UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 23, 2018
PATTERSON COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota | 0-20572 | 41-0886515 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1031 Mendota Heights Road
St. Paul, Minnesota 55120
(Address of Principal Executive Offices, including Zip Code)
(651) 686-1600
(Registrants Telephone Number, including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
(b), (c) and (e) On May 23, 2018, Patterson Companies, Inc. (the Company) announced that its Board of Directors (Board) has appointed Donald J. Zurbay as the Companys Chief Financial Officer, effective June 29, 2018 (the Effective Date), and that Dennis W. Goedken, who has been serving as the Companys Interim Chief Financial Officer since March 1, 2018, will step down from such position at that time. Mr. Goedken will continue to serve as the Companys Controller.
Mr. Zurbay, age 50, most recently served as Vice President and Chief Financial Officer at global medical device manufacturer St. Jude Medical, Inc. from August 2012 through the January 2017 acquisition of St. Jude Medical by Abbott Laboratories. At St. Jude Medical, Mr. Zurbay was responsible for all accounting, financial and business development activities. He joined St. Jude Medical in 2003 and held various leadership positions, including Director of Finance and Vice President and Corporate Controller. Prior to joining St. Jude Medical, Mr. Zurbay worked at PricewaterhouseCoopers for five years as an Assurance and Business Advisory Services Senior Manager. Before joining PricewaterhouseCoopers, he was a General Accounting Manager at The Valspar Corporation. Mr. Zurbay started his career at Deloitte & Touche as an auditor in 1989. There are no familial relationships between Mr. Zurbay and any other director or executive officer of the Company. There are no transactions in which Mr. Zurbay has an interest requiring disclosure under Item 404(a) of Regulation S-K.
In connection with his employment, Mr. Zurbay and the Company entered into an Offer Letter effective May 17, 2018 (the Offer Letter), which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein. Mr. Zurbay and the Company are expected to enter into an Inducement, Severance & Change in Control Agreement (the Agreement), the form of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference herein.
Pursuant to the Offer Letter, Mr. Zurbays employment will be on an at-will basis. The Offer Letter provides for an annual base salary of $525,000 as well as participation in the Companys other employee benefit plans and reimbursement for business expenses. Mr. Zurbay also will be eligible to earn annual cash incentive compensation, which is payable if a threshold level of performance is achieved, pursuant to the Companys Management Incentive Compensation Plan (MICP). If performance at target under the MICP is achieved, Mr. Zurbays annual cash incentive compensation would be 85% of his base salary. In addition, Mr. Zurbay will be eligible to receive annual long-term equity-based incentive compensation pursuant to the Companys 2015 Omnibus Incentive Plan (Omnibus Plan), or any successor plan thereto, which awards currently consist of restricted stock units, performance stock units, and stock options, with an aggregate target value of $1,000,000. The equity awards for fiscal year 2019 will be granted on July 1, 2018. Mr. Zurbays base salary, annual cash incentive compensation, and annual long-term equity-based incentive compensation will be reviewed on an annual basis and may be adjusted by the Board.
The Agreement provides for an inducement award consisting of a combination of stock options and restricted stock units. Subject to execution of the Agreement, Mr. Zurbay will be granted a non-statutory stock option and a restricted stock unit award, both outside the Omnibus Plan, on the Effective Date. The stock option will have an approximate value of $750,000, a per-share exercise price equal to the per-share closing price of the Companys common stock on the date of grant, and a term of ten years. Such award will vest, subject to continued employment, to the extent of one-third of the award on the first anniversary of the date of grant, one-third of the award on the second anniversary of the date of grant, and the remaining one-third of the award on the third anniversary of the date of grant. The restricted stock unit award will cover a number of shares of the Companys common stock with a value of $700,000 based on the per-share closing price of the Companys common stock on the date of grant. Such award will vest,
1
assuming continued employment, to the extent of 50% of the award on the first anniversary of the date of grant and the remaining 50% of the award on the second anniversary of the date of grant. The other terms and conditions of the inducement award are set forth in the Inducement Non Statutory Stock Option Agreement and the Inducement RSU Agreement, the forms of which are filed as Exhibits 10.3 and 10.4 to this Current Report on Form 8-K and are incorporated by reference herein.
Under the Agreement, if the Company terminates Mr. Zurbay without cause, Mr. Zurbay would be entitled to severance benefits including (a) one-and-one-half (1.5) times his then current base salary, (b) cash incentive compensation equal to an average of the last three years of actual MICP incentives, (c) proration of the current year MICP incentive based on actual performance, and (d) 18 months of COBRA. With a change in control and a termination without cause or a resignation for good reason, such severance benefits would include (a) two (2) times his then current base salary, (b) cash incentive compensation equal to his then current target MICP incentive, (c) proration of the current year MICP incentive based on target performance, and (d) 18 months of COBRA.
As set forth in the Agreement, Mr. Zurbay also will agree to certain nondisclosure and non-disparagement provisions during his employment and any time thereafter, and certain non-competition and non-solicitation provisions during his employment and for 24 months thereafter.
Item 7.01 | Regulation FD Disclosure. |
A copy of the press release issued by the Company on May 23, 2018 announcing, among other things, the leadership change described herein is furnished as Exhibit 99 to this Current Report on Form 8-K and is incorporated by reference herein. The information in Exhibit 99 shall not be deemed filed for purposes of Section 18 of the Exchange Act and shall not be deemed incorporated by reference into any filing under the Securities Act.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PATTERSON COMPANIES, INC. | ||||
Date: May 23, 2018 | By: | /s/ Les B. Korsh | ||
Les B. Korsh | ||||
Vice President, General Counsel and Secretary |
3
Exhibit 10.1
PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120
May 16, 2018
Confidential | Via email: donzurbay@gmail.com | |||
Donald J. Zurbay | ||||
10457 Scott Avenue North | ||||
Brooklyn Park, MN 55443 |
Dear Don:
As discussed, enclosed is a revised offer to become Pattersons Chief Financial Officer, reporting directly to me. This offer is contingent upon successful background check and passing a drug test. This offer has received formal approval by the Compensation Committee of the Board of Directors.
All forms of compensation paid to you as an employee of the Company shall be less all applicable withholdings and deductions required by law. The terms in this offer letter override any verbal and/or written representations that have been made to you regarding this position.
Upon completion of a successful background check, I will have someone within our Human Resource Department contact you so that we can begin the onboarding process through our electronic hiring system. You will be asked, via this system, to complete our on-line employment application and drug testing process. Finally, prior to your start date, you will also be asked to complete onboarding forms via this on-line process.
Base Salary
Your initial base salary will be $525,000.00 per year, to be paid semi-monthly in accordance with standard Company payroll practices. This position is exempt from overtime.
Annual Incentive Pay
Upon your entry into this position, you will be eligible to participate in the Management Incentive Compensation Plan in accordance with the terms and conditions set forth in that plan, and your target bonus opportunity will be 85% of your base annual salary. Actual payments will be determined based on a combination of individual performance and Company results, as measured against the applicable performance goals established by the Companys Board of Directors. Any annual incentive bonus with respect to a particular fiscal year will be paid within 2 1⁄2 months following the end of that fiscal year.
Long Term Incentive Pay
Participation in the Long Term Incentive Program for executive officers with an approximate annual target incentive of $1,000,000. It is expected that the value of the annual long term incentive will be configured utilizing three components consisting of Restricted Stock Units, Performance Share Units, and Stock Options, subject to approval and determination by the Board of Directors and the Compensation Committee. The actual make-up of the components would be consistent with the long term equity grants made to Pattersons other executive officers. All executive officer compensation, including the long term incentive program, is subject to annual determination and approval by the Board of Directors and the Compensation Committee of the Board of Directors. The long term incentive equity grants for the FY19 are approved and delivered on or about July 1, 2018.
DONALD J. ZURBAY
MAY 16, 2018
Inducement Award
A one-time inducement equity grant consisting of a combination of Stock Options and Restricted Stock Units. The Stock Options would have an approximate value of $750,000, would vest pro-rata over the course of three years, with one-third of the shares subject vesting on the one year anniversary of the date of grant, one-third vesting on the two year anniversary of the date of the grant, and the remaining one-third vesting on the third anniversary of the date of grant (assuming continued employment), in all cases subject to continued employment and with an overall term of ten years. The Restricted Stock Units would have a value of $700,000 and would have a 2 year vesting schedule, with 50% of the shares vesting on the 12 month anniversary of the grant and the remaining 50% of the shares vesting on the two-year anniversary of the grant, subject to continued employment. The Stock Options and Restricted Stock Unit grants will be made on the first day of employment and will be based on the closing per share price on the first day of your employment. The inducement award would be contingent on your execution of the Inducement, Severance & Change in Control agreement described below.
Benefits and Perquisites
Once you enter this position, you will be eligible to participate in the employee benefit plans and programs, fringe benefits and perquisites that are generally available to other similarly situated executives of the Company, each in accordance with and subject to the eligibility and other provisions of such plans and programs. The Company reserves the right to amend, modify or terminate any of its benefit plans or programs at any time and for any reason. Current benefit offerings include:
| Comprehensive healthcare, vision and dental programs |
| Flexible spending account |
| 401(k) retirement savings plan |
| Life insurance (individual and family) |
| Short-term disability |
| Long-term disability |
| Employee Stock Purchase Plan (ESPP) |
| Employee Stock Ownership Plan (ESOP) |
| Capital Accumulation Plan (CAP): |
| Executive Auto Reimbursement Program, which provides a vehicle with a capitalized cost equal to the base price for a Cadillac CTS 4-Door Sedan ($54,115.25 for 2018) |
| Executive Life Insurance Plan, which provides coverage equal to three times the targeted amount of the executives total annual cash compensation, subject to a maximum death benefit of $1.3 million |
| Executive Physical Program, which is provided through Mayo Clinic |
| 10 annual paid holidays, including at least one floating holiday per year |
You will also enjoy the benefit of the Companys approach to paid time off for executive employees. Our leadership team recognizes the hard work and contributions of our executive employees in helping our customers and our company succeed. Our pay-for-performance culture emphasizes high-integrity business practices, a healthy work/life balance and opportunity for every employee to contribute to our philosophy and success. We expect that you will manage your time accordingly and take time off as needed. You do not need to track your time off, nor will a PTO accrual rate show on your pay statement.
Additional Conditions and Requirements
This offer is contingent upon your execution of the Companys Inducement, Severance & Change in Control Agreement which describes, among other things, the inducement equity award, your ability to receive severance in connection with certain terminations of your employment (18 months severance for a termination without cause and 24 months severance for a termination without cause or for good reason following a change in control) and a 24 month non-competition and a non- solicitation covenant. The Agreement would also include other provisions customary for agreements of this type. Once you have completed the electronic hiring system, I will have Les provide you the form of that agreement.
Your employment with the Company will be for no specific period of time. Rather, your employment will be at-will, meaning that you or the Company may terminate the employment relationship at any time, with or without notice and for any reason or no particular reason. Although your compensation and benefits may change from time to time, the at-will nature of your employment may only be changed by an express written agreement signed by an authorized officer of the Company.
Any amounts payable hereunder are subject to any policy (whether currently in existence or later adopted) established by the Company providing for clawback or recover of amounts that were paid to you. The Company will make any determination for clawback or recover in its sole discretion and in accordance with any applicable law or regulation.
DONALD J. ZURBAY
MAY 16, 2018
Section 409A
This offer letter is intended to comply with Section 409A of the Internal Revenue Code (Section 409A) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this offer letter, payments provided under this offer letter may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this offer letter that may be excluded from Section 409A, either as a short-term deferral or other applicable exception, shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this offer letter shall be treated as a separate payment. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this offer letter comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A.
Patterson believes in providing our employees with an atmosphere that encourages personal accountability, growth and continuous learning, and that rewards individual and team performance. Consistent with this approach, the following details your compensation offer:
Don, I am very excited that you will be joining our team. Please feel free to call me at 651-686-1708 should you have additional questions or need clarification on any of the points in my letter.
Sincerely,
/s/ Mark S. Walchirk | ||||||
Mark S. Walchirk | ||||||
President and Chief Executive Officer | ||||||
Acknowledged and Acceptance: | ||||||
Donald J. Zurbay | ||||||
/s/ Donald J. Zurbay |
May 17, 2018 |
|||||
Signature | Date |
Exhibit 10.2
Inducement, Severance & Change in Control Agreement
This Inducement, Severance & Change in Control Agreement (Agreement) is entered into as of , by and between Patterson Companies, Inc. (the Company) and Donald J. Zurbay (referred to herein as Executive) (the Company and Executive are collectively referred to herein as Parties, and each a Party). This Agreement shall be effective on Executives first day of employment (the Effective Date).
WHEREAS, the Company desires to employ Executive to render services to the Company on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive desires to be employed by the Company on such terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, it is hereby agreed:
1. Severance Benefits. In the event that Executives employment with the Company is terminated by the Company without Cause as defined in Section 1(g), Executive shall, in lieu of any other cash severance benefits under any other Company agreement, plan, policy or program, be entitled to severance benefits as follows:
a. | Severance Payment. Executive shall receive cash in an amount equal to the sum of (i) one-and-one-half (1.5) times Executives then-current base salary and (ii) the average of Executives annual cash incentive compensation paid to him under the Companys Management Incentive Compensation Plan (MICP) (or any other similar annual non-equity compensation plan of the Company) for each of the last three full fiscal years (or such lesser number of years for which Executive was employed by the Company) prior to the year in which Executives employment is terminated. In the event that Executive was not employed by the Company for the whole of any such fiscal year, but received pro-rated cash incentive compensation for such fiscal year, such amount shall be annualized for computation purposes. |
b. | Prorated Non-Equity Incentive Compensation. Executive shall receive cash in an amount equal to his prorated annual cash incentive compensation under the MICP (or any other similar annual non-equity incentive compensation plan of the Company) for the fiscal year in which termination occurs based on actual performance through the date of termination. |
c. | Continued Eligibility for Benefits Programs. Medical/Dental/Vision/Life insurance coverage will terminate following the last day of Executives employment. However, Executive may elect to continue coverage for himself and his eligible dependents by electing continuation coverage under the federal law, the Consolidated Omnibus Budget Reconciliation Act (COBRA), or applicable state law. If Executive timely elects COBRA continuation, the Company will pay for his COBRA premiums until the earlier of: (i) eighteen (18) months following the termination of Executives employment, pursuant to the terms of the |
1
applicable plan, (ii) the date Executive is eligible for such coverage from another employer, or (iii) such time as the reimbursement would result in the Company being subject to an excise tax for a discriminatory health insurance benefit based on the Companys reasonable interpretation of applicable law. |
d. | Release Agreement. Executive shall not receive the severance benefits set forth in Sections 1(a)-(c) unless he has first signed and returned to the Company, and not rescinded pursuant to the terms thereof, a separation agreement containing a release of claims in a reasonably customary form that is provided by and reasonably acceptable to the Company (the Release). The severance payments in Sections 1(a) and 1(b) will be paid in equal monthly installments over the 18-month period following Executives termination beginning on the sixtieth (60th) day following Executives termination, provided that all statutory rescission periods contained in the Release have expired without revocation, and subject to provisions of Section 5(l). Where the period available to execute (and to not revoke) the Release spans more than one calendar year, the payment shall not be made until the second calendar year as required by the applicable terms of this Agreement and Section 409A of the Internal Revenue Code of 1986, as amended (the Code). |
e. | Forfeiture. Notwithstanding the foregoing, if Executive materially breaches any of his obligations in Section 4 hereof or the terms of the Release, the termination automatically shall be deemed one by the Company for Cause and any severance payment already made to Executive shall be determined unearned and must be promptly repaid to the Company. |
f. | Unvested Equity Interests. All unvested equity interests held by Executive as of the date of his termination shall terminate and be forfeited, unless those unvested grants shall be deemed to have vested in their entirety as of Executives termination pursuant to the terms of the applicable grant agreement and the Companys 2015 Omnibus Incentive Plan (the Omnibus Plan), or any successor plan thereto, if applicable. |
g. | Cause. For purposes of this Agreement, Cause shall mean: (i) Executives willful or repeated and material failure or refusal to perform his reasonably assigned and lawful duties (other than any such failure resulting from incapacity due to physical or mental illness or disability), or serious neglect or willful and material misconduct in the performance of his reasonably assigned and lawful duties; (ii) Executives willful and material failure to comply with any reasonably assigned and legal directive of the Companys Board of Directors (the Board); (iii) Executives disclosure or misuse of Confidential Information as defined in Section 4(g); (iv) Executives engagement in illegal conduct, embezzlement, misappropriation, fraud, dishonesty or breach of fiduciary duty, resulting in loss, damage or injury to the Company; (v) Executives conduct related to his employment for which either criminal or civil penalties against Executive or the Company may be sought; (vi) Executives conviction of, or plea of guilty or nolo contendere to, any crime (whether or not involving the Company) that constitutes |
2
a felony in the jurisdiction involved; or (vii) Executives material violation of any Company policy or material breach of the terms of this Agreement or any other agreement between Executive and the Company. For the avoidance of doubt, mere failure of the Company to achieve any performance goals shall not constitute Cause. For purposes of the first sentence of this paragraph, no act, or failure to act, on Executives part shall be considered willful unless done or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Company. |
2. Change In Control. In the event that (x) Executives employment with the Company is terminated by the Company without Cause or (y) Executive resigns his employment for Good Reason as defined in Section 2(f), in either case within two (2) years immediately following a Change in Control as defined in Section 2(e), Executive shall, in lieu of the payment of severance benefits under Section 1 of this Agreement or any other cash severance benefits under any other Company agreement, plan, policy or program, be entitled to severance benefits as follows:
a. | Severance Payment. Executive shall receive cash in an amount equal to the sum of (i) two (2) times Executives then-current base salary and (ii) Executives target annual cash incentive compensation under the MICP (or any other similar annual non-equity compensation plan of the Company) for the fiscal year in which Executives employment is terminated. |
b. | Prorated Non-Equity Incentive Compensation. Executive shall receive cash in an amount equal to his prorated annual cash incentive compensation under the MICP (or any other similar annual non-equity incentive compensation plan of the Company) for the fiscal year in which termination occurs based on Executives target award through the date of termination. |
c. | Continued Eligibility for Benefits Programs. Medical/Dental/Vision/Life insurance coverage will terminate following the last day of Executives employment. However, Executive may elect to continue coverage for himself and his eligible dependents by electing continuation coverage under the federal law, COBRA, or applicable state law. If Executive timely elects COBRA continuation, the Company will pay for his COBRA premiums until the earlier of: (i) eighteen (18) months following the termination of Executives employment, pursuant to the terms of the applicable plan, (ii) the date Executive is eligible for such coverage from another employer, or (iii) such time as the reimbursement would result in the Company being subject to an excise tax for a discriminatory health insurance benefit based on the Companys reasonable interpretation of applicable law. |
d. | Release Agreement. Executive shall not receive the severance benefits set forth in Sections 2(a)-(c) unless he has first signed and returned to the Company, and not rescinded pursuant to the terms thereof, the Release. The severance payments in Sections 2(a) and 2(b) will be paid in a lump sum on the sixtieth (60th) day following Executives termination, provided that all statutory rescission periods |
3
contained in the Release have expired without revocation, and subject to provisions of Section 5(l). Where the period available to execute (and to not revoke) the release spans more than one calendar year, the payment shall not be made until the second calendar year as required by the applicable terms of this Agreement and Section 409A of the Code. |
e. | Change in Control. For purposes of this Agreement, Change in Control shall mean: (i) if any person or group as those terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) or any successors thereto, is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Companys then outstanding securities, provided, that the acquisition of additional securities by any person or group that owns 50% or more of the voting power prior to such acquisition of additional securities shall not be a Change in Control; (ii) during any 12-month period, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by the Companys shareholders was approved by at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved, cease for any reason to constitute a majority thereof; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (x) which would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (y) by which the corporate existence of the Company is not affected and following which the Companys chief executive officer and directors retain their positions with the Company (and constitute at least a majority of the Board) and such merger or consolidation is consummated; or (iv) the shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all the Companys assets and such sale or disposition is consummated. |
f. | Good Reason. For purposes of this Agreement, Good Reason shall mean any refusal to accept: (i) a material diminution in Executives base compensation, which for purposes of this Agreement will mean a reduction of 10% or more in Executives base salary plus MICP target; (ii) discontinuation of eligibility to participate in a material long-term cash or equity award or equity-based grant program (or in a comparable substitute program) in which other officers of the Company are generally eligible to participate; (iii) any material diminution of authority, duties or responsibilities, including any change in the authority, duties or responsibilities of Executive that is inconsistent in any material and adverse respect with Executives then-current position(s), authority, duties and responsibilities with the Company or any subsidiary; provided, however, that |
4
Good Reason will not be deemed to exist pursuant to this clause (iii) solely on account of the Company no longer being a publicly traded entity or solely on account of a change in the reporting relationship of Executive; or (iv) a material adverse change in the geographic location at which the Company requires Executive to be based as compared to the location where Executive was based immediately prior to the change, which for purposes of this Agreement will mean: (x) a relocation that results in an increase in the commuting distance from Executives principal residence to his new job location of more than 50 miles, or (y) a relocation that requires Executive to relocate his principal residence. |
Notwithstanding the foregoing, however, Good Reason will not be deemed to exist as a result of any of the actions stated in clauses (i) or (ii) above to the extent that such actions are in connection with an across-the-board change or termination that equally affects at least ninety percent (90%) of all officers of the Company, and an act or omission will not constitute a Good Reason unless Executive gives written notice to the Company of the existence of such act or omission within ninety (90) days of its initial existence, the Company fails to cure the act or omission within thirty (30) days after the notification, and actual termination of employment occurs within two (2) years of the initial existence of the act or omission.
g. | Forfeiture. Notwithstanding the foregoing, if Executive materially breaches any of his obligations in Section 4 hereof or the terms of the Release, the termination automatically shall be deemed one by the Company for Cause and any severance payment already made to Executive shall be determined unearned and must be promptly repaid to the Company. |
h. | Unvested Equity Interests. All unvested equity interests held by Executive as of the date of his termination shall be governed by the terms of the applicable grant agreement and the Omnibus Plan, or any successor plan thereto, if applicable. |
i. | Section 280G. Notwithstanding anything to the contrary herein contained, under no circumstances shall the payments made to Executive pursuant to Section 2 result in an excess parachute payment as defined under Section 280G of the Code. To the extent that such payments could result in an excess parachute payment, the payments shall be reduced to avoid such result, the manner of which reduction shall be in the discretion of the Board. Any amounts reduced pursuant to this Section 2(i) shall be deemed forfeited by Executive, and Executive shall have no authority whatsoever to determine the order in which benefits under this Agreement shall be so reduced. |
3. Inducement Award. On the Effective Date, Executive shall be granted a non-statutory stock option and a restricted stock unit award both outside the Omnibus Plan. The stock option will have an approximate value of $750,000, a per-share exercise price equal to the per-share closing price of the Companys common stock on the date of grant, and a term of ten years. Such award will vest, subject to continued employment, to the extent of one-third of the award on the first anniversary of the date of grant, one-third of the award on the second anniversary of
5
the date of grant, and the remaining one-third of the award on the third anniversary of the date of grant. The restricted stock unit award will cover a number of shares of the Companys common stock with a value of $700,000 based on the per-share closing price of the Companys common stock on the date of grant. Such award will vest, assuming continued employment, to the extent of 50% of the award on the first anniversary of the date of grant and the remaining 50% of the award on the second anniversary of the date of grant. Both awards shall have the terms and conditions specified by the Company. |
4. Executive Agreements. In exchange for the severance benefits set forth in Sections 1(a)-(c) and Sections 2(a)-(c) and the inducement award set forth in Section 3, Executive agrees as follows:
a. | Non-Encouragement Provision. Executive agrees that during his employment with the Company and thereafter he will not instigate, cause, advise or encourage any other persons, groups of persons, corporations, partnerships or any other entity to file litigation against the Company. |
b. | Cooperation in Transitional Matters. After Executives employment ends, Executive agrees to make himself reasonably available to the Company thereafter without additional compensation to answer questions, provide information and otherwise reasonably cooperate with the Company in any pending or transitional matters on which Executive has worked or about which Executive may have personal knowledge. Executive agrees to reasonably cooperate with the Company, including its attorneys, managers and accountants, in connection with any transitional matters, potential or actual litigation, or other real or potential disputes, which directly or indirectly involve the Company. |
c. | Non-competition and Notification. During Executives employment with the Company and for the Restricted Period as defined below, Executive agrees not to directly or indirectly engage in, be interested in, or be employed by, anywhere in the United States, Canada, the United Kingdom or any additional geographic markets the Company enters, any direct competitor of the Company (including, without limitation, Henry Schein, Inc., Benco Dental Supply Company, Burkhart Dental Supply Co., Amazon.com, Inc., MWI Veterinary Supply, Inc. and AmerisourceBergen Corp.) or any other business which offers, markets or sells any service or product that competes indirectly with any services or products of the Company (a Competing Business). The Restricted Period shall be twenty four (24) months following the voluntary or involuntary termination of Executives employment for whatever reason. By way of example, but not by way of limitation, any service or product that competes directly or indirectly with any services or products of the Company includes dental services, dental products, animal health services and animal health products. For purposes of this provision, Executive shall be deemed to be interested in a Competing Business if he is |
6
engaged or interested in such Competing Business as a stockholder, director, officer, employee, salesperson, sales representative, agent, partner, individual proprietor, consultant, or otherwise, but not if such interest in the Competing Business is limited solely to the ownership of 2% or less of the equity or debt securities of any class of a corporation whose shares are listed for trading on a national securities exchange or traded in the over-the-counter market. |
In the event that Executive obtains new employment prior to expiration of the Restricted Period, Executive shall: (i) disclose this Agreement to his new employer prior to beginning the employment; and (ii) notify the Company of the identity of his new employer within seven (7) days after accepting any offer of employment by sending a written notification to the Company.
Executive agrees that the foregoing restrictions are in consideration of the consideration offered in this Agreement, and that the restrictions are reasonable and necessary for the purpose of protecting the Companys legitimate business interests. Executive agrees that the scope of the business of the Company is independent of the location (such that it is not practical to limit the restrictions contained herein to a specific state, city or part thereof) and therefore acknowledges and agrees that the geographic scope of this restriction throughout the United States, Canada and the United Kingdom is reasonable and necessary.
Executive further agrees that the remedy of damages at law for breach by Executive of any of the covenants and obligations contained in this Agreement is an inadequate remedy. In recognition of the irreparable harm that a violation by Executive of the covenants and obligations in this Agreement would cause the Company, or any company with which the Company has a business relationship, Executive agrees that if he breaches or proposes to breach, any provision of this Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach or proposed breach without showing or proving any actual damage to the Company, it being understood by Executive and the Company that both damages and equitable relief shall be proper modes of relief and are not to be considered alternative remedies.
d. | Non-Solicitation of Customers, Suppliers, or Distributors. Executive agrees that during his employment with the Company and during the Restricted Period, Executive shall not directly or indirectly, whether individually or as an owner, agent, representative, consultant or employee, participate or assist any individual or business entity to solicit or encourage any customer, supplier, or distributor of the Company to (i) do business that could be done with the Company with any person or entity other than the Company or (ii) terminate or otherwise modify adversely its business relationship with the Company. |
7
e. | Non-Solicitation of Employees. Executive agrees that during his employment with the Company and during the Restricted Period, Executive shall not directly or indirectly, whether individually or as an owner, agent, representative, consultant or employee, participate or assist any individual or business entity to solicit, employ or conspire with others to employ any of the Companys employees. The term employ for purposes of this Section 4(e) means to enter into an arrangement for services as a full-time or part-time employee, independent contractor, agent or otherwise. Notwithstanding the foregoing, any general advertisement or public solicitation that is not directed specifically to employees of the Company shall not constitute a breach of this Section 4(e). |
f. | Non-Disparagement Provision. Executive agrees that during his employment with the Company and thereafter, Executive will not make any disparaging or damaging statements about the Company, its products, services or management, whether or not libelous or defamatory, provided that this provision shall not affect Executives right to provide truthful information to any governmental entity. Similarly, the Board shall not at any time, whether during or after the termination of Executives employment with the Company, make any disparaging or damaging statements concerning Executive whether or not libelous or defamatory, provided that this provision shall not affect the Companys right to provide truthful information to any governmental entity. |
g. | Confidential Information. Executive acknowledges that in the course of his employment with the Company, he will have access to Confidential Information. Confidential Information includes but is not limited to information not generally known to the public, in spoken, printed, electronic or any other form or medium relating directly or indirectly to: business processes, practices, policies, plans, documents, operations, services and strategies; contracts, transactions, and potential transactions; negotiations and pending negotiations; customer and prospect information including, without limitation, customer and prospect lists, purchase and order histories, and equipment pipelines; proprietary information, trade secrets and intellectual property; supplier and vendor agreements, strategies, plans and information; financial information and results; legal strategies and information; marketing plans and strategies; pricing plans and strategies; personnel information and staffing and succession planning practices and strategies; internal controls and security policies, strategies and procedures; and/or other confidential business information that Executive will learn, receive or use at any time during his employment with the Company, whether or not such information has been previously identified as confidential or proprietary. |
Confidential Information may be contained in written materials, such as documents, files, reports, manuals, drawings, diagrams, blueprints and correspondence, as well as computer hardware and software, and electronic or other form or media. It may also consist of unwritten knowledge, including ideas, research, processes, plans, practices and know-how.
8
Confidential Information does not include information that: (i) is in or becomes part of the public domain or information generally known in the trade, other than as a result of a disclosure by or through Executive in violation of this Agreement or by a third-party in breach of a confidentiality obligation; (ii) information that Executive acquires or independently develops completely independently of his employment with the Company; (iii) is lawfully disclosed to Executive by a third party provided the third party did not receive it due to a breach of this Agreement or any other obligation of confidentiality; (iv) was lawfully in Executives possession prior to providing services for the Company, provided that said information was not obtained from the Company; or (v) is required to be disclosed by law or the order of any court or governmental agency, or in any litigation or similar proceeding; provided that prior to making any such required disclosure, Executive shall notify the Company in sufficient time to permit the Company to seek an appropriate protective order.
Executive agrees that he shall not, at any time during his employment with the Company or thereafter, disclose or otherwise make available Confidential Information to any person, company or other party. Further, Executive shall not use or disclose any Confidential Information at any time without the Companys prior written consent. This Agreement shall not limit any obligations Executive may have under any other employee confidentiality agreement with the Company or under applicable law nor shall it limit his right to provide truthful information to any governmental agency.
h. | Defend Trade Secrets Act of 2016. Executive understands that if he breaches the provisions of Section 4(g) above, Executive may be liable to the Company under the federal Defend Trade Secrets Act of 2016 (DTSA). Executive further understands that by providing him with the following notice, the Company may recover from Executive its attorney fees and exemplary damages if it brings a successful claim against Executive under the DTSA: Under the DTSA, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (a)(i) in confidence to a federal, state, or local governmental official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Without limiting the foregoing, if Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to his attorney and use the trade secret information in the court proceeding, if Executive (i) files any document containing the trade secret under seal and (ii) does not disclose the trade secret, except pursuant to court order. |
i. | Return of Documents, Materials, and Property. Executive agrees that at the end of his employment with the Company, or at the Companys earlier request, he will return all originals and copies of any documents, materials or other property of the Company and the Companys customers, whether generated by Executive or any other person on his behalf or on behalf of the Company or its customers. This includes all copies and all materials on paper, on disk, on a computer, or in any computerized or electronic medium. All documents, files, records, reports, policies, training materials, communications materials, lists and information, e-mail messages, products, keys and access cards, cellular phones, computers, other |
9
materials, equipment, physical and electronic property, whether or not pertaining to Confidential Information, which were furnished to Executive by the Company, purchased or leased at the expense of the Company, or produced by the Company or Executive in connection with Executives employment will be and remain the sole property of the Company, except as otherwise provided herein. All copies of Company property, whether in tangible or intangible form, are also the property of the Company. Executive agrees that he will not retain any paper or electronic copies of these documents and materials. |
Executive agrees that, following the termination of his employment with the Company, the Company may open all mail (including but not limited to regular mail, electronic mail and voicemail) delivered to the Company and addressed to him. Notwithstanding the foregoing, the Company shall not open any mail (including but not limited to regular mail, electronic mail and voicemail) delivered to the Company and addressed to Executive if it is readily apparent that such mail is a personal item, in which case the Company will promptly forward such mail to Executive without opening it; provided, however, that this provision does not create any reasonable expectation of privacy on behalf of Executive in his use of the Companys communications and technology systems.
j. | Class Action Waiver and Arbitration Agreement. Any dispute, controversy or claim arising out of, relating to or in connection with this Agreement, including the breach, termination or validity thereof, shall be finally resolved by arbitration. The tribunal shall have the power to rule on any challenge to its own jurisdiction or to the validity or enforceability of any portion of the agreement to arbitrate. The Parties agree to arbitrate solely on an individual basis, and that the agreement to arbitrate does not permit class arbitration or any claims brought as a plaintiff or class member in any class or representative arbitration proceeding. The arbitral tribunal may not consolidate more than one persons claims, and may not otherwise preside over any form of a representative or class proceeding. In the event the prohibition on class arbitration is deemed invalid or unenforceable, then the remaining portions of the arbitration agreement will remain in force. |
k. | Reasonable and Necessary. Executive acknowledges that he is a key employee of the Company and that Executive participates in and contributes to key phases of the Companys operations. Executive agrees that the covenants provided for in this Section 4 are reasonable and necessary to protect the Company and its confidential information, goodwill and other legitimate business interests and, without such protection, the Companys customer and client relationships and competitive advantage would be materially adversely affected. Executive agrees that the provisions of this Section 4 are an essential inducement to the Company to enter into this Agreement and they are in addition to, rather than in lieu of, any similar or related covenants with the Company to which Executive may be bound. Executive further acknowledges that the restrictions contained in this Section 4 shall not impose an undue hardship on him since he has general business skills which may be used in industries other than that in which the Company conducts its business and shall not deprive Executive of his livelihood. In exchange for |
10
Executive agreeing to be bound by these reasonable and necessary covenants, the Company is providing Executive with the benefits as set forth in this Agreement. Executive acknowledges and agrees that these benefits constitute full and adequate consideration for his obligations hereunder. |
l. | Company Defined. For purposes of this Section 4, Company shall mean Patterson Companies, Inc., its affiliated and related entities, and any of their respective direct or indirect subsidiaries. |
m. | Survival. Notwithstanding any termination of this Agreement or Executives employment with the Company, Executive shall remain bound by the provisions of this Agreement which specifically relate to periods, activities or obligations upon or subsequent to the termination of his employment, irrespective of whether Executive is eligible for severance benefits under Sections 1 or 2 of this Agreement. |
n. | Company Policies. Executive agrees that during his employment with the Company and thereafter, Executive shall be subject to and shall abide by each of the personnel policies applicable to officers of the Company, including without limitation any policy restricting pledging and hedging investments in Company equity by Company officers, and any policy the Company adopts regarding recovery of incentive compensation (sometimes referred to as clawback) and any additional clawback provisions as required by law and applicable stock exchange listing rules. |
5. General Provisions. This Agreement is subject to the following general provisions:
a. | Consideration. Executive acknowledges that the consideration offered in this Agreement is good and valuable consideration in exchange for the terms of this Agreement. |
b. | Effect of Breach. Executive agrees that it would be impossible to measure in money the damages caused by the irreparable harm the Company would suffer for any breach by him of the terms of this Agreement. Accordingly, Executive agrees that if the Company institutes any action or proceeding to enforce the terms of this Agreement, the Company shall be entitled to temporary and permanent injunctive or other equitable relief to enforce the provisions of this Agreement, such relief may be granted without the necessity of proving actual damages, Executive hereby waives to the extent permitted by law the claim or defense that the Company has an adequate remedy at law, and Executive shall not argue in any such action or proceeding that any such remedy at law exists. This provision with respect to equitable relief shall not, however, diminish the right of the Company to claim and recover damages in addition to injunctive relief. Executive agrees that he shall reimburse the Company for its attorney fees and costs incurred in seeking to enforce the terms of this Agreement. |
11
c. | Notice. Any notice required or permitted to be given under this Agreement shall be deemed to have been delivered on the date following the day the notice is deposited in the United States mail, certified or registered, postage prepaid, return receipt requested, and addressed as follows: |
If to Executive:
Donald J. Zurbay
10457 Scott Avenue North
Brooklyn Park, MN 55443
or such other address as Executive elects by giving to the Company not less than 30 days advance written notice.
If to the Company:
Mark S. Walchirk
President and Chief Executive Officer
Patterson Companies, Inc.
1031 Mendota Heights Road
St. Paul, MN 55120
or such other address as the Company elects by giving to Executive not less than 30 days advance written notice.
d. | Conflicting Agreements. Executive hereby represents that Executive is not subject to any non-competition agreement, non-disclosure agreement, or any other kind of agreement or duty that would prohibit or restrict Executive from vigorously and fully performing services for the Company. |
e. | Waiver. The waiver by either Party of the breach or nonperformance of any provision of this Agreement by the other Party will not operate or be construed as a waiver of any future breach or nonperformance under any such provision of this Agreement or, in the case of the Company, any similar agreement with any other employee. |
f. | Severability and Blue Penciling. To the extent that any provision of this Agreement shall be determined to be invalid or unenforceable as written, the validity and enforceability of the remainder of such provision and of this Agreement shall be unaffected. If any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, the Company and Executive specifically authorize the tribunal making such determination to edit the invalid or unenforceable provision to allow this Agreement, and the provisions thereof, to be valid and enforceable to the fullest extent allowed by law or public policy. Executive expressly stipulates that this Agreement shall be construed in a manner which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. |
12
g. | Enforceable Contract. The Parties agree that this Agreement shall be deemed to have been entered into and shall be construed and enforced in accordance with the laws of the State of Minnesota, without regard to conflicts of law provisions. If any part of this Agreement is construed to be in violation of the law, such part will be modified to achieve the objective of the Parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect. |
h. | Exclusivity of and Consent to Jurisdiction. Subject to the arbitration provisions of Section 4(j) of this Agreement, Executive and the Company agree that the courts of Minnesota shall have exclusive judicial jurisdiction over disputes concerning this Agreement. The Parties specifically consent to the jurisdiction of the state and federal courts of Minnesota. Accordingly, Executive and the Company submit to the personal jurisdiction of such courts for purposes of this Agreement. |
i. | Counterparts. The Parties agree that this Agreement may be executed in counterparts and each executed counterpart shall be as effective as a signed original. Photographic or faxed copies of such signed counterparts may be used in lieu of the originals for any purpose. |
j. | Successors and Assigns. Executive may not assign this Agreement to any third party for whatever purpose and any such purported assignment shall be void. The Company may assign this Agreement to any successor or assign. |
k. | Entire Agreement. Except for the offer letter dated May 16, 2018 and the agreements described herein, this Agreement contains the entire agreement between the Parties relating to Executives employment by the Company and supersedes all prior agreements and understandings, whether written or oral, between the Parties relating to such employment. This Agreement may not be amended or changed except in writing executed by both Parties. |
l. | Section 409A. Notwithstanding any other provision of this Agreement to the contrary, Executive and the Company agree that the payments hereunder shall be exempt from, or satisfy the applicable requirements, if any, of Section 409A of the Code in a manner that will preclude the imposition of penalties described in Section 409A of the Code. Payments made pursuant to this Agreement are intended to satisfy the short-term deferral rule or separation pay exception within the meaning of Section 409A of Code. Executives termination of employment shall mean a separation from service within the meaning of Section 409A of the Code. Notwithstanding anything herein to the contrary, this Agreement shall, to the maximum extent possible, be administered, interpreted and construed in a manner consistent with Section 409A of Code; provided, that in no event shall the Company have any obligation to indemnify Executive from the effect of any taxes under Section 409A of the Code. |
13
If any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute nonqualified deferred compensation within the meaning of Section 409A of the Code and Executive is determined to be a specified employee as defined in Section 409A(a)(2)(b)(i) of the Code, then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the termination or, if earlier, on Executives death (the Specified Employee Payment Date). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
m. | Clawback. The Company may terminate Executives right to the unvested equity compensation under Section 3, and may require reimbursement to the Company by Executive of any incentive compensation previously paid or vested within the prior 12-month period pursuant to any applicable incentive compensation plan or award agreement, in the event: (i) of a willful or reckless breach by Executive of his obligations under Section 4 of this Agreement; (ii) of Executives misconduct constituting Cause as defined in Section 1(g) of this Agreement; or (iii) Executive is obligated to disgorge to or reimburse the Company for such compensation paid or payable to Executive by reason of application of Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any other applicable law or regulation requiring recapture, reimbursement or disgorgement of incentive-based pay. |
n. | Withholding. The Company shall withhold from the compensation payable to Executive hereunder all appropriate deductions necessary for the Company to satisfy its withholding obligations under federal, state and local income and employment tax laws. |
o. | Acknowledgement. Executive affirms that he has read this Agreement and that the provisions of this Agreement are understandable to him and Executive has entered into this Agreement freely and voluntarily. |
[SIGNATURE PAGE FOLLOWS]
14
IN WITNESS WHEREOF, the Parties have executed this Agreement by their signatures below.
Dated: | ||||||
Donald J. Zurbay | ||||||
Dated: | PATTERSON COMPANIES, INC. | |||||
By: |
| |||||
Mark S. Walchirk | ||||||
Chief Executive Officer |
[Signature Page to Inducement, Severance & Change in Control Agreement by and between
Patterson Companies, Inc. and Donald J. Zurbay, dated ]
15
Exhibit 10.3
PATTERSON COMPANIES, INC.
NON STATUTORY STOCK OPTION AGREEMENT
NEITHER THE SECURITIES NOR THE SECURITIES ISSUABLE PURSUANT THIS AGREEMENT HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
OPTION NO:
This Non Statutory Stock Option Agreement (the Agreement) is dated effective , 2018 (the Grant Date) and is entered into by and between Patterson Companies, Inc., a Minnesota corporation (the Company), and Donald J. Zurbay (the Employee).
WITNESSETH:
1. | Grant of Option. Subject to the terms and conditions set forth herein, Employee has been granted on the date hereof the right and option to purchase from the Company all or a part of an aggregate of [] shares of Common Stock ($.01 par value) of the Company (the Stock) at the purchase price of $[] per share (the Option). The Option is not intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986 (the Code). |
2. | Terms and Conditions. It is understood and agreed that this Agreement and the Option are subject to the following terms and conditions. In addition, even though the Option is not made pursuant to the Patterson Companies, Inc. 2015 Omnibus Incentive Plan (the Plan), the terms and conditions of the Plan apply to the Option to the same extent as if the Option was made pursuant to the Plan, except that the maximum shares available provision under Section 4.1 of the Plan, the annual award limit provisions under Section 4.4 of the Plan and the Retirement provisions under Section 15.2 of the Plan shall not apply to the Option. The applicable terms of the Plan are incorporated by reference in this Agreement. The Employee, by execution of this Agreement, acknowledges having access to a copy of the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of this Agreement will control. All capitalized terms in this Agreement not otherwise defined shall have the meaning(s) ascribed to them in the Plan. |
a) | Expiration Date. The Option shall expire ten years after the Grant Date. |
b) | Exercise of Option. With respect to one-third of the Option awarded herein, the Vesting Date shall be the one-year anniversary of the Grant Date. With respect to one-third of the Option awarded herein, the Vesting Date shall be the two-year anniversary of the Grant Date. With respect to the remaining one-third of the Option awarded herein, the Vesting Date shall be the three-year anniversary of the Grant Date. |
c) | Payment of Purchase Price Upon Exercise. At the time of any exercise, the purchase price of the shares as to which this Option is exercised shall be paid in cash to the Company, unless, in accordance with the provisions of Section 6.5 of the Plan, the Board of Directors shall permit payment of the purchase price in another manner. |
3. | Non-Transferability of Options. The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution, or as otherwise provided under Section 18.4 of the Plan. |
4. | Investment Representation. As a condition to the exercise of the Option, the Company may require the person exercising the Option to represent and warrant at the time of exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares, if, in the opinion of counsel for the Company, such a representation is required by any relevant provisions of law. The shares may be issued with appropriate legends on stock certificates representing the shares, and the Company may place stop transfer orders with respect to the shares. |
5. | Forfeiture Provision. Except as otherwise provided in Section 17.3(c) of the Plan, if the Employees employment with the Company or a Subsidiary terminates for any reason prior to the Vesting Date, the Option shall be forfeited. |
6. | No Rights as Shareholder. The Employee shall have no rights as a shareholder with respect to any shares of Stock subject to this Option prior to the date of issuance to him or her of a certificate or certificates for such shares. |
7. | No Right to Continued Status as an Employee. The Option shall not confer upon the Employee any right with respect to continued status as an employee of the Company, nor shall it interfere in any way with the right of the Company to terminate the Employees status as an employee at any time. |
8. | Notices. Any notice to the Company shall be addressed to it at its principal executive offices, located at 1031 Mendota Heights Road, St. Paul, Minnesota, 55120. Any notice to the Employee shall be addressed to him at his current home address on record with the Company. |
9. | Governing Law. This Agreement shall be governed by the laws of the State of Minnesota without regard to choice of law principles. |
2
The Company has caused this Agreement to be executed by a duly authorized officer. The Employee has agreed to accept and execute this Agreement electronically using the grant acceptance procedures on the Employees E*TRADE Financial Services account.
3
Exhibit 10.4
PATTERSON COMPANIES, INC.
RESTRICTED STOCK UNIT AGREEMENT
NEITHER THE SECURITIES NOR THE SECURITIES ISSUABLE PURSUANT THIS AGREEMENT HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
RSU NO: ________
This Restricted Stock Unit Agreement (the Agreement) is dated effective , 2018 (the Grant Date) and is entered into by and between Patterson Companies, Inc., a Minnesota corporation (the Company), and Donald J. Zurbay (the Employee).
WITNESSETH:
1. | Award of Restricted Stock Units. Subject to the terms and conditions set forth herein, Employee has been awarded on the date hereof [] restricted stock units (the Restricted Units) valued at $[] for each unit. |
2. | Terms and Conditions. It is understood and agreed that this Agreement and the Restricted Units awarded herein (the Award) is subject to the following terms and conditions. In addition, even though this Award is not made pursuant to the Patterson Companies, Inc. 2015 Omnibus Incentive Plan (the Plan), the terms and conditions of the Plan apply to this Award, to the same extent as if this Award was made pursuant to the Plan, except that the maximum shares available provision under Section 4.1 of the Plan, the annual award limit provisions under Section 4.4 of the Plan, the vesting restrictions under Section 4.6 of the Plan and the Retirement provisions under Section 15.2 of the Plan shall not apply to this Award. The applicable terms of the Plan are incorporated by reference in this Agreement. The Employee, by execution of this Agreement, acknowledges having access to a copy of the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of this Agreement will control. All capitalized terms in this Agreement not otherwise defined shall have the meaning(s) ascribed to them in the Plan. |
3. | Restrictions. The Restricted Units may not be sold, pledged or transferred, whether voluntarily or involuntarily, by operation of law or otherwise, until the Vesting Date for the Restricted Units, or portion thereof, as provided below. On the Vesting Date(s), and provided the Employee is then employed by the Company or a Subsidiary, the Employee shall receive the Restricted Units, or portion thereof which has vested, free of all restrictions, except with respect to any applicable securities laws restrictions relating to unregistered securities, to the extent such securities are not so registered. The Restricted Units will be denominated in shares of Common Stock of the Company (Shares) and paid in Shares. |
4. | Vesting Date. With respect to fifty percent (50%) of the Restricted Units awarded herein, the Vesting Date shall be the one-year anniversary of the Grant Date. With respect to the remaining fifty percent (50%) of the Restricted Units awarded herein, the Vesting Date shall be the two-year anniversary of the Grant Date. |
5. | Forfeiture Provision. Except as otherwise provided in Section 17.3(c) of the Plan, if the Employees employment with the Company or a Subsidiary terminates for any reason prior to the Vesting Date, the Restricted Units shall be forfeited, and such Restricted Units shall be cancelled and become part of the authorized but unissued stock available for issuance by the Company. |
6. | Limitation of Rights regarding Shares. Until issuance of the Shares, if any, the Employee will not have any rights of a shareholder with respect to the Restricted Units. The Employee will have no voting, dividend, liquidation and other rights with respect to any Restricted Units granted hereunder. Notwithstanding the foregoing, for each Restricted Unit that vests, the Employee will be entitled to an accrual of dividend equivalents with respect to the Restricted Units from the date of grant until the date such Restricted Units are paid. The Company will deliver, together with the Shares delivered under Section 3 of this Agreement, if any, a cash payment equal to the dividend equivalent amount; provided, that in the case of any dividend payable in Shares, the Employee will be issued additional Restricted Units. |
7. | Taxes and Withdrawals. Employee acknowledges that under current federal tax law the value of the Restricted Units will be included as ordinary income in the year the restrictions lapse. The Company is entitled to (a) withhold and deduct from future wages of the Employee (or from other amounts that may be due and owing to the Employee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the Restricted Units, or (b) require the Employee promptly to remit the amount of such withholding to the Company at the time the restrictions lapse. The Company may make the required withholding by canceling Restricted Units at the time the restrictions lapse. |
8. | No Right to Continued Status as an Employee. This Agreement shall not confer upon the Employee any right with respect to continued status as an employee of the Company, nor shall it interfere in any way with the right of the Company to terminate the Employees status as an employee at any time. |
2
9. | Notices. Any notice to the Company shall be addressed to it at its principal executive offices, located at 1031 Mendota Heights Road, St. Paul, Minnesota, 55120. Any notice to the Employee shall be addressed to him at his current home address on record with the Company. |
10. | Governing Law. This Agreement shall be governed by the laws of the State of Minnesota without regard to choice of law principles. |
The Company has caused this Agreement to be executed by a duly authorized officer. The Employee has agreed to accept and execute this Agreement electronically using the grant acceptance procedures on the Employees E*TRADE Financial Services account.
3
Exhibit 99
PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120 | NEWS RELEASE |
PATTERSON COMPANIES ANNOUNCES LEADERSHIP TEAM ADDITIONS
Donald J. Zurbay Named Chief Financial Officer
Andrea Frohning Named Chief Human Resource Officer
May 23, 2018 (ST. PAUL, Minn.) Patterson Companies (Nasdaq: PDCO) today announced additions to further enhance the Companys leadership team. Patterson has appointed Donald J. Zurbay as Chief Financial Officer, effective June 29, 2018. Patterson also announced that Andrea Frohning has joined the Company as Chief Human Resource Officer, effective May 21, 2018.
The addition of talented leaders like Don and Andrea is an important part of our efforts to realize the full potential of Patterson and continue building a deeply engaged and committed team, said Mark Walchirk, President and CEO of Patterson Companies. The ability to attract exceptional leaders is also a testament to the strength of our platform and the opportunity to improve our growth and profitability.
Zurbay joins the organization with more than 28 years of leadership experience in various accounting and finance positions. Most recently, he served as Vice President and CFO at leading global medical device manufacturer St. Jude Medical, Inc. until the companys sale to Abbott. In this role, Zurbay developed strategic and operating plans during a time when St. Jude Medical grew annual revenues from $1 billion to more than $6 billion, optimized its cost structure and oversaw a significant SAP implementation.
Dons strong track record of successfully leading finance teams, particularly during periods of growth and change, will be instrumental as we focus on improving our execution and results, said Walchirk. We look forward to benefitting from his experience and expertise in implementing ERP systems, creating a more efficient cost structure and driving cash flow growth, as we continue to build value for our customers and shareholders.
Zurbay said, Patterson offers a compelling value proposition across strong end markets. I am excited about the opportunity to work with Mark and the rest of the team to continue the Companys transformation and support Pattersons growth initiatives.
Zurbay will succeed Dennis W. Goedken, who has been serving as Interim CFO and will continue to serve as Corporate Controller.
Walchirk continued, I want to thank Dennis for providing a seamless transition as Interim CFO while we conducted our search. He has played an important role in supporting our near-term actions and remains a valued member of our team going forward.
Andrea Frohning joined Patterson as Chief Human Resource Officer on May 21, 2018. Frohning brings more than 20 years of experience in leading numerous human resource departments across a diverse set of business environments and industries. She most recently served as the Chief Human Resources Officer at Snyders-Lance, a global manufacturer and marketer of snack foods, where she helped execute operational improvements, accelerate positive culture changes and grow leadership capabilities.
Andreas background and experience leading people at public, Fortune 500 companies, especially through transformations, will be significant as we continue to align our people and resources to our strategic priorities and future vision, said Walchirk.
Frohning said, I am thrilled to join Patterson at such an exciting time in the Companys history. I look forward to supporting Pattersons transformation, continuing our efforts to attract and retain the best talent and elevating the performance of our team.
Donald Zurbay Biography
Donald Zurbay, 50, most recently served as Vice President and Chief Financial Officer at St. Jude Medical, Inc., where he was responsible for all accounting, financial and business development activities. He joined St. Jude Medical in 2003 and held various leadership positions, including Director of Finance and Vice President and Corporate Controller. Prior to joining St. Jude Medical, Zurbay worked at PricewaterhouseCoopers for five years as an Assurance and Business
PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120 | NEWS RELEASE |
Advisory Services Senior Manager. Before joining PricewaterhouseCoopers, he was a General Accounting Manager at The Valspar Corporation. Zurbay started his career at Deloitte & Touche as an auditor in 1989. Zurbay earned a bachelors of science degree in business, accounting from the University of Minnesota and graduated from the Advanced Management Program from Harvard Business School.
Andrea Frohning Biography
Andrea Frohning, 48, joins Patterson from Snyders-Lance where she held the role of Senior Vice President, Chief Human Resources Officer and was responsible for leading all aspects of the companys human resources. Prior to her tenure at Snyders-Lance, she was Vice President Human Resources at Crane Co. Frohning also held other human resource managerial positions at Hubbell Inc., General Electric Consumer Finance and Pepsi Bottling Group. Frohning holds a bachelors of science degree in human development and family studies from the University of Illinois at Urbana-Champaign and a masters degree from the Institute of Labor and Industrial Relations at the University of Illinois at Urbana-Champaign.
Disclosure of employment inducement grant in accordance with NASDAQ rules: Pattersons inducement, severance and change in control agreement with Zurbay provides for the issuance of a one-time inducement equity grant consisting of a combination of stock options and restricted units. The stock options would have an approximate value of $750,000, would vest pro-rata over the course of three years, with one-third of the shares vesting on the first anniversary of the date of grant, one-third vesting on the second anniversary of the date of the grant, and the remaining one-third vesting on the third anniversary of the date of grant, in all cases subject to continued employment and with an overall term of ten years. The restricted stock units would have a value of $700,000 and would have a two-year vesting schedule, with 50% of the shares vesting on the first anniversary of the grant and the remaining 50% of the shares vesting on the second anniversary of the grant, subject to continued employment. The stock options and restricted stock unit grants will be made on the first day of employment and will be based on the closing per share price on the first day of employment. The stock options and restricted stock unit awards, which will be granted outside our 2015 Omnibus Incentive Plan, were approved by our Compensation Committee pursuant to the inducement grant exception under NASDAQ Rule 5635(c)(4), as an inducement material to Zurbay entering into employment with Patterson.
About Patterson Companies Inc.
Patterson Companies Inc. (Nasdaq: PDCO) is a value-added distributor serving the dental and animal health markets.
Dental Market
Pattersons Dental segment provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists and dental laboratories throughout North America.
Animal Health Market
Pattersons Animal Health segment is a leading distributor of products, services and technologies to both the production and companion animal health markets in North America and the U.K.
CONTACT: | John M. Wright, Investor Relations | |
COMPANY: | Patterson Companies Inc. | |
TEL: | 651.686.1364 | |
EMAIL: | john.wright@pattersoncompanies.com | |
WEB: | pattersoncompanies.com | |
SOURCE: | Patterson Companies Inc. | |
CONTACT: | Bria Townshend, Corporate Communications | |
COMPANY: | Patterson Companies Inc. | |
TEL: | 651.905.3349 | |
EMAIL: | corporate.communications@pattersoncompanies.com | |
WEB: | pattersoncompanies.com | |
SOURCE: | Patterson Companies Inc. |
# # #
)#JM[]D2/55V (L?*J
M?X@/\]*1))[S2;6YU%?](2]C6&1EVLPR,_U_*G[,GZR[[:;;^7Y'*E6#;2K!
MO0CF@@J<,"#Z$8KO+O[*]^^J/C?IY:-E_O$XV_SKF_%/_(?ES_<3^5$Z?*KW
M"ABO:R4;6T,:GM#*D:R-%(L;?=8J0#]#5O18Y9M>TZ*&".XE>ZC"0RG"2'<,
M*WL>]>_>);EKS3/%UA#<2WLT-D"=/N;?RX+4!?F:.38-Y Y'/45R5*O(TK'H
MTZ7.F[GSKY=&>SQH0XR/PJITYRJQFME?\2:5:G&A4IN]Y6Z=OF9E=IX&Y
MTG7L<_N1_P"@M7%UJ6WB/5K*%8;6[\F,#&U(D&?KQS^-&(IRJ4^6(L'6A1JJ
MI.^E]O-6,I?N#Z5VO@)2]MK849S"HX]<-7(7%Q)=3&68J7;J50*/R J_:^(
MM6LH1#:W?DQ@8PD:#/UXYHQ%.=2GRK=CP=:G0K*I*]E?\K=S+AF:!DDC?8Z]
M"#R.,5<:REM/[/DE^5KDATC(Y"AL _CSCZ58_P"$AU3S/,\^/?G.XV\>?_0:
M8VNZF]]]N>YWW.T*)&C4D
&4\_E3-&0-JL):2*-
M5R6>1PH'!'4U=TB_@55TG5CFT$@:*92";:3/4'NI[C\:F;DI-K73;_(JE&$H
M)2T=]']VC\O/]#,G@!U*2VM4<_O3%&K'+$YP/SJU>V]EIMT]FZ2W,T1VS2+)
ML4-W"C!SCID_E4)NC;:T;N/#&*Y,J\\-A\U
^EB#1=(\$-J3Z9>W&KZE>RW[6MO]@50ACW863/?/
M7\#QBMC3_AQHR:QXDM;B>^U232I$$-E8LBS2HP!W'/'&<'&.A^E1>&_B'X;T
MB;4M0N-!N$U6_FE=I[4K^Z1CPJ9/RX[\