EXHIBIT 10.5
PATTERSON DENTAL COMPANY
CAPITAL ACCUMULATION PLAN
SECTION 1. Purpose of the Plan.
The name of this plan is PATTERSON DENTAL COMPANY CAPITAL ACCUMULATION PLAN
(the "Plan"). The purpose of the Plan is to enable PATTERSON DENTAL COMPANY
(the "Company") and its Subsidiaries to attract, retain and motivate officers
and other key employees, to compensate them for their contributions to the
growth and profits of the Company and to encourage ownership of stock in the
Company on the part of such personnel. The Plan provides incentives to
participating officers and other key employees which are linked directly to
increases in stockholder value and will therefore inure to the benefit of all
stockholders of the Company.
SECTION 2. Definitions.
For purposes of the Plan, capitalized terms not otherwise defined herein
shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means termination by the Company or a Subsidiary of a
Participant's employment upon (i) the willful and continued failure by such
Participant to substantially perform his duties with the Company or a
Subsidiary (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to such Participant by the Board, which demand
specifically identifies the manner in which the Board believes that such
Participant has not substantially performed his duties, or (ii) the willful
engaging by a Participant in conduct which is demonstrably and materially
injurious to the Company or a Subsidiary, monetarily or otherwise, including a
violation of Company policies as set forth in the Company's Policy and
Procedure Manual, as the same may be amended from time to time, or policies
adopted from time to time by the Company for officers and key employees and
communicated in writing to Participants. For purposes of this Subsection, no
act, or failure to act, on a Participant's part shall be deemed "willful"
unless done, or omitted to be done, by such Participant not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company or a Subsidiary.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Committee" means the Compensation Committee of the Board, appointed
by the Board from among its members and shall consist of not less than three
members thereof who are and shall remain Committee members only so long as
they remain "disinterested persons" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934 ("Exchange Act"), as amended.
(e) "Disability" means permanent and total disability as determined under
any Company sponsored long-term disability plan or insurance program.
(f) "Eligible Employee" means an employee of the Company or any Subsidiary
as described in Section 3.
(g) "Event of Acceleration" means the date upon which any of the following
events occurs:
(i) The Company acquires actual knowledge that any Person other than
the Company, a Subsidiary or any employee benefit plan(s) sponsored by the
Company or a Subsidiary has acquired the beneficial ownership (determined
as provided in Rule 13d-3 under the Exchange Act in effect on
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such date), directly or indirectly, of securities of the Company entitling
such Person to 30% or more of the voting power of the Company; or
(ii) A tender offer is made to acquire securities of the Company
entitling the holders thereof to 30% or more of the voting power of the
Company; or
(iii) A solicitation subject to Rule 14a-11 under the Exchange Act
(or any successor Rule) relating to the election or removal of 50% or more
of the members of the Board or any class of the Board shall be made by any
Person other than the Company or less than 51% of the members of the Board
shall be Continuing Directors; or
(iv) The shareholders of the Company shall approve a merger,
consolidation, share exchange, division or sale or other disposition of
assets of the Company as a result of which the shareholders of the Company
immediately prior to such transaction shall not hold, directly or
indirectly, immediately following such transaction, a majority of the
voting power of (a) in the case of a merger or consolidation, the surviving
or resulting corporation; (b) in the case of a share exchange, the
acquiring corporation; or (c) in the case of division or a sale or other
disposition of assets, each surviving, resulting or acquiring corporation,
which, immediately following the transaction, holds more than 10% of the
consolidated assets of the Company immediately prior to the transaction.
(h) "Participant" means an Eligible Employee selected by the Committee,
pursuant to the Committee's authority in Section 6, to receive an award of
Restricted Stock.
(i) "Related Employment" means the employment of an individual by an
employer which is neither the Company nor a Subsidiary provided (i) such
employment is undertaken by the individual at the request of the Company or a
Subsidiary, (ii) immediately prior to undertaking such employment, the
individual was an officer or employee of the Company or a Subsidiary, or was
engaged in Related Employment as herein defined and (iii) such employment is
recognized by the Committee, in its sole discretion, as Related Employment for
purposes of this Plan. The death or Disability of an individual during a period
of Related Employment as herein defined shall be treated, for purposes of this
Plan, as if the death or onset of Disability had occurred while the individual
was an officer or employee of the Company or a Subsidiary.
(j) "Restricted Stock" means an award of shares of Stock that is subject
to the restrictions set forth in Section 5.
(k) "Restricted Stock Award" means an award of common stock equal to that
portion of a Participant's annual compensation subject to the Plan, divided by
the fair market value of a share of Restricted Stock, determined in accordance
with Section 5(a).
(l) "Retirement" means retirement of a Participant from active employment
with the Company or any Subsidiary on or after a Participant's 65th birthday.
(m) "Stock" means the common stock of the Company.
(n) "Subsidiary" means any corporation (other than the Company) 50% or more
of the total combined voting power of all classes of stock of which is owned,
directly or indirectly, by the Company.
SECTION 3. Eligibility and Participation.
Officers and other key employees of the Company or its Subsidiaries who are
responsible for or contribute to the management, growth and/or profitability of
the Company or its Subsidiaries shall be eligible to participate in the Plan.
The Participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among Eligible Employees. An Employee
selected by the Company shall affirmatively elect to participate in the Plan. A
Participant may, on or before the first day of any fiscal quarter of the
Company, elect to cease participation in the Plan, whereupon such participation
shall be deemed to have been discontinued as of such first day of the fiscal
quarter following the date such notice was given to the Company. Notice by a
Participant to cease participation in the Plan shall be given in writing by a
Participant and shall be deemed given to the Company only when received by the
Company at its principal
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executive offices. Compensation subject to a Restricted Stock Award paid or
payable to a Participant for the period prior to the date on which participation
in the Plan ceases shall be payable in Restricted Stock and shall not be subject
to refund, except as otherwise provided herein.
SECTION 4. Amount and Form of Awards.
(a) Awards of Restricted Stock under the Plan shall be determined by the
Committee in its discretion. Awards will be made in lieu of cash payments of a
percentage of the Participant's annual compensation and will be granted at such
time as the Committee may in its sole discretion determine, and the Committee
may also in its sole discretion provide for alternative methods for grants of
awards.
(b) The maximum number of shares of Stock which may be issued under the
Plan, as Restricted Stock shall be not more than 1,000,000 shares of Stock,
subject to adjustment as provided in Section 7, and such shares may be
authorized but unissued shares, or previously issued shares reacquired by the
Company, or both. In the event Restricted Stock is forfeited prior to the end of
the period during which the restrictions on Restricted Stock expire, the shares
of Stock called for by such award of Restricted Stock will become available for
future awards.
SECTION 5. Restricted Stock.
(a) A Restricted Stock Award made to a Participant under the Plan will be
determined and approved by the Committee. In order to reflect the impact of the
restrictions on the value of the Restricted Stock, as well as the possibility of
forfeiture of Restricted Stock, the fair market value of Stock shall be
discounted at a rate of 25% in determining the number of shares of Restricted
Stock to be awarded. The Committee may, when it deems appropriate, and in its
sole discretion, provide for an alternative discount rate. For purposes of this
Plan, the fair market value of Restricted Stock purchased pursuant to an award
will be the average of the Stock's closing sale prices on the NASDAQ Stock
Market for the one year period (or such lesser period of time as the Committee
may specify) following the Restricted Stock Award specified by the Committee for
payment of the Restricted Stock Award. The dollar value of an award will be
divided by the discounted market value per share to determine the number of
shares of Restricted Stock in an award. The value of fractional shares will be
paid in cash.
(b) A Participant shall not have any rights with respect to an award,
unless or until such Participant has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, within a period of 60 days after the date of the award
(or such shorter period after the date of the award as the Committee may
specify). The amount of a Restricted Stock Award shall be paid by payroll
deduction from a Participant's compensation over a one-year period or such
lesser period as the Committee shall specify. Each Participant who is awarded
Restricted Stock may, but need not, be issued a stock certificate in respect of
such shares of Restricted Stock. A "book entry" (i.e., a computerized or manual
entry) shall be made in the records of the Company to evidence an award of
shares of Restricted Stock to a Participant where no certificate is issued in
the name of the Participant. Such Company records shall, absent manifest error,
be binding on the Participants. Each certificate, if any, registered in the name
of a Participant shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
The transferability of the certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of Patterson Dental Company Capital
Accumulation Plan and a Restricted Stock Award Agreement entered
into between the registered owner and Patterson Dental Company.
Copies of such Plan and Agreement are on file in the offices of
Patterson Dental Company.
The Committee shall require that any stock certificate issued in the name of a
Participant evidencing shares of Restricted Stock be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of such issuance of a certificate for Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the shares covered by such certificate.
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(c) The shares of Restricted Stock issued pursuant to a Restricted Stock
Award shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Award Agreements, during the three-year period (together with any
extensions thereof approved as provided herein) commencing on the date of
the Restricted Stock Award (the "Restricted Period"), the Participant shall
not be permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. The Committee may, in its sole discretion,
(x) initially provide for an alternative Restricted Period or alter the
three-year Restricted Period for a previously granted award (provided that
the Committee may not extend the Restricted Period for a previously granted
award without the Participant's written consent), (y) during any extension
of such Restricted Period, provide for alternative restrictions (provided
that nothing contained in this clause shall grant the Committee any
additional powers under the Plan with respect to awards granted to or to be
granted to persons who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended), and (z) provide for the lapse of any such
restrictions in installments and accelerate or waive any such restrictions
in whole or in part based on such factors and such circumstances as the
Committee may determine, in its sole discretion, including, but not limited
to, the Participant's Retirement, termination, death or Disability.
(ii) Unless the Committee in its sole discretion shall determine
otherwise at or prior to the time of the grant of any award, the
Participant shall have the right to vote his shares of Restricted Stock
during the Restricted Period. The Participant shall have the right to
receive any regular dividends on such shares of Restricted Stock. The
Committee shall in its sole discretion determine the Participant's rights
with respect to extraordinary dividends on the shares of Restricted Stock,
including, but not limited to, dividends payable in the common stock of the
Company.
(iii) Certificates for shares of Restricted Stock shall be delivered
to the Participant promptly after, and only after, the Restricted Period
shall expire (or such earlier time as the restrictions may lapse in
accordance with paragraph (c)(i) of this Section 5) without forfeiture in
respect of such shares of Restricted Stock.
(d) Subject to the provisions of paragraph (c)(i) of this Section 5, the
following provisions shall apply to a Participant's shares of Restricted Stock
prior to the end of the Restricted Period relating thereto (including extensions
thereof and Related Employment):
(i) Upon the death or Disability of a Participant, the restrictions
on his or her Restricted Stock shall immediately lapse.
(ii) If, prior to reaching age 55, a Participant voluntarily
terminates employment, such Participant shall forfeit his or her Restricted
Stock.
(iii) If, on or after the date a Participant has reached age 55, a
Participant's employment is voluntarily terminated prior to Retirement,
such Participant shall forfeit his or her Restricted Stock, but shall be
entitled to receive in lieu thereof, on the first anniversary of such
termination, provided he or she has not taken employment in competition
with the Company, a cash payment equal to the portion of his or her
compensation that had been paid in the form of such forfeited Restricted
Stock, together with interest thereon at a rate to be determined from time
to time by the Committee.
(iv) If a Participant is involuntarily terminated without cause prior
to Retirement, such Participant shall forfeit his or her Restricted Stock,
but shall be entitled to receive in lieu thereof a cash payment equal to
the portion of his or her compensation that had been paid in the form of
such forfeited Restricted Stock, together with interest thereon at a rate
to be determined from time to time by the Committee.
(v) If a Participant's employment is involuntarily terminated for
Cause prior to such Participant's 65th birthday, he or she shall forfeit
his or her Restricted Stock, and no cash payment shall be made in respect
thereto or in lieu thereof.
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(vi) If employment of a Participant terminates upon Retirement, he or
she shall receive his or her Restricted Stock upon expiration of the
Restricted Period.
(e) Notwithstanding any other provision contained in the Plan, in case any
Event of Acceleration occurs, the Restricted Period applicable to any Restricted
Stock Award shall be deemed to have expired and lapsed.
SECTION 6. Administration.
The Plan shall be administered by the Committee which shall be appointed by
the Board and which shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant Restricted Stock
awards to Participants, pursuant to the terms of the Plan. In particular, the
Committee shall have the authority:
(i) to select those employees of the Company and its Subsidiaries
who are Eligible Employees;
(ii) to determine whether and to what extent Restricted Stock awards
shall be granted to Participants hereunder;
(iii) to determine the number of shares of Stock to be covered by
each such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder; and
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instructions evidencing
Restricted Stock.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan; and to otherwise supervise the
administration of the Plan. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and the Participants.
SECTION 7. Adjustments upon a Change in Common Stock.
In the event of any change in the outstanding Stock of the Company by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar events if such change equitably requires an adjustment in the number or
kind of shares that may be issued under the Plan pursuant to Section 4(b), such
adjustment shall be made by the Committee and shall be conclusive and binding
for all purposes of the Plan.
SECTION 8. Amendment and Termination.
The Plan may be amended or terminated at any time and from time to time by
the Board, but no amendment which increases the aggregate number of shares of
Stock which may be issued pursuant to the Plan (except as provided in Section 7)
shall be effective unless and until the same is approved by the shareholders of
the Company. Neither an amendment to the Plan nor the termination of the Plan
shall adversely affect any right of any Participant with respect to any
Restricted Stock award theretofore made without such Participant's written
consent.
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SECTION 9. General Provisions.
(a) All certificates for shares issued pursuant to Restricted Stock awards
may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of Stock delivered under
the Plan shall be subject to such stock transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate references to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company or any Subsidiary any right to
continued employment with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.
(c) No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, determination or interpretation.
(d) A Participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of a Participant's death) including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner and no such right or interest of any Participant in the
Plan shall be subject to any obligation or liability of such Participant.
(e) The Company and its Subsidiaries shall have the right to deduct from
any payment made under the Plan any federal, state or local income or other
taxes required by law to be withheld with respect to such payment. It shall be
a condition to the obligation of the Company to issue Stock upon the lapse of
restrictions on Restricted Stock that the Participant pay to the Company, upon
its demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold federal, state or local income or other
taxes. If the amount requested is not paid, the Company may refuse to issue
shares. Unless the Committee shall in its sole discretion determine otherwise,
payment for taxes required to be withheld may be made in whole or in part by an
election by a Participant, in accordance with rules adopted by the Committee
from time to time to have the Company withhold Stock otherwise issuable pursuant
to the Plan having a fair market value equal to such tax liability.
SECTION 10. Effective Date of Plan.
The Plan shall be effective on the date it is adopted by the Board, subject
to the approval of stockholders.
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