Filed pursuant to Rule 424(b)(5)
Registration No. 333-67054
FIRST SUPPLEMENT TO THE
PROSPECTUS DATED OCTOBER 26, 2001
[ORTHODONTIC CENTERS OF AMERICA LOGO]
SHARES OF COMMON STOCK
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This supplement to our prospectus dated October 26, 2001 supplements
some of the information contained in that prospectus.
The information in this supplement supersedes any inconsistent
information contained in the prospectus. Each investor should study carefully
the information in the entire prospectus and this supplement in evaluating the
merits of an investment in our common stock or participation in the incentive
programs.
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BEFORE INVESTING IN SHARES OF OUR COMMON STOCK, YOU SHOULD CAREFULLY
CONSIDER THE RISK FACTORS DESCRIBED IN THE SECTION OF THE PROSPECTUS CAPTIONED
"RISK FACTORS," WHICH BEGINS ON PAGE 6 OF THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO PURCHASE ANY SECURITIES OTHER THAN SHARES OF OUR COMMON STOCK TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER.
The date of this First Supplement is August 26, 2002.
AMENDMENT TO TARGET STOCK PROGRAM,
ORTHALLIANCE STOCKHOLDER VALUE PROGRAM AND
STOCK POOL PROGRAM
Target Stock Program
We have amended our Target Stock Program to provide that, if, by
October 1, 2002, a participant in the Target Stock Program executes and
delivers, along with his or her professional corporation, either (1) an
additional amendment to the participant's employment agreement and an additional
amendment to the participant's service, management service or consulting
agreement with OrthAlliance, Inc. or its subsidiary, with each additional
amendment to be in the form and substance specified by us, or (2) a new business
services agreement with OrthAlliance based on our general form of that
agreement, then the dates on which shares of our common stock may be issued to
that participant under the Target Stock Program would be accelerated by one
year.
Accordingly, the shares would be issued to the participant under the
Target Stock Program following each of the fourth, fifth, sixth and seventh
anniversaries of the effective date of our merger with OrthAlliance, Inc. on
November 9, 2001, rather than the fifth, sixth, seventh and eighth anniversaries
of the merger, if certain conditions are met and satisfied.
A copy of the amendment to our Target Stock Program is attached as
Annex A.
OrthAlliance Stockholder Value Program
We have also amended our OrthAlliance Stockholder Value Program to
provide for two changes. If, by October 1, 2002, a participant in the
OrthAlliance Stockholder Value Program executes and delivers, along with his or
her professional corporation, either (1) the additional amendment to the
participant's employment agreement and the additional amendment to the
participant's service, management service or consulting agreement with
OrthAlliance or its subsidiary (as discussed above), with each additional
amendment to be in the form and substance specified by us, or (2) a new business
services agreement with OrthAlliance based on our general form of that
agreement, then:
o The dates on which shares of our common stock may be issued to
the participant under the OrthAlliance Stockholder Value
Program would be accelerated by one year. Accordingly, the
shares would be issued to the participant under the
OrthAlliance Stockholder Value Program following each of the
first, second, third and fourth anniversaries of the effective
date of our merger with OrthAlliance on November 9, 2001,
rather than the second, third, fourth and fifth anniversaries
of the merger, if certain conditions are met and satisfied;
and
o The participant may, during the 30 calendar days ending on and
including the first anniversary of the effective date of our
merger with OrthAlliance, elect to receive a promissory note
in lieu of all shares of our common stock that the participant
may otherwise be issued under the OrthAlliance Stockholder
Value Program.
A copy of the amendment to our OrthAlliance Stockholder Value Program
is attached as Annex B.
Stock Pool Program
We have also amended our Stock Pool Program to provide that if, by
October 1, 2002, a participant in the Stock Pool Program executes and delivers,
along with his or her professional corporation, either (1) the additional
amendment to the participant's employment agreement and the additional amendment
to the participant's service, management service or consulting agreement
2
with OrthAlliance or its subsidiary (as discussed above), with each additional
amendment to be in the form and substance specified by us, or (2) a new business
services agreement with OrthAlliance based on our general form of that
agreement, then the participant may, during the 30 calendar days ending on and
including the first anniversary of the effective date of our merger with
OrthAlliance on November 9, 2001, elect to receive a promissory note in lieu of
all shares of our common stock that the participant may otherwise be issued
under the OrthAlliance Stock Pool Program.
A copy of the amendment to our Stock Pool Program is attached as Annex C.
3
ANNEX A
AMENDMENT TO
ORTHODONTIC CENTERS OF AMERICA, INC.
TARGET STOCK PROGRAM
PREAMBLE
WHEREAS, on November 9, 2001, a subsidiary of Orthodontic Centers of
America, Inc., a Delaware corporation ("OCA"), merged with and into
OrthAlliance, Inc., a Delaware corporation ("OrthAlliance"), and OrthAlliance
thereby became a wholly-owned subsidiary of OCA (the "Merger");
WHEREAS, OCA established the Orthodontic Centers of America, Inc.
Target Stock Program (the "Program") through which OCA may grant shares of its
common stock, $.01 par value per share ("OCA Common Stock"), to certain eligible
individuals (each such eligible individual, a "Participant") who are
OrthAlliance Affiliated Practitioners and who timely executed and delivered an
Amendment to OrthAlliance Service/Consulting Agreement and Amendment to
Employment Agreement and/or OCA Business Services Agreement, subject to the
terms described therein;
WHEREAS, all capitalized terms not defined herein shall have the
meaning ascribed to such terms in the Program; and
WHEREAS, OCA desires to amend the terms of the Program as set forth
herein (the "Amendment");
NOW, THEREFORE, OCA hereby amends the Program as follows:
1. Amendment to Timing and Conditions of Grants. Section 2.5 of the
Program is hereby amended by inserting the following text following subsection
(b) thereof:
"(c) With respect to each Participant who, along with his or
her respective OrthAlliance Affiliated PC, executes and delivers to OCA
by October 1, 2002 his or her respective Additional Amendments (as
defined below) or Business Services Agreement (as defined below), the
following shall apply, and the provisions of Subsections 2.5(a) and (b)
shall not apply:
(i) One-fourth of the total number of shares of OCA
Common Stock (rounded to the nearest whole number) to be
issued to such Participant under the Program will be issued to
such Participant following each of the fourth, fifth, sixth
and seventh anniversaries of the effective date of the Merger
if, subject to all of the other conditions set forth in the
Program, the 90% Minimum Target (as defined in Subsection
2.5(a)) is achieved by such Participant and/or his or her
OrthAlliance Affiliated PC during and with respect to the 12
calendar months immediately preceding that particular
anniversary;
(ii) However, if the 90% Minimum Target is not
achieved by such Participant and/or his or her OrthAlliance
Affiliated PC in the 12 calendar month period immediately
preceding the fourth, fifth or sixth anniversary of the
effective date of the Merger (each, an "Amended Earlier
Period"), but is achieved during the 12 calendar month period
immediately preceding the fifth, sixth or seventh, as
applicable, anniversary of the effective date of the Merger
(each, an "Amended Later Period"), then, subject to all of the
other conditions set forth in the Program, the installment of
shares of OCA Common Stock issuable with respect to such
Amended Earlier Period will be issued following such Amended
Later Period.
A-1
(iii) "Additional Amendments" means (1) a written
amendment to the OrthAlliance Affiliated Practitioner's
respective Employment Agreement, in form and substance
specified by and satisfactory to OCA and its counsel, which
amendment shall be in full force and effect, and (2) a written
amendment to the OrthAlliance Affiliated Practitioner's and/or
his or her OrthAlliance Affiliated PC's applicable
OrthAlliance Service/Consulting Agreement, in form and
substance specified by and satisfactory to OCA and its
counsel, which amendment shall be in full force and effect.
(iv) "Business Services Agreement" means a written
long-term business services agreement among the OrthAlliance
Affiliated Practitioner, his or her respective OrthAlliance
Affiliated PC and OrthAlliance (or other subsidiary of OCA),
in form and substance specified by and satisfactory to OCA and
its counsel and based on OCA's form of such agreement
(including, without limitation, the service fee, restrictive
covenant and termination provisions thereof), which agreement
shall be in full force and effect, and pursuant to which OCA,
OrthAlliance or other subsidiary of OCA would provide business
management or consulting services for such OrthAlliance
Affiliated Practitioner's and OrthAlliance Affiliated PC's
orthodontic or pediatric dental practice in exchange for a
monthly consulting or service fee."
2. No Other Changes. Except as set forth in this Amendment, the terms
and conditions of the Program shall remain in place and shall not be altered or
amended, except by any further amendment to the Program made in accordance with
the terms of Program.
3. Rules of Construction. Headings are given to the sections of this
Amendment solely as a convenience to facilitate reference. The masculine gender
when used herein refers to both masculine and feminine. The reference to any
statute, regulation or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
4. Governing Law. The internal laws of the State of Louisiana (without
regard to the choice of law provisions of Louisiana) shall apply to all matters
arising under this Amendment, to the extent that federal law does not apply.
A-2
IN WITNESS WHEREOF, the undersigned officer has executed this document
effective as of August 26, 2002.
ORTHODONTIC CENTERS OF AMERICA, INC.
By: /s/ Bartholomew F. Palmisano, Sr.
----------------------------------------
Bartholomew F. Palmisano, Sr.
Chairman of the Board, President
and Chief Executive Officer
A-3
ANNEX B
AMENDMENT TO
ORTHODONTIC CENTERS OF AMERICA, INC.
ORTHALLIANCE STOCKHOLDER VALUE PROGRAM
PREAMBLE
WHEREAS, on November 9, 2001, a subsidiary of Orthodontic Centers of
America, Inc., a Delaware corporation ("OCA"), merged with and into
OrthAlliance, Inc., a Delaware corporation ("OrthAlliance"), and OrthAlliance
thereby became a wholly-owned subsidiary of OCA (the "Merger");
WHEREAS, OCA established the Orthodontic Centers of America, Inc.
OrthAlliance Stockholder Value Program (the "Program") through which OCA may
grant shares of its common stock, $.01 par value per share ("OCA Common Stock"),
to certain eligible individuals (each such eligible individual, a "Participant")
who are OrthAlliance Stock Recipients and who (i) executed and delivered an
Addendum to OrthAlliance Service/Consulting Agreement by no later than December
31, 2001, or (ii) executed and delivered the Amendments and/or an OCA Business
Services Agreement by September 30, 2001, subject in each case to the terms
described therein;
WHEREAS, all capitalized terms not defined herein shall have the
meaning ascribed to such terms in the Program; and
WHEREAS, OCA desires to amend the terms of the Program as set forth
herein (the "Amendment");
NOW, THEREFORE, OCA hereby amends the Program as follows:
1. Amendment to Timing and Conditions of Grants. Section 2.2 of the
Program is hereby amended by inserting the following text following subsection
(d) thereof:
"(e) With respect to each Participant who, along with his or
her respective PC, executes and delivers to OCA by October 1, 2002 his
or her respective Additional Amendments (as defined below) or Business
Services Agreement (as defined below), the following provisions shall
apply and the provisions in the first paragraph of Section 2.2 (that
is, the prefatory language in such section) and Subsection 2.2(a) of
the Program shall not apply:
(i) The shares of OCA Common Stock awarded under the
Program shall be issuable to such Participant in four annual
installments, as follows. For each such Participant,
one-fourth of the total number of shares of OCA Common Stock
(rounded to the nearest whole number) to be issued to such
Participant under the Program will be issued to such
Participant following each of the first, second, third and
fourth anniversaries of the effective date of the Merger if,
subject to all of the other conditions set forth in the
Program, the 90% Minimum Target (as defined in Subsection
2.2(a)) is achieved by such Participant and/or his or her
OrthAlliance Affiliated PC; however, if the 90% Minimum Target
is not achieved in the 12 calendar month period immediately
preceding the first, second or third anniversary of the
effective date of the Merger (each, an "Amended Earlier
Period") but is achieved during the 12 calendar month period
immediately preceding the second, third or fourth, as
applicable, anniversary of the effective date of the Merger
(each, an "Amended Later Period"), then, subject to all of the
other conditions set forth in
B-1
the Program, the installment of shares of OCA Common Stock
issuable with respect to such Amended Earlier Period will be
issued following such Amended Later Period.
(ii) "Additional Amendments" means (1) a written
amendment to the OrthAlliance Affiliated Practitioner's
respective Employment Agreement, in form and substance
specified by and satisfactory to OCA and its counsel, which
amendment shall be in full force and effect, and (2) a written
amendment to the OrthAlliance Affiliated Practitioner's and/or
his or her OrthAlliance Affiliated PC's applicable
OrthAlliance Service/Consulting Agreement, in form and
substance specified by and satisfactory to OCA and its
counsel, which amendment shall be in full force and effect.
(iii) "Business Services Agreement" means a written
long-term business services agreement among the OrthAlliance
Affiliated Practitioner, his or her respective OrthAlliance
Affiliated PC and OrthAlliance (or other subsidiary of OCA),
in form and substance specified by and satisfactory to OCA and
its counsel and based on OCA's form of such agreement
(including, without limitation, the service fee, restrictive
covenant and termination provisions thereof), which agreement
shall be in full force and effect, and pursuant to which OCA,
OrthAlliance or other subsidiary of OCA would provide business
management or consulting services for such OrthAlliance
Affiliated Practitioner's and OrthAlliance Affiliated PC's
orthodontic or pediatric dental practice in exchange for a
monthly consulting or service fee."
2. Amendment to Provide for Participant's Election to Receive
Promissory Note in Lieu of Shares. Article II of the Program is amended by
inserting the following text following Section 2.3 thereof:
"2.4 Certain Participants May Elect to Receive Promissory Note in Lieu
of Shares.
(a) Promissory Note. With respect to each Participant who,
along with his or her respective OrthAlliance Affiliated PC, (1)
executes and delivers to OCA by October 1, 2002 his or her respective
Additional Amendments (as defined above) or Business Services Agreement
(as defined above) and (2) meets and satisfies all of the other
conditions set forth in the Program, such Participant may make a
one-time, permanent election (as provided below) during the 30 calendar
days ending on and including the first anniversary of the effective
date of the Merger as to all shares of OCA Common Stock that the
Participant may be issued under the Program, to receive, in lieu and
full substitution of any and all shares of OCA Common Stock that would
otherwise be issued to such Participant pursuant to Sections 2.1 and
2.2 of the Program, a non-transferable, non-negotiable promissory note
from OCA or a subsidiary thereof selected by OCA in the form and
substance specified by and satisfactory to OCA and its counsel
("Promissory Note"), in an original principal amount equal to the
product of:
(x) the Applicable Stock Price (as defined
below),
TIMES
(y) the total, maximum number of shares of OCA
Common Stock that would otherwise be issued
to such Participant pursuant to Section 2.1
of the Program (notwithstanding the vesting
conditions set forth in Section 2.2).
B-2
For purposes of the Program:
o Applicable Stock Price" means: (A) the sum of (x) $1.00,
plus (y) the greater of $26.00 or the 10-Day Average
Closing Price, for each Participant who executes and
delivers to OCA his or her Additional Amendments or
Business Services Agreement, by no later than 5:00 p.m.
(Central Time) on October 1, 2002, and (B) the greater of
$26.00 or the 10-Day Average Closing Price, for each of
the other Participants.
o "10-Day Average Closing Price" means the average closing
price per share of OCA Common Stock reported on the New
York Stock Exchange during the 10 trading day period
immediately following the date on which the Participant
executes and delivers to OCA his or her Additional
Amendments or Business Services Agreement.
(b) Other Terms of Promissory Note. Principal amounts owing
under the Promissory Note will bear interest from the first anniversary
of the effective date of the Merger (except as provided in Subsection
2.4(d) hereof) at a rate equal to the prime rate on the first
anniversary date of the Merger (as reported in the Wall Street Journal
or comparable reporting service selected by OCA) plus 1.5% per annum.
OCA may prepay all or part of the amounts owing under the Promissory
Note at any time in its discretion without penalty. The Promissory Note
will be non-transferable and non-negotiable.
(c) Election. A Participant may make such election to receive
a Promissory Note in lieu of all shares of OCA Common Stock to be
issued to such Participant under the Program only by giving written
notice of such election to the Chief Executive Officer of OCA during
the 30 calendar days ending on and including the first anniversary of
the effective date of the Merger. Once such an election has been made,
it may not be withdrawn, and such an election may not be made before or
following such 30-day period, and may not be made during the 30 days
ending on any other anniversary of the effective date of the Merger. If
such Participant makes such an election, in accordance with such notice
and timing requirements, such Participant will be issued a Promissory
Note in an original principal amount computed as provided above, in
complete substitution and replacement of all shares of OCA Common Stock
to be issued to such Participant pursuant to Sections 2.1 and 2.2 of
the Program, and such shares will not be issued to such Participant.
(d) Manner of Payment. Principal and accrued interest payable
under such Promissory Note will be payable in up to four installments,
subject to all of the other conditions set forth in the Program, as
follows:
(i) the first installment will consist of principal
only (with respect to which no interest shall accrue), in an
amount equal to 25% of the original principal amount of the
Promissory Note, and will be payable, subject to all of the
other conditions set forth in the Program, within 15 business
days following the first anniversary of the effective date of
the Merger; and
(ii) the second, third and fourth installments will
each consist of principal and accrued interest, in an amount
equal to 25% of the original principal amount of the
Promissory Note and interest accrued on that payment of 25% of
the original principal amount since the first anniversary of
the effective date of the Merger, and will be payable, subject
to all of the other conditions set forth in the
B-3
Program, within 15 business days following the second, third
and fourth anniversaries of the effective date of the Merger,
respectively.
Each such installment will be payable if, and only if, each of the
conditions set forth in the Program are met and satisfied through and
as of such date and the amount of service, management service or
consulting fees (excluding any amounts reimbursed, paid, earned or
accrued with respect to center expenses, operating and non-operating
expenses incurred in the operation of the applicable practice or other
expenses) actually paid to OCA, OrthAlliance or their subsidiaries by
the Participant and/or the PC owned by and employing such Participant
pursuant to the applicable OrthAlliance Service/Consulting Agreement or
Business Services Agreement during and with respect to the 12 calendar
months immediately preceding the particular anniversary of the
effective date of the Merger relating to that installment is at least
equal to the 90% Minimum Target, and the other conditions set forth in
Section 2.2 are met and satisfied as of such date. However, if the 90%
Minimum Target is not achieved in an Amended Earlier Period (in which
case the installment of principal and accrued interest relating to that
Amended Earlier Period shall cease to accrue interest as of the
anniversary of the effective date of the Merger relating to such
Amended Earlier Period), but is achieved during an Amended Later
Period, and the other conditions set forth in Section 2.2 are met and
satisfied as of such date, then the installment payable with respect to
such Amended Earlier Period will be paid, subject to all of the other
conditions set forth in the Program, following such Amended Later
Period in the same amount of principal and accrued interest that would
have been paid following the Amended Earlier Period (with no interest
accruing thereon from the anniversary of the effective date of the
Merger relating to such Amended Earlier Period)."
3. No Other Changes. Except as set forth in this Amendment, the terms
and conditions of the Program shall remain in place and shall not be altered or
amended, except by any further amendment to the Program made in accordance with
the terms of Program.
4. Rules of Construction. Headings are given to the articles and
sections of the Amendment solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and feminine. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
5. Governing Law. The internal laws of the State of Louisiana (without
regard to the choice of law provisions of Louisiana) shall apply to all matters
arising under the Amendment, to the extent that federal law does not apply.
B-4
IN WITNESS WHEREOF, the undersigned officer has executed this document
effective as of August 26, 2002.
ORTHODONTIC CENTERS OF AMERICA, INC.
By: /s/ Bartholomew F. Palmisano, Sr.
----------------------------------------
Bartholomew F. Palmisano, Sr.
Chairman of the Board, President
and Chief Executive Officer
B-5
ANNEX C
AMENDMENT TO
ORTHODONTIC CENTERS OF AMERICA, INC.
STOCK POOL PROGRAM
PREAMBLE
WHEREAS, on November 9, 2001, a subsidiary of Orthodontic Centers of
America, Inc., a Delaware corporation ("OCA"), merged with and into
OrthAlliance, Inc., a Delaware corporation ("OrthAlliance"), and OrthAlliance
thereby became a wholly-owned subsidiary of OCA (the "Merger");
WHEREAS, OCA established the Orthodontic Centers of America, Inc. Stock
Pool Program (the "Program") through which OCA may grant shares of its common
stock, $.01 par value per share ("OCA Common Stock"), to certain eligible
individuals (each such eligible individual, a "Participant") who are
OrthAlliance Stock Recipients and who (i) executed and delivered an Addendum to
OrthAlliance Service/Consulting Agreement by no later than December 31, 2001, or
(ii) executed and delivered the Amendments and/or an OCA Business Services
Agreement by September 30, 2001, subject in each case to the terms described
therein;
WHEREAS, all capitalized terms not defined herein shall have the
meaning ascribed to such terms in the Program; and
WHEREAS, OCA desires to amend the terms of the Program as set forth
herein (the "Amendment");
NOW, THEREFORE, OCA hereby amends the Program as follows:
1. Amendment to Provide for Participant's Election to Receive
Promissory Note in Lieu of Shares. Article II of the Program is hereby amended
by inserting the following text following Section 2.6 hereof:
"2.7 Certain Participants May Elect to Receive Promissory Note in Lieu
of Shares.
(a) Promissory Note. With respect to each Participant who,
along with his or her respective OrthAlliance Affiliated PC, (1)
executes and delivers to OCA by October 1, 2002 his or her respective
Additional Amendments (as defined below) or Business Services Agreement
(as defined below) and (2) meets and satisfies all of the other
conditions set forth in the Program, such Participant may make a
one-time, permanent election (as provided below) during the 30 calendar
days ending on and including the first anniversary of the effective
date of the Merger as to all shares of OCA Common Stock that the
Participant may be issued under the Program, to receive, in lieu and
full substitution of any and all shares of OCA Common Stock that would
otherwise be issued to such Participant pursuant to Sections 2.1 and
2.2 of the Program, a non-transferable, non-negotiable promissory note
from OCA or a subsidiary thereof selected by OCA in the form and
substance specified by and satisfactory to OCA and its counsel
("Promissory Note"), in an original principal amount equal to the
product of:
C-1
(x) the Applicable Stock Price (as defined
below),
TIMES
(y) the total, maximum number of shares of OCA
Common Stock that would otherwise be issued
to such Participant pursuant to Sections 2.1
and 2.2 of the Program (notwithstanding the
vesting conditions set forth in Section
2.5).
For purposes of the Program:
o "Additional Amendments" means (1) a written amendment
to the OrthAlliance Affiliated Practitioner's
respective Employment Agreement, in form and
substance specified by and satisfactory to OCA and
its counsel, which amendment shall be in full force
and effect, and (2) a written amendment to the
OrthAlliance Affiliated Practitioner's and/or his or
her OrthAlliance Affiliated PC's applicable
OrthAlliance Service/Consulting Agreement, in form
and substance specified by and satisfactory to OCA
and its counsel, which amendment shall be in full
force and effect.
o "Business Services Agreement" means a written
long-term business services agreement among the
OrthAlliance Affiliated Practitioner, his or her
respective OrthAlliance Affiliated PC and
OrthAlliance (or other subsidiary of OCA), in form
and substance specified by and satisfactory to OCA
and its counsel and based on OCA's form of such
agreement (including, without limitation, the service
fee, restrictive covenant and termination provisions
thereof), which agreement shall be in full force and
effect, and pursuant to which OCA, OrthAlliance or
other subsidiary of OCA would provide business
management or consulting services for such
OrthAlliance Affiliated Practitioner's and
OrthAlliance Affiliated PC's orthodontic or pediatric
dental practice in exchange for a monthly consulting
or service fee.
o "Applicable Stock Price" means: (A) the sum of (x)
$1.00, plus (y) the greater of $26.00 or the 10-Day
Average Closing Price, for each Participant who
executes and delivers to OCA his or her Additional
Amendments (as defined above) or Business Services
Agreement (as defined above), by no later than 5:00
p.m. (Central Time) on October 1, 2002, and (B) the
greater of $26.00 or the 10-Day Average Closing
Price, for each of the other Participants.
o "10-Day Average Closing Price" means the average
closing price per share of OCA Common Stock reported
on the New York Stock Exchange during the 10 trading
day period immediately following the date on which
the Participant executes and delivers to OCA his or
her Additional Amendments (as defined above) or
Business Services Agreement (as defined above).
(b) Other Terms of Promissory Note. Principal amounts owing
under the Promissory Note will bear interest from the first anniversary
of the effective date of the Merger (except as provided in Subsection
2.3(d) hereof) at a rate equal to the prime rate on the first
anniversary of the effective date of the Merger (as reported in the
Wall Street Journal or comparable reporting service selected by OCA)
plus 1.5% per annum. OCA may prepay all or part of the amounts owing
under the Promissory Note at any time in its discretion without
penalty. The Promissory Note will be non-transferable and
non-negotiable.
C-2
(c) Election. A Participant may make such election to receive
a Promissory Note in lieu of all shares of OCA Common Stock to be
issued to such Participant under the Program only by giving written
notice of such election to the Chief Executive Officer of OCA during
the 30 calendar days ending on and including the first anniversary of
the effective date of the Merger. Once such an election has been made,
it may not be withdrawn, and such an election may not be made before or
following such 30-day period, and may not be made during the 30 days
ending on any other anniversary of the effective date of the Merger. If
such Participant makes such an election, in accordance with such notice
and timing requirements, such Participant will be issued a Promissory
Note in an original principal amount computed as provided above, in
complete substitution and replacement of all shares of OCA Common Stock
to be issued to such Participant pursuant to Sections 2.1 and 2.2 of
the Program, and such shares will not be issued to such Participant.
(d) Manner of Payment. Principal and accrued interest payable
under such Promissory Note will be payable in up to three installments,
subject to all of the other conditions set forth in the Program, as
follows:
(i) the first installment will consist of principal
only (with respect to which no interest shall accrue), in an
amount equal to one third of the original principal amount of
the Promissory Note, and will be payable, subject to all of
the other conditions set forth in the Program, within 15
business days following the first anniversary of the effective
date of the Merger; and
(ii) the second and third installments will each
consist of principal and accrued interest, in an amount equal
to one third of the original principal amount of the
Promissory Note and interest accrued on that payment of one
third of the original principal amount since the first
anniversary of the effective date of the Merger, and will be
payable, subject to all of the other conditions set forth in
the Program, within 15 business days following the second and
third anniversaries of the effective date of the Merger,
respectively.
Each such installment will be payable if, and only if, each of the
conditions set forth in the Program are met and satisfied through and
as of such date and the amount of service, management service or
consulting fees (excluding any amounts reimbursed, paid, earned or
accrued with respect to center expenses, operating and non-operating
expenses incurred in the operation of the applicable practice or other
expenses) actually paid to OCA, OrthAlliance or their subsidiaries by
the Participant and/or the PC owned by and employing such Participant
pursuant to the applicable OrthAlliance Service/Consulting Agreement or
Business Services Agreement during and with respect to the 12 calendar
months immediately preceding the particular anniversary of the
effective date of the Merger relating to that installment is at least
equal to the 90% Minimum Target, and the other conditions set forth in
Section 2.2 are met and satisfied as of such date. However, if the 90%
Minimum Target is not achieved in an Amended Earlier Period (in which
case the installment of principal and accrued interest relating to that
Amended Earlier Period shall cease to accrue interest as of the
anniversary of the effective date of the Merger relating to such
Amended Earlier Period), but is achieved during an Amended Later
Period, and the other conditions set forth in Section 2.2 are met and
satisfied as of such date, then the installment payable with respect to
such Amended Earlier Period will be paid, subject to all of the other
conditions set forth in the Program, following such Amended Later
Period in the same amount of principal and accrued interest that would
have been paid following the Amended Earlier Period (with no interest
accruing thereon from the anniversary of the effective date of the
Merger relating to such Amended Earlier Period)."
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2. No Other Changes. Except as set forth in this Amendment, the terms
and conditions of the Program shall remain in place and shall not be altered or
amended, except by any further amendment to the Program made in accordance with
the terms of Program.
3. Rules of Construction. Headings are given to the articles and
sections of the Amendment solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and feminine. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
4. Governing Law. The internal laws of the State of Louisiana (without
regard to the choice of law provisions of Louisiana) shall apply to all matters
arising under the Amendment, to the extent that federal law does not apply.
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IN WITNESS WHEREOF, the undersigned officer has executed this document
effective as of August 26, 2002.
ORTHODONTIC CENTERS OF AMERICA, INC.
By: /s/ Bartholomew F. Palmisano Sr.
---------------------------------------
Bartholomew F. Palmisano, Sr.
Chairman of the Board, President
and Chief Executive Officer
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