the Treasury’s Office of Foreign Assets Control.
“Patriot Act” means
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law
October 26, 2001.
“Payment Office” means
such office of PNC as shall be from time to time selected by the Agent and
notified by the Agent to the Company and the Lenders.
“PBGC” means the
Pension Benefit Guaranty Corporation (or any successor).
“Permitted Liens”
means such of the following as to which no enforcement, collection, execution,
levy or foreclosure proceeding shall have been
commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under
Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other
similar Liens arising in the ordinary course of business securing obligations
that are not overdue for a period of more than 30 days; (c) pledges or
deposits to secure obligations under workers’ compensation laws or similar
legislation or to secure public or statutory obligations; and
(d) easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for its
present purposes.
“Person” means an
individual, partnership, corporation (including a business trust), joint stock
company, trust, unincorporated association, joint venture, limited liability
company or other entity, or a government or any political subdivision or agency
thereof.
“Plan” means a Single
Employer Plan or a Multiple Employer Plan.
“Prime Rate” means the
rate publicly announced by PNC from time to time as its prime rate. The
Prime Rate is determined from time to time by PNC as a means of pricing some
loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of
customers.
“Published Rate” means
the rate of interest published each Business Day in The Wall Street Journal
“Money Rates” listing under the caption “London Interbank Offered Rates” for a
one-month period (or, if no such rate is published therein for any reason, then
the Published Rate shall be the eurodollar rate for a one-month period as
published in another publication determined by the Agent).
7
“Ratable Share” means,
as to any Lender, (a) until the funding of the Term Loans, the percentage which
such Lender’s Term Loan Commitment constitutes of the aggregate Term Loan
Commitments of all of the Lenders and (b) thereafter, the percentage which the
principal amount of such Lender’s Term Loan constitutes of the aggregate
principal amount of the Term Loans of all of the Lenders then
outstanding.
“Register” has the
meaning specified in Section 9.07(d).
“Required Lenders”
means at any time Lenders owed at least a majority of the then aggregate unpaid
principal amount of the Term Loans then owing to the Lenders; provided that, at any time
that there are only two Lenders party hereto, Required Lenders shall mean both
such Lenders.
“Single Employer Plan”
means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Company or any ERISA Affiliate
and no Person other than the Company and the ERISA Affiliates or (b) was so
maintained and in respect of which the Company or any ERISA Affiliate could have
liability under Section 4062 or 4069 of ERISA in the event such plan has
been or were to be terminated.
“Solvent” and “Solvency” mean, with
respect to any Person on a particular date, that on such date (a) the fair
value of the property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as
they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
“Subsidiary” of any
Person means any corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.
“Swiss Francs” means
the lawful currency of the Swiss Federation.
8
“Term Loan” shall have
the meaning assigned to such term in Section 2.01 hereof.
“Term Loan Commitment”
shall mean, with respect to any Lender, the commitment of such Lender to make a
Term Loan on the date hereof pursuant to Section 2.01 in an amount not to exceed
the amount set forth opposite such Lender’s name on Schedule I
hereto. The aggregate amount of the Term Loan Commitments on the Effective
Date is 65,000,000 Swiss Francs.
“Term Loan Funding
Date” means the date that is three (3) Business Days after the Effective
Date.
“Term Loan Maturity
Date” means March 1, 2012, which date is two years from the Term Loan
Funding Date.
“Voting Stock” means
capital stock issued by a corporation, or equivalent interests in any other
Person, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended by
the happening of such a contingency.
SECTION
1.02 Computation of Time
Periods.
In this Agreement in the computation of periods of time from a specified date to
a later specified date, the word “from” means “from and including”
and the words “to” and “until” each mean “to but excluding”.
SECTION
1.03 Accounting
Terms.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred to in
Section 4.01(e) (“GAAP”).
ARTICLE
II
AMOUNTS AND TERMS OF THE
TERM LOANS
SECTION
2.01 The
Term Loans.
Each Lender severally agrees, on the terms and conditions hereinafter set forth,
to make a term loan ( each, a “Term Loan”) to the
Company on the Term Loan Funding Date in Swiss Francs in an amount equal to such
Lender’s Ratable Share of the aggregate Term Loans requested by the Company, but
not to exceed such Lender’s Term Loan Commitment. The Company may only
request the making of Term Loans on the Effective Date, such Term Loans to be
funded on the Term Loan Funding Date. The Term Loans shall be in
increments of 5,000,000 Swiss Francs. No portion of the Term Loans which
are repaid may be reborrowed.
9
SECTION
2.02 Procedures for Term
Loans.
(a) The borrowing of the Term Loans shall be made on notice, given
not later than 10:00 A.M. Philadelphia, Pennsylvania time on the Effective
Date by the Company to the Agent, which shall give to each Lender prompt notice
thereof by telecopier. The notice of borrowing (the “Notice of Borrowing”)
shall be by telephone, confirmed immediately in writing, or telecopier in
substantially the form of Exhibit B hereto, specifying therein the
requested (i) date of such borrowing, which shall be the Term Loan Funding
Date and (ii) the aggregate amount of such borrowing. Each Lender
shall, before 1:00 P.M. (Philadelphia, Pennsylvania time) on the Term Loan
Funding Date, make available for the account of its Lending Office to the Agent
at the Agent’s Account, in same day funds, such Lender’s ratable portion of such
borrowing. After the Agent’s receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Agent will make
such funds available to the Company at the Agent’s address referred to in
Section 9.02.
(b) [Intentionally
Left Blank]
(c) The
Notice of Borrowing shall be irrevocable and binding on the Company. The
Company shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the Term Loan
Funding Date the applicable conditions set forth in Article III, including,
without limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the Term Loans to be made by such
Lender when the Term Loans, as a result of such failure, are not made on the
Term Loan Funding Date.
(d) Unless
the Agent shall have received notice from a Lender prior to the Term Loan
Funding Date that such Lender will not make available to the Agent such Lender’s
ratable portion of the Term Loans, the Agent may assume that such Lender has
made such portion available to the Agent on the Term Loan Funding Date in
accordance with subsection (a) of this Section 2.02, and the Agent
may, in reliance upon such assumption, make available to the Company on such
date a corresponding amount. If and to the extent that such Lender shall
not have so made such ratable portion available to the Agent, such Lender and
the Company severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Company until the date such amount is
repaid to the Agent, at (i) in the case of the Company, the interest rate
applicable at the time to the Term Loans (ii) in the case of such Lender,
the cost of funds incurred by the Agent in respect of such amount. If such
Lender shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Lender’s Term Loans for purposes of this
Agreement.
(e) The
failure of any Lender to make the Term Loans to be made by it on the Term Loan
Funding Date shall not relieve any other Lender of its obligation, if any,
hereunder to make its Term Loans on the Term Loan Funding Date, but no Lender
shall be responsible for the failure of any other Lender to make the Term Loans
to be made by such other Lender on the Term Loan Funding Date.
SECTION
2.03 [Intentionally Left Blank]
SECTION
2.04 [Intentionally Left Blank]
SECTION
2.05 [Intentionally Left Blank]
10
SECTION
2.06 Repayment.
The Company shall repay to the Agent for the ratable account of the Lenders on
the Term Loan Maturity Date the aggregate principal amount of the Term Loans
then outstanding and all accrued and unpaid interest thereon.
SECTION
2.07 Interest on Term
Loans.
(a) Scheduled
Interest. The Company shall pay interest on the unpaid principal
amount of the Term Loans owing to each Lender from the date of the making of the
Term Loans until such principal amount shall be paid in full, at a rate per
annum equal at all times during each Interest Period to the sum of (x) the
Eurocurrency Rate for such Interest Period plus (y) one and
one-half percent (1.5%), payable in arrears on the last day of such Interest
Period and on the date the Term Loans are paid in full.
(b) Default
Interest. Upon the occurrence and during the continuance of an
Event of Default under Section 6.01(a), the Agent may, and upon the request
of the Required Lenders shall, require the Company to pay interest (“Default Interest”) on
(i) the unpaid principal amount of the Term Loans payable to each Lender,
payable in arrears on the dates referred to in clause (a) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on the Term Loans payable to each Lender pursuant to clause (a)
above and (ii) to the fullest extent permitted by law, the amount of any
interest or other amount payable hereunder that is not paid when due, from the
date such amount shall be due until such amount shall be paid in full, payable
in arrears on the date such amount shall be paid in full and on demand, at a
rate per annum equal at all times to the Base Rate plus 3.5% per annum; provided, however, that
following acceleration of the Term Loans pursuant to Section 6.01, Default
Interest shall accrue and be payable hereunder whether or not previously
required by the Agent.
SECTION
2.08 Interest Rate
Determination.
(a) [Intentionally Left Blank]
(b) If
the Lenders owed at least 51% of the aggregate principal amount of the Term
Loans notify the Agent that (i) they are unable to obtain matching deposits
in the London inter-bank market at or about 11:00 A.M. (London time) on the
second Business Day before the making of the Term Loans in sufficient amounts to
fund their respective Term Loan or (ii) the Eurocurrency Rate for any
Interest Period will not adequately reflect the cost to such Lenders of making,
funding or maintaining their respective Term Loans for such Interest Period, the
Agent shall forthwith so notify the Company and the Lenders, whereupon the
Company will, on the last day of the then existing Interest Period therefor
prepay the Term Loans.
(c) Without
limiting the Agent and the Lender’s rights and remedies hereunder, upon the
occurrence and during the continuation of an Event of Default, unless the Agent
otherwise agrees in its sole discretion, the Interest Period for the Term Loans
shall be one (1) month.
(d) [Intentionally
Left Blank]
(e) [Intentionally
Left Blank]
(f)
If the Agent determines that reasonable means do not exist for
ascertaining the Eurocurrency Rate,
11
(i) the
Agent shall forthwith notify the Company and the Lenders that the Eurocurrency
Rate cannot be determined, and
(ii) the
Company shall, on the last day of the then existing Interest Period for the Term
Loans, prepay, without penalty, the Term Loans in full with accrued interest;
provided that if such payment is not made on the last day of an Interest Period,
such payment shall be subject to Section 9.04(c).
SECTION
2.09 [Intentionally Left Blank]
SECTION
2.10 Prepayments of Term
Loans.
The Company may, upon notice at least two Business Days’ prior to the date of
such prepayment to the Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Company shall, prepay
the outstanding principal amount of the Term Loans in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x)
each partial prepayment of Term Loans shall be in an aggregate principal amount
of not less than 5,000,000 Swiss Francs or a whole multiple thereof and
(y) the Company shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 9.04(c). Each notice of prepayment shall
be irrevocable.
SECTION
2.11 Increased
Costs.
(a) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) the compliance
with any guideline or request from any central bank or other governmental
authority including, without limitation, any agency of the European Union or
similar monetary or multinational authority (whether or not having the force of
law), there shall be any increase in the cost to any Lender of agreeing to make
or making, funding or maintaining the Term Loans (excluding for purposes of this
Section 2.11 any such increased costs resulting from (i) Taxes or Other Taxes
(as to which Section 2.14 shall govern) and (ii) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign jurisdiction or state under the laws of which such Lender is
organized or has its Lending Office or any political subdivision thereof), then
the Company shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost;
provided, however, that before
making any such demand, each Lender agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate a
different Lending Office if the making of such designation would avoid the need
for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender. A certificate as to the amount of such increased cost, submitted
to the Company and the Agent by such Lender, shall be conclusive and binding for
all purposes, absent manifest error.
(b) If
any Lender determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of the Term Loans, then, upon demand by such Lender
(with a copy of such demand to the Agent), the Company shall pay to the Agent
for the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender’s Term Loans. A certificate as to such amounts submitted to the
Company and the Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
12
SECTION
2.12 Illegality.
Notwithstanding any other provision of this Agreement, if any Lender shall
notify the Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful, for any Lender or
its Lending Office to perform its obligations hereunder to make or maintain the
Term Loans, the Company shall prepay, without penalty (other than, if not paid
on the last day of the Interest Period therefor, as provided in Section
9.04(c)), the Term Loans in full with accrued interest on the last day of the
Interest Period then in effect or within such earlier period as
required by law.
SECTION
2.13 Payments and
Computations.
(a) The Company shall make each payment hereunder with respect to
principal of, interest on, and other amounts relating to, the Term Loans,
irrespective of any right of counterclaim or set-off, not later than
11:00 A.M. Philadelphia, Pennsylvania time (at the Payment Office) on the
day when due in Swiss Francs to the Agent, by deposit of such funds to the
Agent’s Account in same day funds. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal or
interest, fees or commissions ratably (other than amounts payable pursuant to
Sections 2.11, 2.14 or 9.04(c)) to the Lenders for the account of their
respective Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 9.07(c), from and after the effective date specified in such
Assignment and Acceptance, the Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) The
Company hereby authorizes each Lender, if and to the extent payment owed to such
Lender is not made when due hereunder or under the Note held by such Lender, to
charge from time to time against any or all of the Company’s accounts with such
Lender any amount so due.
(c) All
computations of interest shall be made by the Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever
any payment hereunder or under the Notes shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest; provided, however, that, if
such extension would cause payment of interest on or principal of the Term Loans
to be made in the next following calendar month, such payment shall be made on
the next preceding Business Day.
13
(e) Unless
the Agent shall have received notice from the Company prior to the date on which
any payment is due to the Lenders hereunder that the Company will not make such
payment in full, the Agent may assume that the Company has made such payment in
full to the Agent on such date and the Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Company
shall not have so made such payment in full to the Agent, each Lender shall
repay to the Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the cost of funds incurred by the Agent in respect of such
amount.
(f) To
the extent that the Agent receives funds for application to the amounts owing by
the Company under or in respect of this Agreement or any Note in currencies
other than the currency or currencies required to enable the Agent to distribute
funds to the Lenders in accordance with the terms of this Section 2.13, the
Agent shall be entitled to convert or exchange such funds into Dollars or into
Swiss Francs or from Dollars to Swiss Francs or from Swiss Francs to Dollars, as
the case may be, to the extent necessary to enable the Agent to distribute such
funds in accordance with the terms of this Section 2.13; provided that the
Company and each of the Lenders hereby agree that the Agent shall not be liable
or responsible for any loss, cost or expense suffered by the Company or such
Lender as a result of any conversion or exchange of currencies affected pursuant
to this Section 2.13(f) or as a result of the failure of the Agent to effect any
such conversion or exchange; and provided further that the Company agrees to
indemnify the Agent and each Lender, and hold the Agent and each Lender
harmless, for any and all losses, costs and expenses incurred by the Agent or
any Lender for any conversion or exchange of currencies (or the failure to
convert or exchange any currencies) in accordance with this Section
2.13(f).
SECTION
2.14 Taxes.
(a) Any and all payments by the Company to or for the account of any
Lender or the Agent hereunder or under the Notes or any other documents to be
delivered hereunder shall be made, in accordance with Section 2.13 or the
applicable provisions of such other documents, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction
under the laws of which such Lender or the Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its overall net income, and franchise taxes imposed on it in
lieu of net income taxes, by the jurisdiction of such Lender’s Lending Office or
any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as “Taxes”). If the
Company shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or any other documents to be delivered
hereunder to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Company shall make such deductions and (iii) the Company
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
14
(b) In
addition, the Company shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or under the Notes or any other documents to be
delivered hereunder or from the execution, delivery or registration of,
performing under, or otherwise with respect to, this Agreement or the Notes or
any other documents to be delivered hereunder (hereinafter referred to as “Other
Taxes”).
(c) The
Company shall indemnify each Lender and the Agent for and hold it harmless
against the full amount of Taxes or Other Taxes (including, without limitation,
taxes of any kind imposed or asserted by any jurisdiction on amounts payable
under this Section 2.14) imposed on or paid by such Lender or the Agent (as
the case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be
made within 30 days from the date such Lender or the Agent (as the case may be)
makes written demand therefor.
(d) Within
30 days after the date of any payment of Taxes by or on behalf of the Company,
the Company shall furnish to the Agent, at its address referred to in
Section 9.02, the original or a certified copy of a receipt evidencing such
payment to the extent such a receipt is issued therefor, or other written proof
of payment thereof that is reasonably satisfactory to the Agent. In the
case of any payment hereunder or under the Notes or any other documents to be
delivered hereunder by or on behalf of the Company through an account or branch
outside the United States or by or on behalf of the Company by a payor that is
not a United States person, if the Company determines that no Taxes are payable
in respect thereof, the Company shall furnish, or shall cause such payor to
furnish, to the Agent, at such address, an opinion of counsel acceptable to the
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms “United States” and
“United States
person” shall have the meanings specified in Section 7701 of the
Internal Revenue Code.
(e) Each
Lender organized under the laws of a jurisdiction outside the United States, on
or prior to the date of its execution and delivery of this Agreement in the case
of each Initial Lender and on the date of the Assignment and Acceptance pursuant
to which it becomes a Lender in the case of each other Lender, and from time to
time thereafter as reasonably requested in writing by the Company (but only so
long as such Lender remains lawfully able to do so), shall provide each of the
Agent and the Company with two original Internal Revenue Service
Forms W-8BEN or W-8ECI, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the Notes. If the form provided by
a Lender at the time such Lender first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from Taxes unless and
until such Lender provides the appropriate forms certifying that a lesser rate
applies, whereupon withholding tax at such lesser rate only shall be considered
excluded from Taxes for periods governed by such form; provided, however, that, if at
the date of the Assignment and Acceptance pursuant to which a Lender assignee
becomes a party to this Agreement, the Lender assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Lender assignee on such date.
If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by Internal Revenue Service
Form W-8BEN or W-8ECI, that the Lender reasonably considers to be
confidential, the Lender shall give notice thereof to the Company and shall not
be obligated to include in such form or document such confidential
information.
15
(f)
For any period
with respect to which a Lender has failed to provide the Company with the
appropriate form, certificate or other document described in
Section 2.14(e) (other than if such failure
is due to a change in law, or in the interpretation or application thereof,
occurring subsequent to the date on which a form, certificate or other document
originally was required to be provided, or if such form, certificate or other
document otherwise is not required under subsection (e) above), such Lender
shall not be entitled to indemnification under Section 2.14(a) or (c) with
respect to Taxes imposed by the United States by reason of such failure; provided, however, that should
a Lender become subject to Taxes because of its failure to deliver a form,
certificate or other document required hereunder, the Company shall take such
steps as the Lender shall reasonably request to assist the Lender to recover
such Taxes.
SECTION
2.15 Sharing of Payments,
Etc.
If any Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of the Term Loans
owing to it (other than pursuant to Sections 2.11, 2.14 or 9.04(c)) in
excess of its Ratable Share of payments on account of the Term Loans obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Term Loans owing to them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them; provided,
however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender’s ratable share
(according to the proportion of (i) the amount of such Lender’s required
repayment to (ii) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Company agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section 2.15 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the Company
in the amount of such participation.
SECTION
2.16 Evidence of
Debt.
(a) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Company to such Lender
resulting from the Term Loans owing to such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder in respect of the Term Loans. The Company agrees that
upon notice by any Lender to the Company (with a copy of such notice to the
Agent) to the effect that a Note is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Term Loans owing to such Lender, the Company shall promptly execute and
deliver to such Lender a Note in substantially the form of Exhibit A hereto,
payable to the order of such Lender in a principal amount equal to the Term
Loans of such Lender.
16
(b) The
Register maintained by the Agent pursuant to Section 9.07(d) shall include a
control account, and a subsidiary account for each Lender, in which accounts
(taken together) shall be recorded (i) the date and amount of the Term Loans
made hereunder, and the Interest Period applicable thereto which Interest Period
shall, except as otherwise specifically provided in Section 2.08(c) in the case
of an Event of Default, be three (3) months, (ii) the terms of each Assignment
and Acceptance delivered to and accepted by it, (iii) the amount of any
principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iv) the amount of any sum received by the
Agent from the Company hereunder and each Lender’s share thereof.
(c) Entries
made in good faith by the Agent in the Register pursuant to subsection (b)
above, and by each Lender in its account or accounts pursuant to subsection (a)
above, shall be prima facie evidence of the
amount of principal and interest due and payable or to become due and payable
from the Company to, in the case of the Register, each Lender and, in the case
of such account or accounts, such Lender, under this Agreement, absent manifest
error; provided, however, that the
failure of the Agent or such Lender to make an entry, or any finding that an
entry is incorrect, in the Register or such account or accounts shall not limit
or otherwise affect the obligations of the Company under this
Agreement.
SECTION
2.17 Use of
Proceeds.
The proceeds of the Term Loans shall be used by the Company solely to repay an
equal amount of loans in Swiss Francs made to the Company or a Subsidiary
thereof by PNC and certain other lenders under that certain Five Year Credit
Agreement, dated as of May 9, 2005, among the Company, the lenders party hereto
and Citibank, N.A., as agent.
ARTICLE
III
CONDITIONS TO EFFECTIVENESS
AND LENDING
SECTION
3.01 Conditions Precedent to
Effectiveness of Section 2.01.
Section 2.01 of this Agreement shall become effective on and as of the first
date (the “Effective
Date”) on which the following conditions precedent have been
satisfied:
(a) There
shall have occurred no Material Adverse Change since December 31,
2009.
(b) There
shall exist no action, suit, investigation, litigation or proceeding affecting
the Company or any of its Subsidiaries pending or threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely to
have a Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note or the consummation of
the transactions contemplated hereby.
17
(c) Nothing
shall have come to the attention of the Lenders during the course of their due
diligence investigation to lead them to believe that any information provided to
the Lenders prior to such date was or has become misleading, incorrect or
incomplete in any material respect; without limiting the generality of the
foregoing, the Lenders shall have been given such access to the management,
records, books of account, contracts and properties of the Company and its
Subsidiaries as they shall have requested.
(d) All
governmental and third party consents and approvals necessary in connection with
the transactions contemplated hereby shall have been obtained (without the
imposition of any conditions that are not acceptable to the Lenders) and shall
remain in effect, and no law or regulation shall be applicable in the reasonable
judgment of the Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.
(e) The
Company shall have notified each Lender and the Agent in writing as to the
proposed Effective Date.
(f) The
Company shall have paid all accrued fees and expenses of the Agent and the
Lenders (including the accrued fees and expenses of counsel to the
Agent).
(g) On
the Effective Date, the following statements shall be true and the Agent shall
have received for the account of each Lender a certificate signed by a duly
authorized officer of the Company, dated the Effective Date, stating
that:
(i) The
representations and warranties contained in Section 4.01 are correct on and
as of the Effective Date, and
(ii) No
event has occurred and is continuing that constitutes a Default.
(h) The
Agent shall have received on or before the Effective Date the following, each
dated such day, in form and substance satisfactory to the Agent and (except for
the Notes) in sufficient copies for each Lender:
(i) The
Notes to the order of the Lenders to the extent requested by any Lender pursuant
to Section 2.16.
(ii) Certified
copies of the resolutions of the Board of Directors of the Company approving
this Agreement and the Notes, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement and the Notes.
(iii) A
certificate of the Secretary or an Assistant Secretary of the Company certifying
the names and true signatures of the officers of the Company authorized to sign
this Agreement and the Notes and the other documents to be delivered
hereunder.
18
(iv) A
favorable opinion of Brian M. Addison, General Counsel for the Company,
substantially in the form of Exhibit D hereto and as to such other matters
as any Lender through the Agent may reasonably request.
ARTICLE
IV
REPRESENTATIONS AND
WARRANTIES
SECTION
4.01 Representations and
Warranties of the Company.
The Company represents and warrants as follows:
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The
execution, delivery and performance by the Company of this Agreement and the
Notes to be delivered by it, and the consummation of the transactions
contemplated hereby, are within the Company’s corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Company’s charter or by-laws or (ii) any law or contractual restriction
binding on or affecting the Company.
(c) No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or any other third party is
required for the due execution, delivery and performance by the Company of this
Agreement or the Notes to be delivered by it.
(d) This
Agreement has been, and each of the Notes to be delivered by it when delivered
hereunder will have been, duly executed and delivered by the Company. This
Agreement is, and each of the Notes when delivered hereunder will be, the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with their respective terms, except as the enforceability thereof may
be limited by the effect of any applicable bankruptcy, insolvency or similar
laws affecting creditors’ rights generally and by general principles of
equity.
(e) The
Consolidated balance sheet of the Company and its Subsidiaries as at
December 31, 2009, and the related Consolidated statements of income and
cash flows of the Company and its Subsidiaries for the fiscal year then ended,
which include an opinion of PricewaterhouseCoopers LLC, independent public
accountants, copies of which have been furnished to each Lender, fairly present,
the Consolidated financial condition of the Company and its Subsidiaries as at
such date and the Consolidated results of the operations of the Company and its
Subsidiaries for the periods ended on such date, all in accordance with
generally accepted accounting principles consistently applied. Since
December 31, 2009, there has been no Material Adverse Change.
(f)
There is no pending or, to the knowledge of the Company, threatened
action, suit, investigation, litigation or proceeding, including, without
limitation, any Environmental Action, affecting the Company or any of its
Subsidiaries before any court, governmental agency or arbitrator that
(i) could be reasonably likely to have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
19
(g) The
Company is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of the Term Loans will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(h) The
Company is not an “investment company”, or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as amended.
(i)
No other information, exhibit or report furnished by or on
behalf of the Company to the Agent or any Lender in connection with the
negotiation and syndication of this Agreement or pursuant to the terms of this
Agreement contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein not
misleading.
(j)
The Company is, individually and together with its
Subsidiaries, Solvent.
ARTICLE
V
COVENANTS OF THE
COMPANY
SECTION
5.01 Affirmative
Covenants.
So long as any Term Loan shall remain unpaid or any Lender shall have any Term
Loan Commitment hereunder, the Company will:
(a) Compliance with Laws,
Etc. Comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, compliance with ERISA, Environmental
Laws and the Patriot Act.
(b) Payment of Taxes,
Etc. Pay and discharge, and cause each of its Subsidiaries to pay
and discharge, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
property and (ii) except to the extent such breach would not cause an Event
of Default under Section 6.01(d) hereof or have a Material Adverse Effect, all
other lawful claims; provided, however, that neither
the Company nor any of its Subsidiaries shall be required to pay or discharge
any such tax, assessment, charge or claim that is being contested in good faith
and by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors.
(c) Maintenance of
Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates; provided, however, that the
Company and its Subsidiaries may self-insure to the same extent as other
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates and to the
extent consistent with prudent business practice.
20
(d) Preservation of Corporate
Existence, Etc. Preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its corporate existence, rights (charter
and statutory) and franchises; provided, however, that the
Company and its Subsidiaries may consummate any merger or consolidation
permitted under Section 5.02(b) and provided further that neither
the Company nor any of its Subsidiaries shall be required to maintain corporate
existence of any Subsidiary or preserve any right or franchise if the Board of
Directors of the Company or such Subsidiary shall determine that the maintenance
or preservation thereof is no longer desirable in the conduct of the business of
the Company or such Subsidiary, as the case may be, and that the loss thereof is
not disadvantageous in any material respect to the Company, such Subsidiary or
the Lenders.
(e) Visitation
Rights. At any reasonable time and from time to time, permit the
Agent or any of the Lenders or any agents or representatives thereof, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Company and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Company and any of its Subsidiaries
with any of their officers or directors and with their independent certified
public accountants.
(f)
Keeping of
Books. Keep, and cause each of its Subsidiaries to keep, proper
books of record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and each
such Subsidiary in accordance with generally accepted accounting principles in
effect from time to time.
(g) Maintenance of Properties,
Etc. Maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
(h) Transactions with
Affiliates. Conduct, and cause each of its Subsidiaries to conduct,
all transactions otherwise permitted under this Agreement with any of their
Affiliates on terms that are fair and reasonable and no less favorable to the
Company or such Subsidiary in any material respect than it would obtain in a
comparable arm’s-length transaction with a Person not an Affiliate.
(i) Reporting
Requirements. Furnish to the Lenders:
(i) as
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, the Consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and Consolidated statements of income and cash flows of the Company and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, duly certified (subject to year-end
audit adjustments) by the chief financial officer, treasurer or controller of
the Company as having been prepared in accordance with generally accepted
accounting principles and certificates of the chief financial officer, treasurer
or controller of the Company as to compliance with the terms of this Agreement
and setting forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the
event of any change in generally accepted accounting principles used in the
preparation of such financial statements, the Company shall also provide, if
necessary for the determination of compliance with Section 5.03, a
statement of reconciliation conforming such financial statements to
GAAP;
21
(ii) as
soon as available and in any event within 90 days after the end of each fiscal
year of the Company, a copy of the annual audit report for such year for the
Company and its Subsidiaries, containing the Consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Company and its Subsidiaries for such
fiscal year, in each case accompanied by an opinion acceptable to the Required
Lenders by PricewaterhouseCoopers LLC or other independent public accountants
acceptable to the Required Lenders and certificates of the chief financial
officer, treasurer or controller of the Company as to compliance with the terms
of this Agreement and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 5.03, provided that in the
event of any change in generally accepted accounting principles used in the
preparation of such financial statements, the Company shall also provide, if
necessary for the determination of compliance with Section 5.03, a statement of
reconciliation conforming such financial statements to GAAP;
(iii) as
soon as possible and in any event within five days after the occurrence of each
Default continuing on the date of such statement, a statement of the chief
financial officer, treasurer or controller of the Company setting forth details
of such Default and the action that the Company has taken and proposes to take
with respect thereto;
(iv) promptly
after the sending or filing thereof, copies of all reports that the Company
sends to any of its securityholders, and copies of all reports and registration
statements that the Company or any Subsidiary files with the Securities and
Exchange Commission or any national securities exchange;
(v) promptly
after the commencement thereof, notice of all actions and proceedings before any
court, governmental agency or arbitrator affecting the Company or any of its
Subsidiaries of the type described in Section 4.01(f); and
(vi) such
other information respecting the Company or any of its Subsidiaries as any
Lender through the Agent may from time to time reasonably request.
(j) Subsequent Credit
Terms. Notify the Agent in writing prior to entering into any new
credit arrangement or any amendment or modification of any existing credit
arrangement, in each case providing debt financing of $10,000,000 (or the
Equivalent thereof if the financing is in a currency other than Dollars) or
more, pursuant to which the Company or any of its Subsidiaries agree to
affirmative or negative covenants (including without limitation financial
covenants and limitations on Debt and Liens) which in any such case are less
favorable in any material respect to the Company or any of its Subsidiaries than
those contained in this Agreement (any such less favorable provisions, the
“New
Provisions”). Effective upon the Company or any of its
Subsidiaries’ entry into any such agreement, amendment or modification, this
Agreement, at the option of the Required Lenders in their sole discretion, shall
be and shall be deemed to be immediately amended to add the New Provisions;
provided, however, that the foregoing shall not be applicable to or be deemed to
affect any provision of this Agreement if any such agreement, amendment or
modification is more favorable to the Company or any of its Subsidiaries.
The Company hereby agrees promptly to execute and deliver any and all such
amendments, documents and instruments and to take all such further actions as
the Agent may, in its sole discretion, deem necessary or appropriate to
effectuate the provisions of this Section 5.01(j).
22
SECTION
5.02 Negative
Covenants.
So long as any Term Loan shall remain unpaid or any Lender shall have any Term
Loan Commitment hereunder, the Company will not:
(a) Liens, Etc.
Create or suffer to exist, or permit any of its Subsidiaries to create or suffer
to exist, any Lien on or with respect to any of its properties, whether now
owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, other than:
(i) Permitted
Liens,
(ii) purchase
money Liens upon or in any real property or equipment acquired or held by the
Company or any Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt incurred solely
for the purpose of financing the acquisition of such property or equipment, or
Liens existing on such property or equipment at the time of its acquisition
(other than any such Liens created in contemplation of such acquisition that
were not incurred to finance the acquisition of such property) or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
amount, provided, however, that no such
Lien shall extend to or cover any properties of any character other than the
real property or equipment being acquired, and no such extension, renewal or
replacement shall extend to or cover any properties not theretofore subject to
the Lien being extended, renewed or replaced, provided further that the
aggregate principal amount of the indebtedness secured by the Liens referred to
in this clause (ii) shall not exceed the amount specified therefor in
Section 5.02(d)(iii) at any time outstanding,
(iii) the
Liens existing on the Effective Date and described on Schedule 5.02(a)
hereto,
(iv) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company or becomes a
Subsidiary of the Company; provided that such
Liens were not created in contemplation of such merger, consolidation or
acquisition and do not extend to any assets other than those of the Person so
merged into or consolidated with the Company or such Subsidiary or acquired by
the Company or such Subsidiary,
(v) other
Liens securing Debt in an aggregate principal amount not to exceed the amount
specified therefor in Section 5.02(d)(iv) at any time outstanding,
and
23
(vi) the
replacement, extension or renewal of any Lien permitted by clause (iii) or
(iv) above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the Debt secured thereby.
(b) Mergers,
Etc. Merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so,
except that any Subsidiary of the Company may merge or consolidate with or into,
or dispose of assets to, any other Subsidiary of the Company, and except that
any Subsidiary of the Company may merge into or dispose of assets to the
Company, provided, in each
case, that no Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting
Changes. Make or permit, or permit any of its Subsidiaries to
make or permit, any change in accounting policies or reporting practices, except
as required or permitted by generally accepted accounting
principles.
(d) Subsidiary
Debt. Permit any of its Subsidiaries to create or suffer to
exist, any Debt other than:
(i) Debt
owed to the Company or to a wholly owned Subsidiary of the Company or Debt under
this Agreement or the Notes,
(ii) Debt
existing on the Effective Date and described on Schedule 5.02(d) hereto
(the “Existing
Debt”), and any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, the Existing Debt, provided that the
principal amount of such Existing Debt shall not be increased above the
principal amount thereof outstanding immediately prior to such extension,
refunding or refinancing, and the direct and contingent obligors therefor shall
not be changed, as a result of or in connection with such extension, refunding
or refinancing,
(iii) Debt
secured by Liens permitted by Section 5.02(a)(ii) aggregating for all of
the Company’s Subsidiaries not more than $50,000,000 at any one time
outstanding,
(iv) Debt
that, in aggregate with all Debt secured by Liens permitted by Section
5.02(a)(v), does not exceed an amount equal to 15% of Consolidated net worth of
the Company and its Subsidiaries at any one time outstanding,
(v) endorsement
of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
(e) Change in Nature of
Business. Make, or permit any of its Subsidiaries to make, any
material change in the nature of the business as carried on by the Company and
its Subsidiaries at the date hereof.
24
SECTION
5.03 Financial
Covenants. So long as any Term Loan shall remain unpaid or any
Lender shall have any Term Loan Commitment hereunder, the Company
will:
(a) Leverage
Ratio. Maintain a ratio of Consolidated Debt for Borrowed
Money to the sum of Consolidated Debt for Borrowed Money plus Consolidated net
worth of the Company and its Subsidiaries of not greater than 0.55 to
1.00.
(b) Interest Coverage
Ratio. Maintain a ratio of Consolidated EBITDA for the period
of four fiscal quarters then ended of the Company and its Subsidiaries to the
sum of interest payable on, and amortization of debt discount in respect of, all
Debt during such period by the Company and its Subsidiaries of not less than 3.5
to 1.0.
ARTICLE
VI
EVENTS OF
DEFAULT
SECTION
6.01 Events of
Default. If any of the following events (“Events of
Default”) shall occur and be continuing:
(a) The
Company shall fail to pay any principal of any Term Loan when the same becomes
due and payable; or the Company shall fail to pay any interest on any Term Loan
or make any other payment of fees or other amounts payable under this Agreement
or any Note within five Business Days after the same becomes due and payable;
or
(b) Any
representation or warranty made by the Company herein or by the Company (or any
of its officers) in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c) (i) The
Company shall fail to perform or observe any term, covenant or agreement
contained in Section 5.01(d), (e), (h) or (i), 5.02 or 5.03, or
(ii) the Company shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement on its part to be performed or observed
if such failure shall remain unremedied for 10 days after written notice thereof
shall have been given to the Company by the Agent or any Lender; or
(d) The
Company or any of its Subsidiaries shall fail to pay any principal of or premium
or interest on any Debt that is outstanding in a principal or notional amount of
at least $25,000,000 in the aggregate (but excluding Debt outstanding hereunder)
of the Company or such Subsidiary (as the case may be), when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid or redeemed (other
than by a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
or
25
(e) The
Company or any of its Subsidiaries shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Company or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Company or any of its
Subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
(f) Judgments
or orders for the payment of money in excess of $25,000,000 in the aggregate
shall be rendered against the Company or any of its Subsidiaries and either
(i) enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) (i) Any
Person or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or indirectly,
of Voting Stock of the Company (or other securities convertible into such Voting
Stock) representing 30% or more of the combined voting power of all Voting Stock
of the Company; or (ii) during any period of up to 24 consecutive months,
commencing after the date of this Agreement, individuals who at the beginning of
such 24-month period were directors of the Company shall cease for any reason
(other than due to death or disability) to constitute a majority of the board of
directors of the Company (except to the extent that individuals who at the
beginning of such 24-month period were replaced by individuals (x) elected
by a majority of the remaining members of the board of directors of the Company
or (y) nominated for election by a majority of the remaining members of the
board of directors of the Company and thereafter elected as directors by the
shareholders of the Company); or
(h) The
Company or any of its ERISA Affiliates shall incur, or shall be reasonably
likely to incur liability in excess of $25,000,000 in the aggregate as a result
of one or more of the following: (i) the occurrence of any ERISA
Event; (ii) the partial or complete withdrawal of the Company or any of its
ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or
termination of a Multiemployer Plan;
26
then, and
in any such event, the Agent (i) shall at the request, or may with the consent,
of the Required Lenders, by notice to the Company, if prior to the Term Loan
Funding Date, declare the obligation of each Lender to make Term Loans to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Required Lenders, by notice to the
Company, declare the Term Loans, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the Term
Loans, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Company under the Federal Bankruptcy Code, (A) if prior to the Term Loan Funding
Date, the obligation of each Lender to make Term Loans shall automatically be
terminated and (B) the Term Loans, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Company.
ARTICLE
VII
[INTENTIONALLY LEFT
BLANK]
ARTICLE
VIII
THE
AGENT
SECTION
8.01 Authorization and
Action. Each Lender hereby appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the
Agent shall not be required to take any action that exposes the Agent to
personal liability or that is contrary to this Agreement or applicable
law. The Agent agrees to give to each Lender prompt notice of each
notice given to it by the Company pursuant to the terms of this
Agreement.
SECTION
8.02 Agent’s Reliance,
Etc. Neither the Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement, except for its or
their own gross negligence or willful misconduct. Without limitation
of the generality of the foregoing, the Agent: (i) may treat
the Lender
that made any Term Loan as the holder of the Debt resulting therefrom until the
Agent receives and accepts an Assignment and Acceptance entered into by such
Lender, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 9.07; (ii) may consult with legal counsel (including counsel
for the Company), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (iii) makes no warranty or representation to any Lender and shall
not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to
the performance, observance or satisfaction of any of the terms, covenants or
conditions of this Agreement on the part of the Company or the existence at any
time of any Default or to inspect the property (including the books and records)
of the Company; (v) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier
or telegram) believed by it to be genuine and signed or sent by the proper party
or parties.
27
SECTION
8.03 PNC
and Affiliates. With respect to its Term Loan Commitment, the
Term Loans made by it and the Note issued to it, PNC shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not the Agent; and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated, include PNC in its individual
capacity. PNC and its Affiliates may accept deposits from, lend money
to, act as trustee under indentures of, accept investment banking engagements
from and generally engage in any kind of business with, the Company, any of its
Subsidiaries and any Person who may do business with or own securities of the
Company or any such Subsidiary, all as if PNC were not the Agent and without any
duty to account therefor to the Lenders. The Agent shall have no duty
to disclose any information obtained or received by it or any of its Affiliates
relating to the Company or any of its Subsidiaries to the extent such
information was obtained or received in any capacity other than as
Agent.
SECTION
8.04 Lender
Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION
8.05 Indemnification. (a) Each
Lender severally agrees to indemnify the Agent (to the extent not reimbursed by
the Company) from and against such Lender’s Ratable Share of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent in its capacity as such,
in any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement (collectively, the “Indemnified Costs”),
provided that
no Lender shall be liable for any portion of the Indemnified Costs resulting
from the Agent’s gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
reasonable counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the
Company. In the case of any investigation, litigation or proceeding
giving rise to any Indemnified Costs, this Section 8.05 applies whether any
such investigation, litigation or proceeding is brought by the Agent, any Lender
or a third party.
28
(b) [Intentionally
Left Blank]
(c) The
failure of any Lender to reimburse the Agent promptly upon demand for its
ratable share of any amount required to be paid by the Lenders to the Agent as
provided herein shall not relieve any other Lender of its obligation hereunder
to reimburse the Agent for its ratable share of such amount, but no Lender shall
be responsible for the failure of any other Lender to reimburse the Agent for
such other Lender’s ratable share of such amount. Without prejudice
to the survival of any other agreement of any Lender hereunder, the agreement
and obligations of each Lender contained in this Section 8.05 shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under the Notes. The Agent agrees to return to the Lenders their
respective ratable shares of any amounts paid under this Section 8.05 that are
subsequently reimbursed by the Company.
SECTION
8.06 Successor
Agent. The
Agent may resign at any time by giving written notice thereof to the Lenders and
the Company and may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent’s giving of
notice of resignation or the Required Lenders’ removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this
Agreement. After any retiring Agent’s resignation or removal
hereunder as Agent, the provisions of this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
ARTICLE
IX
MISCELLANEOUS
SECTION
9.01 Amendments,
Etc. No amendment or waiver of any provision of this Agreement
or the Notes, nor consent to any departure by the Company therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Required Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, however, that (a) no
amendment, waiver or consent shall, unless in writing and signed by all the
Lenders, do any of the following: (i) waive any of the
conditions specified in Section 3.01, (ii) change the percentage the
aggregate unpaid principal amount of the Term Loans, or the number of Lenders,
that shall be required for the Lenders or any of them to take any action
hereunder, or (iii) amend this Section 9.01; and (b) no amendment,
waiver or consent shall, unless in writing and signed by the Required Lenders
and each Lender that is directly affected by such amendment, waiver or consent
(i) increase the Term Loans of such Lender, (ii) reduce the principal of,
or interest on, the Term Loans or any fees or other amounts payable hereunder to
such Lender or (iii) postpone any date fixed for any payment of principal
of, or interest on, the Term Loans or any fees or other amounts payable
hereunder to such Lender; and provided further that no
amendment, waiver or consent shall, unless in writing and signed by the Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the Agent under this Agreement or any Note.
29
SECTION
9.02 Notices. All
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by electronic transmission, telecopy
transmission or posting on a secured web site), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or three days after being deposited in the mail, postage prepaid, or
the next Business Day if sent by reputable overnight courier, postage prepaid,
for delivery on the next Business Day, or, in the case of telecopy notice, when
received during normal business hours, or in the case of electronic
transmission, when received, and in the case of posting on a secured web site,
upon receipt of (i) notice of such posting and (ii) rights to access such web
site, addressed as follows in the case of the Company and the Agent, and as set
forth in Schedule I or in its Assignment and Acceptance in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
|
If
to the Company:
|
Dentsply
International Inc.
|
|
|
Susquehanna
Commerce Center
|
|
|
221
West Philadelphia Street
|
|
|
York,
PA 17405-0872
|
|
|
Attention: Secretary
with a copy to Treasurer
|
|
|
Telecopy: (717)
849-4753
|
|
If
to the Agent:
|
PNC
Bank, National Association
|
|
|
1600
Market Street, 22nd
Floor
|
|
|
Philadelphia,
PA 19103
|
|
|
Attention: Meredith
Jermann
|
|
|
Telecopy: (215)
585-6987
|
SECTION
9.03 No
Waiver; Remedies. No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION
9.04 Costs
and Expenses. (a) The Company agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication
(including printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the
reasonable fees and expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and responsibilities under
this Agreement. The Company further agrees to pay on demand all costs
and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 9.04(a).
30
(b) The
Company agrees to indemnify and hold harmless the Agent and each Lender and each
of their Affiliates and their officers, directors, employees, agents and
advisors (each, an “Indemnified Party”)
from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (i) the Notes, this
Agreement, any of the transactions contemplated herein or the actual or proposed
use of the proceeds of the Term Loans, (ii) the actual or alleged presence
of Hazardous Materials on any property of the Company or any of its Subsidiaries
or any Environmental Action relating in any way to the Company or any of its
Subsidiaries, except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party’s gross negligence or
willful misconduct or (iii) any civil penalty or fine assessed by OFAC against,
and all reasonable costs and expenses (including counsel fees and disbursements)
incurred in connection with defense thereof, by the Agent or any Lender as a
result of conduct of the Company that violates a sanction enforced by
OFAC. In the case of an investigation, litigation or other proceeding
to which the indemnity in this Section 9.04(b) applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by the Company, its directors, equityholders or creditors or an Indemnified
Party or any other Person, whether or not any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated. The Company also agrees not to assert any claim for
special, indirect, consequential or punitive damages against the Agent, any
Lender, any of their Affiliates, or any of their respective directors, officers,
employees, attorneys and agents, on any theory of liability, arising out of or
otherwise relating to the Notes, this Agreement, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the Term
Loans.
(c) If
any payment of principal of the Term Loans is made by the Company to or for the
account of a Lender (i) other than on the last day of the Interest Period
therefor, as a result of a payment pursuant to Section 2.08, 2.10 or 2.12,
acceleration of the maturity of the Notes pursuant to Section 6.01 or for
any other reason, or by an Eligible Assignee to a Lender other than on the last
day of the Interest Period therefor upon an assignment of rights and obligations
under this Agreement pursuant to Section 9.07 as a result of a demand by
the Company pursuant to Section 9.07(a) or (ii) as a result of a payment
pursuant to Section 2.08, 2.10 or 2.12, the Company shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain the Term Loans.
31
(d) Without
prejudice to the survival of any other agreement of the Company hereunder, the
agreements and obligations of the Company contained in Sections 2.11, 2.14
and 9.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the Notes.
SECTION
9.05 Right
of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the
Agent to declare the Term Loans due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender or such Affiliate to or for the credit or the account of the
Company against any and all of the obligations of the Company now or hereafter
existing under this Agreement and the Note held by such Lender, whether or not
such Lender shall have made any demand under this Agreement or such Note and
although such obligations may be unmatured. Each Lender agrees
promptly to notify the Company after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender and its Affiliates under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender and its Affiliates may
have.
SECTION
9.06 Binding Effect. This
Agreement shall become effective (other than Section 2.01, which shall only
become effective upon satisfaction of the conditions precedent set forth in
Section 3.01) when it shall have been executed by the Company and the Agent
and when the Agent shall have been notified by each Initial Lender that such
Initial Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Company, the Agent and each Lender and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
32
SECTION
9.07 Assignments and
Participations. (a) Each Lender may and, if
demanded by the Company (so long as no Default shall have occurred and be
continuing and following a demand by such Lender pursuant to Section 2.11
or 2.14) upon at least five Business Days’ notice to such Lender and the Agent,
will assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Term Loans and the Note or Notes held by it); provided, however, that
(i) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an assignment of all of a Lender’s
rights and obligations under this Agreement, the amount of the Term Loans of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than 5,000,000 Swiss Francs or an integral multiple of
1,000,000 Swiss Francs in excess thereof and unless the Company and the Agent
otherwise agree (ii) each such assignment shall be to an Eligible Assignee,
(iii) each such assignment made as a result of a demand by the Company pursuant
to this Section 9.07(a) shall be arranged by the Company after consultation
with the Agent and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (iv) no Lender
shall be obligated to make any such assignment as a result of a demand by the
Company pursuant to this Section 9.07(a) unless and until such Lender shall
have received one or more payments from the Company or one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Term Loans owing to such Lender, together with accrued
interest thereon to the date of payment of such principal amount and all other
amounts payable to such Lender under this Agreement, and (v) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance, together with any
Note subject to such assignment and a processing and recordation fee of $3,500
payable by the parties to each such assignment, provided, however, that in the
case of each assignment made as a result of a demand by the Company, such
recordation fee shall be payable by the Company except that no such recordation
fee shall be payable in the case of an assignment made at the request of the
Company to an Eligible Assignee that is an existing Lender. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (y) the Lender assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(other than its rights under Sections 2.11, 2.14 and 9.04 to the extent any
claim thereunder relates to an event arising prior to such assignment) and be
released from its obligations (other than its obligations under Section 8.05 to
the extent any claim thereunder relates to an event arising prior to such
assignment) under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By
executing and delivering an Assignment and Acceptance, the Lender assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any lien or security interest created
or purported to be created under or in connection with, this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or the performance or
observance by the Company of any of its obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
33
(c) Upon
its receipt of an Assignment and Acceptance executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with any Note
or Notes subject to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company.
(d) The
Agent shall maintain at its address referred to in Section 9.02 a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and principal
amount of the Term Loans owing to each Lender from time to time (the “Register”). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, the Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the
Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Each
Lender may sell participations to one or more banks or other entities (other
than the Company or any of its Affiliates) in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of the Term Loans owing to it and any Note or Notes held by it);
provided, however, that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement,
(iv) the Company, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by the
Company therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation.
(f) Any
Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section 9.07, disclose to the
assignee or participant or proposed assignee or participant, any information
relating to the Company furnished to such Lender by or on behalf of the Company;
provided that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree to preserve the confidentiality of any Company
Information relating to the Company received by it from such
Lender.
34
(g) Notwithstanding
any other provision set forth in this Agreement, any Lender may at any time
create a security interest in all or any portion of its rights under this
Agreement (including, without limitation, the Term Loans owing to it and any
Note or Notes held by it) in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION
9.08 Confidentiality. Neither
the Agent nor any Lender may disclose to any Person any confidential,
proprietary or non-public information of the Company furnished to the Agent or
the Lenders by the Company (such information being referred to collectively
herein as the “Company
Information”), except that each of the Agent and each of the Lenders may
disclose Company Information (i) to its and its affiliates’ employees,
officers, directors, agents and advisors (it being understood that the Persons
to whom such disclosure is made will be informed of the confidential nature of
such Company Information and instructed to keep such Company Information
confidential on substantially the same terms as provided herein), (ii) to
the extent requested by any regulatory authority, (iii) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (iv) to any other party to this Agreement, (v) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder,
(vi) subject to an agreement containing provisions substantially the same
as those of this Section 9.08, to any assignee or participant or prospective
assignee or participant, (vii) to the extent such Company Information (A) is or
becomes generally available to the public on a non-confidential basis other than
as a result of a breach of this Section 9.08 by the Agent or such Lender, or (B)
is or becomes available to the Agent or such Lender on a nonconfidential basis
from a source other than the Company and (viii) with the consent of the
Company.
SECTION
9.09 [Intentionally Left Blank]
SECTION
9.10 Governing
Law. This Agreement and the Notes shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Pennsylvania.
SECTION
9.11 Execution in
Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this
Agreement.
SECTION
9.12 Judgment. (a) If
for the purposes of obtaining judgment in any court it is necessary to convert a
sum due hereunder in Dollars into another currency, the parties hereto agree, to
the fullest extent that they may effectively do so, that the rate of exchange
used shall be that at which in accordance with normal banking procedures the
Agent could purchase Dollars with such other currency on the Business Day
preceding that on which final judgment is given.
35
(b) If
for the purposes of obtaining judgment in any court it is necessary to convert a
sum due hereunder in Swiss Francs into Dollars, the parties agree to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Agent could
purchase Swiss Francs with Dollars on the Business Day preceding that on which
final judgment is given.
(c) The
obligation of the Company in respect of any sum due from it in any currency (the
“Primary
Currency”) to any Lender or the Agent hereunder shall, notwithstanding
any judgment in any other currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Agent (as the case may be),
of any sum adjudged to be so due in such other currency, such Lender or the
Agent (as the case may be) may in accordance with normal banking procedures
purchase the applicable Primary Currency with such other currency; if the amount
of the applicable Primary Currency so purchased is less than such sum due to
such Lender or the Agent (as the case may be) in the applicable Primary
Currency, the Company agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender or the Agent (as the case may be)
against such loss, and if the amount of the applicable Primary Currency so
purchased exceeds such sum due to any Lender or the Agent (as the case may be)
in the applicable Primary Currency, such Lender or the Agent (as the case may
be) agrees to remit to the Company such excess.
SECTION
9.13 Jurisdiction,
Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the courts of the Commonwealth of Pennsylvania, the
courts of the United States of America for the Eastern District of Pennsylvania,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the Notes, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such Commonwealth of Pennsylvania
court or, to the extent permitted by law, in such federal court. The
Company hereby further irrevocably consents to the service of process in any
action or proceeding in such courts by the mailing thereof by any parties hereto
by registered or certified mail, postage prepaid, to the Company at its address
specified pursuant to Section 9.02. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or the Notes in the courts of any
jurisdiction.
(b) Each
of the parties hereto irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the Notes in any Commonwealth of
Pennsylvania or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION
9.14 Substitution of
Currency. If a change in Swiss Francs occurs pursuant to any applicable
law, rule or regulation of any governmental, monetary or multi-national
authority, this Agreement (including, without limitation, the definition of
Eurocurrency Rate) will be amended to the extent determined by the Agent (acting
reasonably and in consultation with the Company) to be necessary to reflect the
change in currency and to put the Lenders and the Company in the same position,
so far as possible, that they would have been in if no change in Swiss Francs
had occurred.
36
SECTION
9.15 [Intentionally Left Blank].
SECTION
9.16 Patriot Act
Notice. Each Lender and the Agent (for itself and not on
behalf of any Lender) hereby notifies the Company that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the Company, which information includes the name and
address of the Company and other information that will allow such Lender or the
Agent, as applicable, to identify the Company in accordance with the Patriot
Act. The Company shall provide such information and take such actions
as are reasonably requested by the Agent or any Lenders in order to assist the
Agent and the Lenders in maintaining compliance with the Patriot Act or any
similar “know your customer” or other similar checks under all applicable laws
and regulations.
SECTION
9.17 Waiver
of Jury Trial. Each of the Company, the Agent and the Lenders
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the Notes or the actions of the Agent or any
Lender in the negotiation, administration, performance or enforcement
thereof.
37
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
|
DENTSPLY
INTERNATIONAL INC.
|
||
|
By
|
||
|
|
William
R. Jellison
|
|
|
Senior
Vice President and Chief
|
||
|
Financial
Officer
|
||
|
By
|
||
|
William
E. Reardon
|
||
|
Treasurer
|
||
|
PNC
BANK, NATIONAL ASSOCIATION,
as
Agent
|
||
|
By
|
||
|
Title:
|
||
Initial
Lenders
|
PNC
BANK, NATIONAL ASSOCIATION,
|
||
|
By
|
||
|
Title:
|
||
SCHEDULE
I
DENTSPLY
INTERNATIONAL INC.
TWO YEAR
CREDIT AGREEMENT
LENDING
OFFICES
|
Name of Initial Lender
|
Term Loan Commitment
|
Lending Office
|
||
|
PNC
Bank, National Association
|
65,000,000
Swiss
Francs
|
1600
Market Street
22nd
Floor
Philadelphia,
PA 19103
Attn: Meredith
Jermann
Tel: 215-585-5622
Fax:
215-585-6987
|
|
EXHIBIT
A - FORM OF
|
|
|
TERM
LOAN
|
|
|
PROMISSORY
NOTE
|
|
_______________ Swiss
Francs
|
Dated: February
24, 2010
|
FOR VALUE
RECEIVED, the undersigned, DENTSPLY INTERNATIONAL INC., a Delaware corporation
(the “Company”), HEREBY
PROMISES TO PAY to the order of _________________________ (the “Lender”) on the Term
Loan Maturity Date (as defined in the Credit Agreement referred to below) the
principal sum of [insert Term
Loan Commitment] Swiss Francs pursuant to the Two Year Credit Agreement
dated as of February 24, 2010 among the Company and the lenders parties thereto,
and PNC Bank, National Association, as Agent for the Lenders (as amended or
modified from time to time, the “Credit Agreement”;
the terms defined therein being used herein as therein defined).
The
Company promises to pay interest on the unpaid principal amount of the Term
Loans from the Term Loan Funding Date until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Credit Agreement.
Both
principal and interest in respect of the Term Loans are payable in Swiss Francs
at the Payment Office in same day funds. Each Term Loan owing to the
Lender by the Company pursuant to the Credit Agreement, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This
Promissory Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events.
|
DENTSPLY
INTERNATIONAL INC.
|
||
|
By
|
||
|
Title:
|
||
TERM
LOANS AND PAYMENTS OF PRINCIPAL
|
Date
|
Amount of
Term Loans
|
Amount of
Principal Paid
or Prepaid
|
Unpaid Principal
Balance
|
Notation
Made By
|
||||
2
|
EXHIBIT
B - FORM OF NOTICE OF
|
|
|
BORROWING
|
PNC Bank
National Association, as Agent
for
the Lenders parties
to
the Credit Agreement
referred
to below
1600
Market Street
Philadelphia,
PA 19103
February
24, 2010
| Attention: | Meredith Jermann | |
|
|
T: 215-585-5622;
F: 215-585-6987
|
|
|
and
|
||
|
Christine
Yanok
|
||
|
T: 440-546-7057;
F: 440-546-7341
|
Ladies
and Gentlemen:
The
undersigned, DENTSPLY INTERNATIONAL INC., refers to the Two Year Credit
Agreement, dated as of February 24, 2010 (as amended or modified from time to
time, the “Credit
Agreement”, the terms defined therein being used herein as therein
defined), among the undersigned, certain Lenders parties thereto and PNC Bank
National Association, as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a borrowing of Term Loans under the Credit
Agreement, and in that connection sets forth below the information relating to
such borrowing (the “Proposed Borrowing”)
as required by Section 2.02(a) of the Credit Agreement:
(i)
The Business Day of the Proposed Borrowing is March 1, 2010.
(ii) The
aggregate amount of the Proposed Borrowing is 65,000,000 Swiss
Francs.
(iii) The
initial Interest Period for the Proposed Borrowing is three months.
The
undersigned hereby certifies that the following statements are true on the date
hereof, and will be true on the date of the Proposed Borrowing:
(A) the
representations and warranties contained in Section 4.01 of the Credit
Agreement are correct, before and after giving effect to the Proposed Borrowing
and to the application of the proceeds therefrom, as though made on and as of
such date; and
(B) no
event has occurred and is continuing, or would result from such Proposed
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.
|
Very
truly yours,
|
||
|
DENTSPLY
INTERNATIONAL INC.
|
||
|
By
|
||
|
Title:
|
||
2
|
EXHIBIT
C - FORM OF
|
|
|
ASSIGNMENT
AND ACCEPTANCE
|
Reference
is made to the Two Year Credit Agreement dated as of February 24, 2010 (as
amended or modified from time to time, the “Credit Agreement”)
among Dentsply International Inc., a Delaware corporation (the “Company”), the
Lenders (as defined in the Credit Agreement), and PNC Bank National Association,
as agent for the Lenders (the “Agent”). Terms
defined in the Credit Agreement are used herein with the same
meaning.
The
“Assignor” and the “Assignee” referred to on Schedule I hereto agree as
follows:
1. The
Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, an interest in and to the Assignor’s
rights and obligations under the Credit Agreement as of the date hereof equal to
the percentage interest specified on Schedule 1 hereto of all outstanding rights
and obligations under the Credit Agreement on the date hereof. After
giving effect to such sale and assignment, the amount of the Term Loans owing to
the Assignee will be as set forth on Schedule 1 hereto.
2. The
Assignor (i) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of, or the perfection or priority of any lien or security interest
created or purported to be created under or in connection with, the Credit
Agreement or any other instrument or document furnished pursuant thereto;
(iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Company or the performance or
observance by the Company of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto; and
(iv) attaches the Note[, if any,] held by the Assignor [and requests that
the Agent exchange such Note for a new Note payable to the order of the Assignee
in an amount equal to the Term Loans purchased by the Assignee pursuant hereto
or new Notes payable to the order of [the Assignee in an amount equal to the
Term Loans purchased by the Assignee pursuant hereto and] the Assignor in an
amount equal to the Term Loans retained by the Assignor under the Credit
Agreement[, respectively,] as specified on Schedule 1 hereto].
3. The
Assignee (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender 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; (iii) confirms that it is an Eligible Assignee;
(iv) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Credit Agreement as
are delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender; and
(vi) attaches any U.S. Internal Revenue Service forms required under
Section 2.14 of the Credit Agreement.
4. Following
the execution of this Assignment and Acceptance, it will be delivered to the
Agent for acceptance and recording by the Agent. The effective date
for this Assignment and Acceptance (the “Effective Date”)
shall be the date of acceptance hereof by the Agent, unless otherwise specified
on Schedule 1 hereto.
5. Upon
such acceptance and recording by the Agent, as of the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon
such acceptance and recording by the Agent, from and after the Effective Date,
the Agent shall make all payments under the Credit Agreement and the Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and facility fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This
Assignment and Acceptance shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Pennsylvania.
8. This
Assignment and Acceptance may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN
WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
2
Schedule
1
to
Assignment
and Acceptance
|
Percentage
interest assigned:
|
_____%
|
|
|
Assignee’s
Term Loans Outstanding:
|
______
Swiss Francs
|
|
|
Aggregate
outstanding principal amount of Term Loans
|
||
|
assigned:
|
______
Swiss Francs
|
|
|
Principal
amount of Note payable to Assignee:
|
______
Swiss Francs
|
|
|
Principal
amount of Note payable to Assignor:
|
______
Swiss Francs
|
|
|
Effective
Date*: _______________,
201_
|
|
[NAME
OF ASSIGNOR], as Assignor
|
||
|
By
|
||
|
Title:
|
||
|
Dated: _______________,
201_
|
||
|
[NAME
OF ASSIGNEE], as Assignee
|
||
|
By
|
||
|
Title:
|
||
|
Dated: _______________,
201_
|
||
|
Lending
Office:
|
||
|
[Address]
|
||
|
*
|
This
date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the
Agent.
|
3
|
Accepted
[and Approved]**
this
|
||
|
__________
day of _______________, 201_
|
||
|
PNC
Bank, National Association., as Agent
|
||
|
By
|
||
|
Title:
|
||
|
[Approved
this __________ day
|
||
|
of
_______________, 201_
|
||
|
DENTSPLY
INTERNATIONAL INC.
|
||
|
By
|
|
**
|
|
Title:
|
||
4
|
EXHIBIT
D - FORM OF
|
|
|
OPINION
OF COUNSEL
|
|
|
FOR
THE COMPANY
|
February
24, 2010
To each
of the Lenders parties
to the
Two Year Credit Agreement dated
as of
February 24, 2010
among
Dentsply International Inc.,
said
Lenders and PNC Bank, National Association,
as Agent
for said Lenders
|
Re:
|
Two Year Credit
Agreement dated February 24, 2010 (“Credit
Agreement”)
|
Ladies
and Gentlemen:
I am
General Counsel for DENTSPLY International Inc., a Delaware corporation (the
"Borrower"), and its Subsidiaries (as that term is defined in the Credit
Agreement defined below). This opinion is furnished to you pursuant
to Section 3.01(h)(iv) of the Two Year Credit Agreement, dated as of February
24, 2010 (the “Credit Agreement”), among Dentsply International Inc., the
Lenders parties thereto and PNC Bank, National Association, as Agent for said
Lenders. All capitalized terms, unless otherwise defined herein,
shall have the respective meanings assigned to them in the Credit
Agreement. In connection with the Credit Agreement, I am of the
opinion that:
1. The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
2. The
execution, delivery and performance by the Borrower of the Credit Agreement and
the Notes, and the consummation of the transactions contemplated thereby, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Charter or the
By-laws of the Borrower or (ii) any law, rule or regulation applicable to
the Borrower (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or (iii) any contractual or legal
restriction contained in any document to which the Borrower is a
party. The Credit Agreement and the Notes have been duly executed and
delivered on behalf of the Borrower.
3. No
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is required
for the due execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes.
February
24, 2010
Page
2
4. The
Credit Agreement is, and after giving effect to the borrowing of the Term Loans,
the Notes will be legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
5. To
the best of my knowledge, there are no pending or overtly threatened actions or
proceedings against the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator that purport to affect the legality, validity,
binding effect or enforceability of the Credit Agreement or any of the Notes or
the consummation of the transactions contemplated thereby or that are likely to
have a materially adverse effect upon the financial condition or operations of
the Borrower and its Subsidiaries, taken as a whole.
The
opinions set forth in this letter with respect to enforceability are subject to:
(a) the effect of any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar law affecting creditors’ rights generally; and (b) the
effect of general principles of equity, including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law). Moreover,
provisions of the Credit Agreement that permit the Lenders to take action or
make determinations, or to benefit from indemnities and similar undertakings of
the Borrower, may be subject to a requirement that such action be taken or such
determinations be made, and that any action or inaction by the Lenders that may
give rise to a request for payment under such an undertaking be taken or not
taken, on a reasonable basis and in good faith. The foregoing
opinions with respect to enforceability are further qualified by reference to
the fact that certain of the remedies and waivers set forth in the Credit
Agreement may be rendered unavailable or unenforceable under applicable
principles of law or equity but, in my opinion, such unavailability or
unenforceability should not render other remedies which are set forth in the
Credit Agreement unenforceable or otherwise inadequate for the practical
realization of the benefits intended to be provided by the Credit
Agreement.
I express
no opinion as to: (a) the effect of any law or regulation applicable
to the Borrower or the transactions contemplated by the Credit Agreement, as a
consequence of any Lender’s involvement in such transactions or because of such
Lender’s legal or regulatory status or any other facts specifically pertaining
to such Lender, or (b) as to Section 2.15 of the Credit Agreement insofar as it
provides that any Lender purchasing a participation from another Lender pursuant
thereto may exercise set-off or similar rights with respect to such
participation.
My
opinions are issued as of the date hereof and are limited to the laws now in
effect as to which my opinions relate and facts and circumstances in existence
on the date hereof, and I assume no undertaking to advise you of any changes in
the opinions expressed herein as a result of any change in any laws, facts or
circumstances which may come to my attention after the date hereof.
I am
qualified to practice law in the Commonwealth of Pennsylvania and do not purport
to be expert on, or to express any opinion herein concerning, any law other than
the laws of the Commonwealth of Pennsylvania, the Delaware General Corporation
Law and the federal laws of the United States of America.
February
24, 2010
Page
3
This
letter is furnished solely for the benefit of the Agent and the Lenders in
connection with matters relating to the Credit Agreement and may not be relied
upon by any other person or for any other purpose without my prior written
consent, other than any subsequent holder of a Note transferred in accordance
with the terms and provisions of the Credit Agreement.
Very
truly yours,
Brian M.
Addison
Vice
President, Secretary and
General
Counsel
DENTSPLY
International Inc.
2010
Equity Incentive Plan
The purpose of the DENTSPLY
International Inc. 2010 Equity Incentive Plan (the "Plan") is to benefit
DENTSPLY International Inc. ("DENTSPLY") and its "Subsidiaries," as defined
below (hereinafter referred to, either individually or collectively, as the
"Company") by recognizing the contributions made to the Company by officers and
other key employees, consultants and advisers, to provide such persons with an
additional incentive to devote themselves to the future success of the Company,
and to improve the ability of the Company to attract, retain and motivate such
persons. The Plan is also intended as an additional incentive to members of the
Board of Directors of DENTSPLY (the "Board") who are not employees of the
Company ("Outside Directors") to serve on the Board and to devote themselves to
the future success of the Company. "Subsidiaries," as used in the
Plan, has the definition set forth in Section 424 (f) of the Internal Revenue
Code of 1986, as amended (the "Code").
Stock options which constitute
"incentive stock options" within the meaning of Section 422 of the Code
("ISOs"), stock options which do not constitute ISOs ("NSOs"), stock which is
subject to certain forfeiture risks and restrictions ("Restricted Stock"), stock
delivered upon vesting of units ("Restricted Stock Units") and stock
appreciation rights ("Stock Appreciation Rights") may be awarded under the Plan.
ISOs and NSOs are collectively referred to as "Options." Options, Restricted
Stock, Restricted Stock Units and Stock Appreciation Rights are collectively
referred to as "Awards." The persons to whom Options are granted under the Plan
are hereinafter referred to as "Optionees." The persons to whom Restricted
Stock, Restricted Stock Units and/or Stock Appreciation Rights are granted under
the Plan are hereinafter referred as to "Grantees."
SECTION
2 ELIGIBILITY
Outside Directors shall be eligible to
participate in the Plan in the same manner as Key Employees (as defined below)
and other participants in the Plan. The Committee (as defined in
Section 3) shall initially, and from time to time thereafter, select those
officers and other key employees of the Company, including members of the Board
who are also employees ("Employee Directors"), and consultants and advisers to
the Company, to participate in the Plan on the basis of the importance of their
services in the management, development and operations of the Company. Officers,
other key employees and Employee Directors are collectively referred to as "Key
Employees."
SECTION
3 ADMINISTRATION
|
3.1
|
The
Committee
|
The Plan
shall be administered by the Human Resources Committee of the Board or a
subcommittee thereof (“Committee”). The Committee shall be comprised
of two (2) or more members of the Board. All members of the Committee
shall qualify as "Non-Employee Directors" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor
rule or regulation, "independent directors" as defined in Section 4200(15) of
the Marketplace Rules of The Nasdaq Stock Market and "outside directors" as
defined in Section 162(m) or any successor provision of the Code and applicable
Treasury regulations thereunder, if such qualification is deemed necessary in
order for the grant or the exercise of Options under the Plan to qualify for any
tax or other material benefit to Optionees or the Company under applicable
law.
|
3.2
|
Authority
of the Committee
|
Subject
to the express provisions of the Plan, the Committee shall have sole discretion
concerning all matters relating to the Plan and Awards granted
hereunder. The Committee, in its sole discretion, shall determine the
Key Employees, consultants and advisors to whom, and the time or times at which,
Awards will be granted, the number of shares to be subject to each Award, the
expiration date of each Award, the time or times within which the Option may be
exercised or forfeiture restrictions lapse, the cancellation or termination of
the Award and the other terms and conditions of the grant of the
Award. The terms and conditions of Awards need not be the same with
respect to each Optionee and/or Grantee or with respect to each
Award. The Governance Committee, which is responsible for Director
compensation, makes such determinations with respect to Outside
Directors.
The
Committee may, subject to the provisions of the Plan, establish such rules and
regulations as it deems necessary or advisable for the proper administration of
the Plan, and may make determinations and may take such other actions in
connection with or in relation to the Plan as it deems necessary or
advisable. Each determination or other action made or taken pursuant
to the Plan, including interpretation of the Plan and the specific terms and
conditions of the Award granted hereunder by the Committee, shall be final,
binding and conclusive for all purposes and upon all persons.
|
3.3
|
Award
Agreement
|
Each
Award shall be evidenced by a written agreement or grant certificate specifying
the type of Award granted, the number of shares of Common Stock ("Common Stock")
to be subject to such Award and, as applicable, the vesting schedule, the
exercise or grant price, the terms for payment of the exercise price, the
expiration date of the Option, the restrictions imposed upon the Restricted
Stock and/or Restricted Stock Units and such other terms and conditions
established by the Committee, in its sole discretion, which are not inconsistent
with the Plan.
2
SECTION
4 SHARES OF COMMON STOCK SUBJECT TO THE PLAN
4.1 Subject
to adjustment as provided in Sections 4.1 and 4.2, Options, Restricted Stock,
Restricted Stock Units and Stock Appreciation Rights with respect to an
aggregate of thirteen million (13,000,000) shares of common stock of DENTSPLY
(the "Common Stock") (plus any shares of Common Stock covered by any remaining
authorizations under the DENTSPLY International Inc. 2002 Equity
Incentive Plan, as amended), may be granted under the Plan (the "Maximum
Number"). The Maximum Number shall be increased, if at all, on January 1 of each
calendar year during the term of the Plan (as set forth in Section 15) by the
excess of the amount by which seven percent (7%) of the outstanding shares of
Common Stock on such date exceeds the thirteen million (13,000,000) shares
authorized at the time of adoption of this Plan. Notwithstanding the
foregoing, and subject to adjustment as provided in Section 4.2, (i) Options
with respect to no more than one million (1,000,000) shares of Common Stock may
be granted as ISOs under the Plan, (ii) no more than two million five hundred
thousand (2,500,000) shares may be awarded as Restricted Stock or Restricted
Stock Units under the Plan, and (iii) in any calendar year no Key Employee shall
be granted Options or Stock Appreciation Rights with respect to more than five
hundred thousand (500,000) shares of Common Stock, or Restricted Stock and
Restricted Stock Units in excess of 150,000 shares of Common Stock. Any shares
of Common Stock reserved for issuance upon exercise of Options or Stock
Appreciation Rights which expire, terminate or are cancelled, and any shares of
Common Stock subject to any grant of Restricted Stock or Restricted Stock Units
which are forfeited, may again be subject to new Awards under the
Plan. For the avoidance of doubt, notwithstanding any adjustment in
the Maximum Number, as provided above, all Awards granted under the Plan on or
following the Effective Date, subject to forfeitures or cancellation, shall be
counted towards the Maximum Number.
4.2 The
number of shares of Common Stock subject to the Plan and to Awards granted under
the Plan shall be adjusted as follows: (a) in the event that the number of
outstanding shares of Common Stock is changed by any stock dividend, stock split
or combination of shares, the number of shares subject to the Plan and to Awards
previously granted thereunder shall be proportionately adjusted, (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or corporations, there shall be substituted on an equitable
basis as determined by the Board of Directors, in its sole discretion, for each
share of Common Stock then subject to the Plan and for each share of Common
Stock then subject to an Award granted under the Plan, the number and kind of
shares of stock, other securities, cash or other property to which the holders
of Common Stock of the Company are entitled pursuant to the transaction, and (c)
in the event of any other changes in the capitalization of the Company, the
Committee, in its sole discretion, shall provide for an equitable adjustment in
the number of shares of Common Stock then subject to the Plan and to each share
of Common Stock then subject to Award granted under the Plan. In the
event of any such adjustment, the exercise price per share of any Options or
Stock Appreciation Rights shall be proportionately adjusted.
3
SECTION
5 GRANTS OF OPTIONS TO EMPLOYEES, OUTSIDE DIRECTORS,CONSULTANTS AND
ADVISERS
|
5.1
|
Grants
|
Subject
to the terms of the Plan, the Committee (the Governance Committee with respect
to Outside Directors) may from time to time grant Options which are ISOs to Key
Employees and Options which are NSOs to Outside Directors, Key Employees,
consultants and advisers of the Company. Each such grant shall
specify whether the Options so granted are ISOs or NSOs, provided, however, that
if, notwithstanding its designation as an ISO, all or any portion of an Option
does not qualify under the Code as an ISO, the portion which does not so qualify
shall be treated for all purposes as a NSO.
|
5.2
|
Expiration
|
Except to
the extent otherwise provided in or pursuant to Sections 10 and 11, each Option
shall expire, and all rights to purchase shares of Common Stock shall expire, on
the tenth anniversary of the date on which the Option was
granted.
|
5.3
|
Vesting
|
Except to
the extent otherwise provided in or pursuant to Sections 10 and 11, or in the
proviso to this sentence, Options shall vest pursuant to the following schedule:
with respect to one-third of the total number of shares of Common Stock subject
to Option on the first anniversary following the date of its grant, and with
respect to an additional one-third of the total number of shares of Common Stock
subject to the Option, on each anniversary thereafter during the succeeding two
years; provided, however, that the Committee, in its sole discretion, shall have
the authority to shorten or lengthen the vesting schedule with respect to any or
all Options, or any part thereof, granted under the Plan.
4
|
5.4
|
Required
Terms and Conditions of ISOs
|
ISOs may
be granted to Key Employees. Each ISO granted to a Key Employee shall be in such
form and subject to such restrictions and other terms and conditions as the
Committee may determine, in its sole discretion, at the time of grant, subject
to the general provisions of the Plan, the applicable Option agreement or grant
certificate, and the following specific rules:
(a) Except
as provided in Section 5.4(c), the exercise price per share of each ISO shall be
the “Fair Market Value” of a share of Common Stock on the date such ISO is
granted. For purposes of the Plan, “Fair Market Value” shall mean the
closing sales price of the Common Stock on The NASDAQ National Market, or other
national securities exchange which is the principal securities market on which
the Common Stock is traded (as reported in The Wall Street Journal, Eastern
Edition).”
(b) The
aggregate Fair Market Value (determined with respect to each ISO at the time
such Option is granted) of the shares of Common Stock with respect to which ISOs
are exercisable for the first time by an Optionee during any calendar year
(under all incentive stock option plans of the Company) shall not exceed
$100,000.
(c) Notwithstanding
anything herein to the contrary, if an ISO is granted to an individual who owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, (i) the exercise price of each ISO shall
be not less than one hundred ten percent (110%) of the Fair Market Value of a
share of Common Stock on the date the ISO is granted, and (ii) the ISO shall
expire and all rights to purchase shares thereunder shall cease no later than
the fifth anniversary of the date the ISO was granted.
|
5.5
|
Required
Terms and Conditions of NSOs
|
Each NSO
granted to Outside Directors, Key Employees, consultants and advisers shall be
in such form and subject to such restrictions and other terms and conditions as
the Committee may determine, in its sole discretion, at the time of grant,
subject to the general provisions of the Plan, the applicable Option agreement
or grant certificate, and the following specific rule: except as otherwise
determined by the Committee in its sole discretion with respect to a specific
grant, the exercise price per share of each NSO shall be not less than the Fair
Market Value of a share of Common Stock on the date the NSO is
granted.
5
SECTION
6 EXERCISE OF OPTIONS
|
6.1
|
Notices
|
A person
entitled to exercise an Option may do so by delivery of a written notice to that
effect, in a form specified by the Committee, specifying the number of shares of
Common Stock with respect to which the Option is being exercised and any other
information or documents the Committee may prescribe. The notice
shall be accompanied by payment as described in Section 6.2. All
notices, documents or requests provided for herein shall be delivered to the
Secretary of the Company.
|
6.2
|
Exercise
Price
|
Except as
otherwise provided in the Plan or in any Option agreement or grant certificate,
the Optionee shall pay the exercise price of the number of shares of Common
Stock with respect to which the Option is being exercised upon the date of
exercise of such Option (a) in cash, (b) pursuant to a cashless exercise
arrangement with a broker on such terms as the Committee may determine, (c) by
delivering shares of Common Stock held by the Optionee for at least six (6)
months and having an aggregate Fair Market Value on the date of exercise equal
to the Option exercise price, (d) in the case of a Key Employee, by such other
medium of payment as the Committee, in its sole discretion, shall authorize, or
(e) by any combination of (a), (b), (c), and (d). The Company shall issue, in
the name of the Optionee, stock certificates representing the total number of
shares of Common Stock issuable pursuant to the exercise of any Option as soon
as reasonably practicable after such exercise, provided that any shares of
Common Stock purchased by an Optionee through a broker pursuant to clause (b)
above shall be delivered to such broker in accordance with applicable
law.
SECTION
7 STOCK APPRECIATION RIGHTS
The Committee (the Governance Committee
with respect to Outside Directors) may award shares of Common Stock to Outside
Directors, Key Employees and consultants and advisors under a Stock Appreciation
Right Award, upon such terms as the Committee deems applicable, including the
provisions set forth below:
|
7.1
|
General
Requirements.
|
Stock Appreciation Rights may be
granted in tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award. Stock Appreciation
Rights granted in tandem with or in addition to an Award may be granted either
at the same time as the Award or, except in the case of Incentive Stock Options,
at a later time. The Committee shall determine the number of shares
of Common Stock to be issued pursuant to a Stock Appreciation Right Award and
the conditions and limitations applicable to the exercise thereof subject to the
following specific rule: except as otherwise determined by the Committee in its
sole discretion with respect to a specific grant, the exercise price per share
of each Stock Appreciation Right shall be not less than the Fair Market Value of
a share of Common Stock on the date the Stock Appreciation Right is
granted.
6
|
7.2
|
Expiration.
|
Except to
the extent otherwise provided in or pursuant to Sections 10 and 11, each Stock
Appreciation Right Award shall expire, and all rights to purchase shares of
Common Stock shall expire, on the tenth anniversary of the date on which the
Stock Appreciation Right Award was granted.
|
7.3
|
Payment.
|
A Stock Appreciation Right shall
entitle the Grantee to receive, upon exercise of the Stock Appreciation Right or
any portion thereof, an amount equal to the product of (a) the excess of the
Fair Market Value of a share of Common Stock on the date of exercise over the
grant price thereof and (b) the number of shares of Common Stock as to which
such Stock Appreciation Right Award is being exercised. Payment of
the amount determined under this Section 7.2 shall be made solely in shares of
Common Stock, provided that, the Stock Appreciation Rights which are settled
shall be counted in full against the number of shares available for award under
the Plan, regardless of the number of shares of Common Stock issued upon
settlement of the Stock Appreciation Right.
|
7.4
|
Exercise.
|
(a) Except
to the extent otherwise provided in Sections 10 or 11, or in the proviso to this
sentence, Stock Appreciation Rights shall vest pursuant to the following
schedule: with respect to one-third of the total number of shares of Common
Stock subject to the Stock Appreciation Right on the first anniversary following
the date of its grant, and with respect to an additional one-third of the total
number of shares of Common Stock subject to the Stock Appreciation Right, on
each anniversary thereafter during the succeeding two years; provided, however,
that the Committee, in its sole discretion, shall have the authority to shorten
or lengthen the vesting schedule with respect to any or all Stock Appreciation
Rights, or any part thereof, granted under the Plan. Notwithstanding the
foregoing, a tandem stock appreciation right shall be exercisable at such time
or times and only to the extent that the related Award is
exercisable.
(b) A
person entitled to exercise a Stock Appreciation Right Award may do so by
delivery of a written notice to that effect, in a form specified by the
Committee, specifying the number of shares of Common Stock with respect to which
the Stock Appreciation Right Award is being exercised and any other information
or documents the Committee may prescribe. Upon exercise of a tandem Stock
Appreciation Right Award, the number of shares of Common Stock covered by the
related Award shall be reduced by the number of shares with respect to which the
Stock Appreciation Right has been exercised.
7
SECTION
8 TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Unless
otherwise determined by the Committee, no Option or Stock Appreciation Right
granted pursuant to the Plan shall be transferable otherwise than by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code.
SECTION
9 RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The Committee may award shares of
Common Stock to Outside Directors, Key Employees and consultants and advisors
under an Award of Restricted Stock and/or Restricted Stock Units, upon such
terms as the Committee deems applicable, including the provisions set forth
below.
|
9.1
|
General
Requirements.
|
Shares of Common Stock issued or
transferred pursuant to an Award of Restricted Stock and/or Restricted Stock
Units may be issued or transferred for consideration or for no consideration,
and subject to restrictions or no restrictions, as determined by the
Committee. The Committee may establish conditions under which
restrictions on shares of Restricted Stock and/or Restricted Stock Units shall
lapse over a period of time or according to such other criteria (including
performance-based criteria which are intended to satisfy the qualified
performance-based compensation exception from the tax deductibility limitations
of Section 162(m) of the Code) as the Committee deems
appropriate. The period of time during which shares of Restricted
Stock and/or Restricted Stock Units remain subject to restrictions will be
designated in the written agreement or grant certificate as the "Restricted
Period."
|
9.2
|
Number of
Shares.
|
The Committee shall determine the
number of shares of Common Stock to be issued pursuant to an Award of Restricted
Stock and/or Restricted Stock Units and the restrictions applicable to the
shares subject to such Award.
|
9.3
|
Restrictions on Transfer and
Legend on Stock Certificate.
|
During the Restricted Period, subject
to such exceptions as the Committee may deem appropriate, a Grantee may not
sell, assign, transfer, donate, pledge or otherwise dispose of the shares of
Restricted Stock or Restricted Stock Units. Each certificate for a share of
Restricted Stock shall contain a legend giving appropriate notice of the
applicable restrictions. The Grantee shall be entitled to have the
legend removed from the stock certificate covering the shares of Restricted
Stock subject to restrictions when all restrictions on such shares
lapse. The Board may determine that the Company will not issue
certificates for shares of Restricted Stock until all restrictions on such
shares lapse, or that the Company will retain possession of certificates for
shares of Restricted Stock until all restrictions on such shares
lapse.
8
|
9.4
|
Right to
Dividends.
|
During the Restricted Period, except as
otherwise set forth in the applicable written agreement or grant certificate, in
the event that dividends are paid on shares of Common Stock, an amount equal to
the dividend paid on each such share shall be credited to the shares subject to
Award of Restricted Stock Units ("Dividend Credits"). Any Dividend
Credits shall be paid to the Grantee if and when the restrictions with respect
to such Restricted Stock Units lapse as set forth in Section 9.5.
|
9.5
|
Lapse of
Restrictions.
|
(a) All
restrictions imposed on Restricted Stock and/or Restricted Stock Units shall
lapse upon the expiration of the applicable Restricted Period and the
satisfaction of all conditions imposed by the Committee (the date on which
restrictions lapse as to any shares of Restricted Stock or Restricted Stock
Units, the "Vesting Date"). The Committee may determine, as to any
grant of Restricted Stock and/or Restricted Stock Units, that the restrictions
shall lapse without regard to any Restricted Period.
(b) Upon
the lapse of restrictions with respect to any Restricted Stock Units, the value
of such Restricted Stock Units shall be paid to the Grantee in shares of Common
Stock. For purposes of the preceding sentence, each Restricted Stock Unit as to
which restrictions have lapsed shall have a value equal to the Fair Market Value
as of the Units Vesting Date. "Units Vesting Date" means, with respect to any
Restricted Stock Units, the date on which restrictions with respect to such
Restricted Stock Units lapse.
|
9.6
|
Performance-Based
Criteria
|
At the
Committee's discretion, awards of Restricted Stock and Restricted Stock Units
may be made subject to the attainment of performance goals which are intended to
satisfy the qualified performance-based compensation exception from the tax
deductibility limitations of Section 162(m) of the Code. The performance
criteria shall consist of one or more or any combination of the following
measures: net sales (with or without precious metal content); sales
growth; operating income; earnings before or after tax; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization; cash
flow; gross or net margin; earnings per share (whether on a pre-tax, after-tax,
operational or other basis); ratio of debt to debt plus equity; credit quality
or debt ratings; capital expenditures; expenses or expense levels; ratio of
operating earnings to revenues or any other operating ratios; the extent to
which business goals are met; the accomplishment of mergers, acquisitions,
dispositions, or similar extraordinary business transactions; price of the
Company’s Common Stock; market share criteria; management of costs; return on
assets, net assets, invested capital, equity, or stockholders’ equity; market
share; inventory levels, inventory turn or shrinkage; regulatory compliance;
total return to stockholders (“Performance Criteria”). The
Performance Criteria may be applied to the performance of the Company as a whole
or any business unit of the Company and may be measured relative to a peer group
or index selected by the Committee, provided that, the Performance Criteria
shall be calculated consistently with the Company’s financial statements, under
generally accepted accounting principles, or under a methodology established by
the Committee in connection with the granting of an Award which is consistently
applied with respect to that Award. To the extent the Committee deems
appropriate, Performance Criteria may exclude or otherwise be adjusted for (i)
extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or
losses on the disposition of a business, (iii) the effect of changes in tax
and/or accounting regulations, laws or principles and the interpretation
thereof, or (iv) the effects of mergers, acquisitions and/or
dispositions. This Section 9.6 shall not limit the discretion of the
Committee to grant Awards that do not satisfy the requirements of the qualified
performance-based compensation exception from the tax deductibility limitations
of Section 162(m) of the Code.
9
SECTION
10 EFFECT OF TERMINATION OF EMPLOYMENT
|
|
10.1
|
Termination
Generally
|
(a) Except
as provided in Section 10.2, 10.3 or 11, or as determined by the Committee, in
its sole discretion, all rights to exercise the vested portion of any Option
held by an Optionee or of any Stock Appreciation Right Award held by a Grantee
whose employment and/or relationship with the Company or service on the Board is
terminated for any reason other than "Cause," as defined below, shall terminate
ninety (90) days following the date of termination of employment, relationship
or service on the Board, as the case may be (“Exercise Period”). All rights to
exercise the vested portion of any Option held by an Optionee or of any Stock
Appreciation Right Award held by a Grantee whose employment and/or relationship
with the Company is terminated for "Cause" shall terminate on the date of
termination of employment and/or the relationship. For the purposes of this
Plan, "Cause" shall mean a finding by the Committee that the Optionee has
engaged in conduct that is fraudulent, disloyal, criminal or injurious to the
Company, including, without limitation, acts of dishonesty, embezzlement, theft,
felonious conduct or unauthorized disclosure of trade secrets or confidential
information of the Company. Unless otherwise provided in the Plan or determined
by the Committee, vesting of Options and Stock Appreciation Right Awards for Key
Employees and consultants ceases immediately upon the date of termination of
employment and/or the relationship with the Company and any portion of an Option
and/or Stock Appreciation Right Award that has not vested on or before such date
is forfeited on such date.
10
(b) If
a Grantee who has received an Award of Restricted Stock and/or Restricted Stock
Units ceases to be employed by the Company during the Restricted Period, or if
other specified conditions are not met, the Award of Restricted Stock and/or
Restricted Stock Units shall terminate as to all shares covered by the Award as
to which the restrictions have not lapsed, and, in the case of Restricted Stock,
those shares of Common Stock shall be canceled in exchange for the purchase
price, if any, paid by the Grantee for such shares. The Committee may
provide, however, for complete or partial exceptions to this requirement as it
deems appropriate.
(c) The
transfer of employment from the Company to a Subsidiary, or from a Subsidiary to
the Company, or from a Subsidiary to another Subsidiary, shall not constitute a
termination of employment for purposes of the Plan. Awards granted under the
Plan shall not be affected by any change of duties in connection with the
employment of the Key Employee or by a leave of absence authorized by the
Company.
|
10.2
|
Death
and Disability
|
|
|
In
the event of the death or Disability (as defined below) of an Optionee or
Grantee during employment or such Optionee's or Grantee relationship with
the Company or service on the Board, (a) all Options held by the Optionee
and all Stock Appreciation Right Awards held by the Grantee shall become
fully exercisable on such date of death or Disability and (b) all
restrictions and conditions on all Restricted Stock and/or Restricted
Stock Units held by the Grantee shall lapse on such date of death or
Disability. Each of the Options held by such an Optionee and
each of the Stock Appreciation Right Awards held by such a Grantee shall
expire on the earlier of (i) the first anniversary of the date of death or
Disability and (ii) the date that such Option or Stock Appreciation Right
Award expires in accordance with its terms, provided that, in any event,
NSOs granted under this Plan shall not expire earlier than one year from
the date of death or disability. For purposes of this Section
11.2, "Disability" shall mean the inability of an individual to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. The Committee, in its sole
discretion, shall determine the existence and date of any
Disability.
|
11
|
10.3
|
Retirement
|
(a) Key
Employees. In the event the employment of a Key Employee with the Company shall
be terminated by reason of "Normal Retirement" or "Early Retirement," as defined
below, all Options and Stock Appreciation Right Awards held by such Key Employee
shall become fully exercisable on the date of such Employee retirement. Each of
the Options and Stock Appreciation Right Awards held by such a Key Employee
shall expire on the earlier of (i) the fifth anniversary of the date of the
Employee retirement, or (ii) the date that such Option expires in accordance
with its terms. For the purposes hereof, "Normal Retirement" shall mean
retirement of a Key Employee at or after age 65 and "Early Retirement" shall
mean retirement of a Key Employee at or after age 60 with a minimum of 15 years
of service with the Company. In the event the employment of a Key Employee with
the Company shall be terminated by reason of a retirement that is not a Normal
Retirement or Early Retirement, the Committee may, in its sole discretion,
determine the vesting, exercisability and exercise periods applicable to Options
and Stock Appreciation Right Awards held by such Key Employee. In the event the
employment of a Key Employee with the Company shall be terminated by reason of
"Normal Retirement" or "Early Retirement", all restrictions and conditions on
all Restricted Stock and/or Restricted Stock Units held by such Key Employee
shall lapse on the date of such Normal Retirement or Early Retirement. In the
event the employment of a Key Employee with the Company shall be terminated by
reason of a retirement that is not a Normal Retirement or Early Retirement, the
Committee may, in its sole discretion, determine the restrictions and
conditions, if any, on Restricted Stock and/or Restricted Stock Units held by
such Key Employee that will lapse.
(b) Outside
Directors. In the event the service on the Board of an Outside Director shall be
terminated by reason of the retirement of such Outside Director ("Outside
Director Retirement"), all Options and Stock Appreciation Right Awards held by
such Outside Director shall become fully exercisable on the date of such Outside
Director Retirement. Each of the Options and Stock Appreciation Right Awards
held by such an Outside Director shall expire on the earlier of (i) the date
that such Option or Stock Appreciation Right Award expires in accordance with
its terms or (ii) the five year anniversary date of such Outside Director
Retirement. In the event the service on the Board of an Outside Director shall
be terminated by reason of an "Outside Director Retirement", all restrictions
and conditions on all Restricted Stock and/or Restricted Stock Units held by
such Outside Director shall lapse on the date of such Outside Director
Retirement. For purposes of this provision, Outside Director
Retirement shall mean a Director resignation from the Board after nine years of
service on the Board or retirement in accordance with the Company’s mandatory
retirement policy for Directors.
12
(c) Key
Employees Who Are Employee Directors. Section 10.3(a) shall be applicable to
Options, Stock Appreciation Rights, Restricted Stock and/or Restricted Stock
Units held by any Key Employee who is an Employee Director at the time that such
Key Employee's employment with the Company terminates by reason of Employee
Retirement. If such Key Employee continues to serve on the Board as of the date
of such Key Employee’s Employee Retirement, then Section 10.3(b) shall be
applicable to Options, Stock Appreciation Rights Restricted Stock and/or
Restricted Stock Units granted after such date.
SECTION
11 CHANGE IN CONTROL
|
11.1
|
Effect
of Change in Control
|
|
|
Notwithstanding
any of the provisions of the Plan or any written agreement or grant
certificate evidencing Awards granted hereunder, immediately upon a
"Change in Control" (as defined in Section 11.2), all outstanding Options
and Stock Appreciation Rights granted to Key Employees or Outside
Directors, whether or not otherwise exercisable as of the date of such
Change in Control, shall accelerate and become fully exercisable and all
restrictions thereon shall terminate in order that Optionees and Grantees
may fully realize the benefits thereunder, and all restrictions and
conditions on all Restricted Stock and Restricted Stock Units granted to
Key Employees or Outside Directors shall lapse upon the effective date of
the Change of Control. The Committee may determine in its discretion (but
shall not be obligated to do so) that any or all holders of outstanding
Options and Stock Appreciation Right Awards which are exercisable
immediately prior to a Change of Control (including those that become
exercisable under this Section 11.1) will be required to surrender them in
exchange for a payment, in cash or Common Stock as determined by the
Committee, equal to the value of such Options and Stock Appreciation Right
Awards, with such payment to take place as of the date of the Change in
Control or such other date as the Committee may
prescribe.
|
|
11.2
|
Definition
of Change in Control
|
|
|
The
term "Change in Control" shall mean the occurrence, at any time during the
term of an Award granted under the Plan, of any of the following
events:
|
(a) The
acquisition, other than from the Company, by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") (other than the Company or any benefit plan sponsored by the Company)
of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of 30% or more of either (i) the then outstanding shares of the Common
Stock (the "Outstanding Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Voting Securities"); or
13
(b) Less
than a majority of the Board (rounded down to the nearest whole number) is
comprised of individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board"), provided that any individual whose election or
nomination for election was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company; or
(c) Consummation
by the Company of a reorganization, merger or consolidation (a "Business
Combination"), in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Outstanding Common Stock and Voting Securities immediately prior to such
Business Combination do not, following such Business Combination, beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination in substantially the same proportion as their ownership immediately
prior to such Business Combination of the Outstanding Common Stock and Voting
Securities, as the case may be; or
(d) Consummation
of a complete liquidation or dissolution of the Company, or sale or other
disposition of all or substantially all of the assets of the Company other than
to a corporation with respect to which, following such sale or disposition, more
than 50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Common Stock and Voting
Securities immediately prior to such sale or disposition in substantially the
same proportions as their ownership of the Outstanding Common Stock and Voting
Securities, as the case may be, immediately prior to such sale or
disposition.
14
(e) In
addition to the foregoing, with respect to any Key Employee covered under this
provision, consummation by the Company of a Business Combination, in each case,
with respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Common Stock and
Voting Securities immediately prior to such Business Combination do not,
following such Business Combination, beneficially own, directly or indirectly,
more than 55% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination in substantially the same
proportion as their ownership immediately prior to such Business Combination of
the Outstanding Common Stock and Voting Securities, as the case may be, and any
Key Employees who were employed by the Company and were Optionees or Grantees
under the Plan at the time of such Business Combination is terminated other than
for Cause or voluntarily leaves the employ of the Company within two (2) years
from the date of any such Business Combination as the result of a voluntary
termination of employment by such Key Employee within sixty (60) days after any
one or more of the following events have occurred:
|
|
(i)
|
failure
by the Company to maintain the duties, status, and responsibilities of the
Key Employee substantially consistent with those prior to the Business
Combination, or
|
|
|
(ii)
|
a
reduction by the Company in the Key Employee’s base salary as in effect as
of the date prior to the Business Combination,
or
|
|
|
(iii)
|
the
failure of the Company to maintain and to continue the Key Employee’s
participation in the Company’s benefit plans as in effect from time to
time on a basis substantially equivalent to the participation and benefits
of Company employees similarly situated to the
Employee.
|
SECTION
12 RIGHTS AS STOCKHOLDER
An Optionee or Grantee (or a transferee
of any such person pursuant to Section 8) shall have no rights as a stockholder
with respect to any Common Stock covered by an Award or receivable
upon the exercise of Award until the Optionee, Grantee or transferee shall have
become the holder of record of such Common Stock, and no adjustments shall be
made for dividends or distributions in cash or other property or rights in
respect to such Common Stock for which the applicable record date is prior to
the date on which the Optionee or Grantee shall have become the holder of record
of the shares of Common Stock purchased pursuant to exercise of the
Award.
SECTION
13 POSTPONEMENT OF EXERCISE
The Committee may postpone any exercise
of an Option or Stock Appreciation Right Awards for such time as the Committee
in its sole discretion may deem necessary in order to permit the Company to
comply with any applicable laws or rules, regulations or other requirements of
the Securities and Exchange Commission or any securities exchange or quotation
system upon which the Common Stock is then listed or quoted. Any such
postponement shall not extend the term of an Option or Stock Appreciation Right
Award, unless such postponement extends beyond the expiration date of the Award
in which case the expiration date shall be extended thirty (30) days, and
neither the Company nor its directors, officers, employees or agents shall have
any obligation or liability to an Optionee or Grantee, or to his or her
successor or to any other person.
15
SECTION
14 TAXES
|
14.1
|
Taxes
Generally
|
|
|
The
Company shall have the right to withhold from any Award, from any payment
due or transfer made under any Award or under the Plan or from any
compensation or other amount owing to a participant the amount (in cash,
shares or other property) of any applicable withholding or other taxes in
respect of an Award, its exercise, or any payment or transfer under an
Award or under the Plan and to take such other action as may be necessary
in the opinion of the Committee to satisfy all obligations for the payment
of such taxes.
|
|
14.2
|
Payment
of Taxes
|
|
|
A
participant, with the approval of the Committee, may satisfy the
obligation set forth in Section 14.1, in whole or in part, by (a)
directing the Company to withhold such number of shares of Common Stock
otherwise issuable upon exercise or vesting of an Award (as the case may
be) having an aggregate Fair Market Value on the date of exercise equal to
the amount of tax required to be withheld, or (b) delivering shares of
Common Stock of the Company having an aggregate Fair Market Value equal to
the amount required to be withheld on any date. The Committee
may, in its sole discretion, require payment by the participant in cash of
any such withholding obligation and may disapprove any election or
delivery or may suspend or terminate the right to make elections or
deliveries under this Section 14.2.
|
SECTION
15 TERMINATION, AMENDMENT AND TERM OF PLAN
15.1 The
Board or the Committee may terminate, suspend, or amend the Plan, in whole or in
part, from time to time, without the approval of the stockholders of the Company
provided, however, that no Plan amendment shall be effective until approved by
the stockholders of the Company if the effect of the amendment is to lower the
exercise price of previously granted Options or Stock Appreciation Rights or if
such stockholder approval is required in order for the Plan to continue to
satisfy the requirements of Rule 16b-3 under the 1934 Act or applicable tax or
other laws. Except in connection with a corporate transaction
involving the Company (including, without limitation, any stock dividend, stock
split, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), the
terms of outstanding awards may not be amended to reduce the exercise price of
outstanding Options of Stock Appreciation Rights or cancel, exchange,
substitute, buyout or surrender outstanding Options or Stock Appreciation Rights
with an exercise price that is less than the exercise price of the original
Options or Stock Appreciation Rights without stockholder approval.
16
15.2 The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award granted hereunder in the manner and to
the extent it shall deem desirable, in its sole discretion, to effectuate the
Plan. No amendment or termination of the Plan shall adversely affect
any Award theretofore granted without the consent of the recipient, except that
the Committee may amend the Plan in a manner that does affect Awards theretofore
granted upon a finding by the Committee that such amendment is in the best
interests of holders of outstanding Options affected thereby.
15.3 The
Plan was adopted and authorized on March 24, 2010 by the Board of Directors for
submission to the stockholders of the Company for their approval. If
the Plan is approved by the stockholders of the Company, it shall be deemed to
have become effective as of March 24, 2010. Unless earlier terminated
in accordance herewith, the Plan shall terminate on March 24,
2020. Termination of the Plan shall not affect Awards previously
granted under the Plan.
SECTION
16 GOVERNING LAW
The Plan shall be governed and
interpreted in accordance with the laws of the State of Delaware, without regard
to any conflict of law provisions which would result in the application of the
laws of any other jurisdiction.
SECTION
17 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT
No person shall have any claim of right
to be granted an Award under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee of the Company
any right to be retained in the employ of the Company or as giving any member of
the Board any right to continue to serve in such capacity.
SECTION
18 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES
Income recognized by a participant
pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of the Employee Retirement Income Security Act of
1974) or group insurance or other benefit plans applicable to the participant
which are maintained by the Company, except as may be provided under the terms
of such plans or determined by resolution of the Committee.
SECTION
19 NO STRICT CONSTRUCTION
No rule of strict construction shall be
implied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Board.
17
SECTION
20 CAPTIONS
All Section headings used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
SECTION
21 SEVERABILITY
Whenever possible, each provision in
the Plan and every Award at any time granted under the Plan shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of the Plan or any Award at any time granted under the Plan shall be
held to be prohibited by or invalid under applicable law, then such provision
shall be deemed amended to accomplish the objectives of the provision as
originally written to the fullest extent permitted by law, and all other
provisions of the Plan and every other Award at any time granted under the Plan
shall remain in full force and effect.
SECTION
22 MODIFICATION FOR GRANTS OUTSIDE THE U.S.
The Board may, without amending the
Plan, determine the terms and conditions applicable to grants of Awards to
participants who are foreign nationals or employed outside the United States in
a manner otherwise inconsistent with the Plan if the Board deems such terms and
conditions necessary in order to recognize differences in local law or
regulations, tax policies or customs.
18
Subsidiaries
of DENTSPLY International Inc. (the “Company”) - 2010
|
1)
|
DENTSPLY
Prosthetics U.S. LLC (Delaware)
|
|
2)
|
GAC
International LLC (New York)
|
|
|
a)
|
Orthodental
International, Inc.
|
|
|
b)
|
Orthodental
S.A. de C.V. (Mexico)
|
|
3)
|
DENTSPLY
Finance Co. (Delaware)
|
|
|
a)
|
Dentsply
Germany Investments GmbH (Germany)
|
|
|
1)
|
Ceramco
Manufacturing B.V. (Netherlands)
|
|
|
2)
|
ESHealthcare
Holding Co.(Belgium)
|
|
|
(a)
|
ES
Dental (Belgium)
|
|
|
(b)
|
ES
Tooling (Belgium)
|
|
|
3)
|
Lomberg
BV (Netherlands)
|
|
|
4)
|
Dentsply
Germany Holdings GmbH (Germany)
|
|
|
(a)
|
VDW
GmbH (Germany)
|
|
|
(b)
|
Dentsply
DeTrey GmbH (Germany)
|
|
|
(c)
|
Friadent
GmbH (Germany)
|
|
|
(d)
|
DeguDent
GmbH (Germany)
|
|
|
(i)
|
Ducera
Dental Verwaltungs-ges.m.b.H.
(Germany)
|
|
|
(e)
|
Elephant
Dental GmbH (Germany)
|
|
|
5)
|
Zhermack
International S.a.r.l. (Luxembourg)
(57.89%)
|
|
|
(a)
|
Zhermack
SpA (Italy)
|
|
|
(i)
|
Zhermack
GmbH (Germany)
|
|
|
(ii)
|
Zhermapol
SP (Poland)
|
|
|
(iii)
|
Zhermack,
Inc. (US – Nevada)
|
|
4)
|
DENTSPLY
North America LLC (Delaware)
|
|
5)
|
Dentsply
Argentina S.A.C.e.I. (Argentina)
|
|
6)
|
Dentsply
Mexico S.A. de C.V. (Mexico)
|
|
7)
|
Dentsply
India Pvt. Ltd. (India)
|
|
8)
|
Dentsply
(Philippines) Inc. (Philippines)
|
|
9)
|
Dentsply
(Thailand) Ltd. (Thailand)
|
|
10)
|
Dentsply
Dental (Tianjin) Co. Ltd. (China)
|
|
11)
|
Dentsply
Tianjin International Trading Co. Ltd.
(China)
|
|
12)
|
Dentsply
Korea Limited
|
| 13) | Materialise Dental Japan Inc. (30%)(Japan) |
|
14)
|
Ceramco
Europe Limited (Cayman Islands)
|
|
|
a)
|
Ceramco
UK Limited (Dormant)
|
|
15)
|
Dentsply
LLC (Delaware)
|
|
16)
|
DSHealthcare
Inc. (Delaware)
|
|
17)
|
TDP
NT LLC (Delaware)
|
|
18)
|
Raintree
Essix Inc. (Delaware)
|
|
19)
|
Dentsply
Israel Ltd.
|
|
20)
|
Ransom
& Randolph Company (Delaware)
|
|
21)
|
EndoAction
Inc.
|
|
22)
|
Osteointegration
Materials LLC (Delaware)
|
|
23)
|
Dentsply
Friadent Turkey (Istanbul)
|
|
24)
|
Tulsa
Dental Products LLC (Delaware)
|
|
|
a)
|
Tulsa
Finance Co. (Delaware)
|
|
25)
|
Dentsply
Canada Ltd. (Canada (Ontario))
|
|
26)
|
The
International Tooth Co. Limited (United
Kingdom)
|
|
27)
|
Dentsply
Services (Switzerland) S.a.r.L.
(Switzerland)
|
|
28)
|
Prident
International,
Inc. (California)
|
|
|
a)
|
Prident
(Shanghai) Dental Medical Devices Co., Ltd.
(China)
|
|
29)
|
Dentsply
Espana SL (Spain)
|
| 30) | Planer Dentaprise GmbH (Austria) |
|
31)
|
DENTSPLY
Holding Company
|
|
|
a)
|
DENTSPLY-Sankin
K.K. (Japan)
|
|
|
1)
|
Sankin
Laboratories K.K. (Japan)
|
|
|
b)
|
DeguDent
Industria e Comercio Ltda. (Brazil)
|
|
|
1)
|
DeguDent
da Amazonia Industria e Comercio Ltda.
(Brazil)
|
|
|
2)
|
DLA
Pharmaceutical Ltda.
(99.9%)(Brazil)
|
|
|
c)
|
Dentsply
Industria e Comercio Ltda.
(Brazil)
|
|
|
1)
|
DLA
Pharmaceutical Ltda. (1%)(Brazil)
|
|
|
d)
|
Dentsply
EU Holding S.a.r.L (Luxembourg)
|
|
|
1)
|
Dentsply
Europe S.a.r.l. (Luxembourg)
|
|
|
(a)
|
Dentsply
Investments KG (Germany)
|
|
|
(b)
|
Dentsply
Sweden AB (Sweden)
|
|
|
2)
|
Dentsply
Friadent Espana SA (Spain)
|
|
|
e)
|
Dentsply
Switzerland Holdings SA
(Switzerland)
|
|
|
1)
|
Maillefer
Instruments Holding S.a.r.l.
(Switzerland)
|
|
|
(a)
|
Maillefer
Instruments Trading S.a.r.l.
(Switzerland)
|
|
|
(b)
|
Maillefer
Instruments Consulting S.a.r.l.
(Switzerland)
|
|
|
(c)
|
Maillefer
Instruments Manufacturing S.a.r.l.
(Switzerland)
|
|
|
(i)
|
ATR
(Italy)
|
|
|
(d)
|
GAC,
SA (Switzerland)
|
|
|
(i)
|
GAC
Deutschland GmbH (Germany)
|
|
|
(ii)
|
GAC
Norge Sa (Norway)
|
|
|
(iii)
|
SOF
SA (France)
|
|
|
f)
|
Dentsply
Australia Pty. Ltd. (Australia
(Victoria))
|
|
|
1)
|
Dentsply
(NZ) Limited (New Zealand)
|
|
|
g)
|
PT
Dentsply Indonesia (Indonesia)
|
|
|
h)
|
Dentsply
CE S.a.r.l. (95%) (Luxembourg)
|
|
|
i)
|
Dentsply
DeTrey Sarl (Switzerland)
|
|
32)
|
Dentsply
(Singapore) Pte. Ltd. (Singapore)
|
|
33)
|
GAC
International Asia Pte. Ltd. (Singapore)
|
| 34) | Elephant Dental B.V. (Netherlands) |
|
|
a)
|
Cicero
Dental Systems B.V. (Netherlands)
|
| b) | DeguDent Benelux B.V. (Netherlands) | |
| c) | Dental Trust B.V. (Netherlands) | |
| d) | Materialise Dental NV (46%) (Netherlands) |
|
|
(i)
|
Materialise
Dental GmbH (Germany)
|
|
|
(ii)
|
Materialise
Dental Japan Inc. (70%)(Japan)
|
|
|
(iii)
|
Materialise
Dental France SAS (France)
|
| (iv) | Materialise Dental Spain S.L.U. (Spain) | |
| (v) | Materialise Dental Inc. (US) |
|
35)
|
DeguDent
Austria Handels GmbH (Austria)
|
| 36) | Dentsply Limited (Cayman Islands) |
|
|
a)
|
Dentsply
Holdings Unlimited (U.K.)
|
| b) | Dentsply Russia Limited (U.K.) | |
| c) | Amalco Holdings Ltd (U.K., Dormant) | |
| d) | Keith Wilson Limited (U.K., Dormant) | |
| e) | Oral Topics Limited (U.K., Dormant) | |
| f) | AD Engineering Company Limited (Dormant) |
| 37) | Dentsply Italia SrL (Italy) |
| 38) | Dentsply France S.A.S. (France) |
| 39) | Dentsply South Africa (Pty) Limited (South Africa) |
| 40) | Friadent Schweiz AG (Switzerland) |
| 41) | Dentsply Friadent N.V. (Belgium) |
| 42) | Dentsply Friadent Scandinavia (Sweden) |
| 43) | Friadent Denmark ApS |
| 44) | Friadent Brasil Ltda. (99%) (Brazil) |
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in the Registration Statement on
Forms S-8
(Nos. 333-167410, 333-101548 and 333-56093) of DENTSPLY International Inc. of
our report dated February 18, 2011 relating to the financial statements,
financial statement schedule and the effectiveness of internal control over
financial reporting, which appears in this Form 10-K.
PricewaterhouseCoopers
LLP
Philadelphia,
Pennsylvania
February
18, 2011
Exhibit
31.1
CERTIFICATION
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bret
W. Wise, certify that:
|
1.
|
I
have reviewed this Form 10-K of DENTSPLY International
Inc;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
(b)
|
Designed
such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under their supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles:
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors:
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
/s/
|
Bret W. Wise
|
|
|||
|
Bret
W. Wise
|
|||||
|
Chairman
of the Board and Chief
Executive Officer
|
|
Date:
February 18, 2011
Exhibit
31.2
CERTIFICATION
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
I,
William R. Jellison, certify that:
|
1.
|
I
have reviewed this Form 10-K of DENTSPLY International
Inc;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
(b)
|
Designed
such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under their supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles:
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors:
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
/s/
|
William R.
Jellison
|
|
|||
| William R. Jellison | |||||
|
Senior
Vice President and Chief
Financial Officer
|
|
Date:
February 18, 2011
Exhibit
32
CERTIFICATION
PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of DENTSPLY International Inc. (the "Company")
on Form 10-K for the year ending December 31, 2010 as filed with the
Securities and Exchange Commission on the date hereof
(the "Report"), We, Bret W. Wise, Chairman of the Board of
Directors and Chief Executive Officer of the Company and William
R. Jellison, Senior
Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
our knowledge and belief:
(1) The
Report fully complies with the requirements of Sections 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company as of the date
of the Report.
|
/s/
|
Bret W. Wise
|
|
|||
|
Bret
W. Wise
|
|
||||
|
Chairman
of the Board and Chief
Executive Officer
|
|
|
/s/
|
William R.
Jellison
|
|
|||
|
William
R. Jellison
|
|
||||
|
Senior
Vice President and Chief
Financial Officer
|
|
Date:
February 18, 2011