Exhibit 10.16
PATTERSON DENTAL COMPANY
2001 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose
The purpose of the Patterson Dental Company 2001 Non-Employee Directors' Stock
Option Plan ("the Plan") is to secure for Patterson Dental Company ("the
Company") and its shareholders the benefits of the incentive inherent in
increased Common Stock ownership by the members of the Board of Directors ("the
Board") of the Company who are Eligible Directors as defined in the Plan.
2. Administration
The Plan shall be administered by the Board. The Board shall have all the powers
vested in it by the terms of the Plan, such powers to include authority (within
the limitations described herein) to prescribe the form of the agreement
embodying awards of stock options made under the Plan ("Options"). The Board
shall, subject to the provisions of the Plan, grant Options under the Plan and
shall have the power to construe the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decision of the Board
in the administration of the Plan, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that the members thereof may authorize any one or more of their number or
the Secretary or any other officer of the Company to execute and deliver
documents on behalf of the Board. No member of the Board shall be liable for
anything done or omitted to be done by such member or by any other member of the
Board in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
3. Amount of Stock
The stock which may be issued and sold under the Plan will be the Common Stock
(par value $.01 per share) of the Company, of a total number not exceeding
400,000 shares, subject to adjustment as provided in Paragraph 6 below. In the
event that Options granted under the Plan shall terminate or expire without
being exercised in whole or in part, new Options may be granted covering the
shares not purchased under such lapsed Options.
4. Eligible Directors
The members of the Board who are eligible to participate in the Plan are persons
who serve as directors of the Company on or after the effective date of the Plan
and who are not current employees of the Company or any affiliate or subsidiary
of the Company.
5. Terms and Conditions of Options
Each Option granted under the Plan shall be evidenced by an agreement in such
form as the Board shall prescribe from time to time in accordance with the Plan
and shall comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value of the Common
Stock shares subject to such Option on the date the Option is granted.
The fair market value of the Common Stock shall be determined as
follows:
(i) if the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange, the
fair market value on any
given day shall be the average of the high and the low sales
price of a Common Stock share on such day or, if such exchange
is closed on that date, on the last preceding date on which such
exchange was open for trading;
(ii) if the Common Stock is not listed on a national securities
exchange, the fair market value on any given day shall be the
average of the high and the low sales prices of a Common Stock
share on the Nasdaq National Market on such day or, if the
Nasdaq National Market is closed on that date, on the last
preceding date on which the Nasdaq National Market was open for
trading;
(iii) if the Common Stock is not listed on a national securities
exchange, is not admitted to unlisted trading privileges on any
such exchange, and is not eligible for inclusion on the Nasdaq
National Market, the fair market value on any given day shall be
the average of the closing representative bid and asked prices
on such day, as reported on the Nasdaq National Market, and if
not reported on such Market, then as reported by the National
Quotation Bureau, Inc. or such other publicly available
compilation of the bid and asked prices of the Common Stock in
any over-the-counter market on which the Common Stock is traded;
or
(iv) if there exists no public trading market for the Common Stock,
the fair market value on any given day shall be an amount
determined by the Board in such manner as it may reasonably
determine in its discretion, provided that such amount shall not
be less than the book value per share as reasonably determined
by the Board as of the date of determination nor less than the
par value of the Stock.
(b) Each year, as of the date of the annual meeting of shareholders of the
Company, commencing with the 2002 annual meeting of the shareholders
of the Company, each Eligible Director who has been elected or
reelected or who is continuing as a member of the Board as of the
adjournment of the annual meeting, shall automatically receive an
Option award. The number of shares to be covered by an Option award to
an Eligible Director who is elected to the Board for the first time,
either by the shareholders of the Company or by the Board to fill a
vacancy thereon, shall be 12,000 shares (an "Initial Grant"). The date
of an Option award to a person first elected to the Board to fill a
vacancy thereon shall be the date of such election. The number of
shares to be covered by an Option award to an Eligible Director who is
reelected to the Board or whose Board Membership is continuing
following such annual meeting shall be 6,000 shares (an "Annual
Grant"). The number of shares of any Option award shall be subject to
adjustment as provided in Section 6. An Initial Grant shall also be
awarded to an Eligible Director who is first elected to the Board
prior to the Company's 2002 annual meeting, and who has not received
the grant of a stock option under any other plan of the Company;
provided, however, that if an Initial Grant is made within six months
of an Annual Grant to which an Eligible Director would be entitled to
receive, such Initial Grant shall be in lieu of the next succeeding
Annual Grant.
(c) In addition to any Options received pursuant to Section 5(b), each
Eligible Director shall automatically be granted the right to elect to
receive additional Options in lieu of the amount of the director's
annual fee such Eligible Director is entitled to receive ("Annual
Retainer"), or a portion thereof, for the year following election or
reelection to, or continuation on, the Board. Such election to receive
additional Options shall be irrevocable and must be made in writing
prior to the commencement of the period
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prior to which the Annual Retainer is to be earned. Options granted
subject to such election shall be granted on the first day of the
Company's fiscal year in which such Annual Retainer is earned. The
number of additional Options such Eligible Director can obtain
pursuant to this Section shall be determined pursuant to the following
formula:
Amount of Annual
Retainer to be Converted = Options Granted in Lieu of
Stock Price per share on Date of Cash
Grant x Valuation Discount
The Valuation Discount shall be based upon the Black-Scholes formula
or upon such other discount as the Board determines to be appropriate.
(d) No Option granted under the Plan shall be transferable by the optionee
other than by will or by the laws of descent and distribution, and
such Option shall be exercisable, during the optionee's lifetime, only
by the optionee. Notwithstanding the foregoing, the Board may set
forth in a stock option agreement, at the time of grant or thereafter,
that Options may be transferred to trusts solely for the benefit of
such immediate family members and to partnerships in which such family
members and/or trusts are the only partners. For this purpose,
immediate family means the optionee's spouse, parents, children,
stepchildren, grandchildren and legal dependants. Any transfer of
Options made under this provision will not be effective until notice
of such transfer is delivered to the Company.
(e) No Option or any part of an Option shall be exercisable:
(i) except as provided in Section 5(h) and Section 6(b), before the
Eligible Director has served one term-year as a member of the
Board since the date the Option was granted (as used herein, the
term "term-year" means that period from one Annual Meeting to
the subsequent Annual Meeting),
(ii) after the expiration of ten years from the date the Option was
granted, or after the expiration of one year following the date
on which the Eligible Director to whom the Option was granted
ceased to be an Eligible Director for any reason.
(iii) unless written notice of the exercise is delivered to the
Company specifying the number of shares to be purchased and
payment in full is made for the shares of Common Stock being
acquired thereunder at the time of exercise, such payment shall
be made:
(A) in United States dollars by certified check, or bank draft,
or
(B) by tendering to the Company Common Stock shares owned by the
person exercising the Option and having a fair market value
equal to the cash exercise price applicable to such Option,
such fair market value to be the average of the high and low
sales prices of a Common Stock share on the date of exercise
as reported on the Nasdaq National Market or, if the Nasdaq
National Market is closed on that date, on the last
preceding date on which the Nasdaq National Market was open
for trading, or
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(C) by a combination of United States dollars and Common Stock
shares as aforesaid, and
(iv) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option
and ending on the date of such exercise, an Eligible Director of
the Company, except that if such person shall cease to be such an
Eligible Director, for any reason, while holding an Option that
has not expired and has not been fully exercised, such person, or
in the case of death, the executors, administrators, legatees or
distributes, as the case may be, at any time within one year
after the date such person ceases to be such an Eligible Director
(but in no event after the Option has expired under the
provisions of subparagraph 5(e)(ii) above), may exercise the
Option with respect to any Common Stock shares as to which such
person has not exercised the Option on the date the person ceased
to be such an Eligible Director.
In the event any Option is exercised by the executors,
administrators, legatees or distributees of the estate of a
deceased optionee, the Company shall be under no obligation to
issue stock thereunder unless and until the Company is satisfied
that the person or persons exercising the Option are the duly
appointed legal representatives of the deceased optionee's estate
or the proper legatees or distributees thereof.
(f) Subject to subparagraph 5(e) above, an Option shall become exercisable
in full beginning on the earlier of (a) the first anniversary date of
the grant of the Option or (b) the completion of one term-year
following the grant of the Option.
(g) Notwithstanding anything to the contrary herein, if an Option has been
transferred in accordance with Section 5(d), the Option shall be
exercisable solely by the transferee. The Option shall remain subject
to the provisions of the Plan, including that it will be exercisable
only to the extent that the optionee or optionee's estate would have
been entitled to exercise it if the optionee had not transferred the
Option. In the event of the death of the transferee prior to the
expiration of the right to exercise the Option, the Option shall be
exercisable by the executors, administrators, legatees and
distributees of the transferee's estate, as the case may be, for a
period of one year following the date of the transferee's death but in
no event be exercisable after the expiration of the Option period set
forth in the Stock Option Agreement. The Option shall be subject to
such other rules or terms as the Board shall determine.
(h) In the case of an Initial Grant, one-third of such Option shall become
exercisable on the first, second and third anniversaries of the date
of grant, respectively.
6. Adjustment Upon Certain Events
(a) In the event of changes in the outstanding Common Stock of the Company
by reason of any stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares, rights
offering to purchase stock at a price substantially below market
value, or the like, the aggregate number and kind of shares available
under the Plan, and the number, kind and price of shares subject to
outstanding Options, shall be appropriately adjusted by the Board,
whose determination shall be conclusive.
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(b) Upon the occurrence of a Change of Control, (i) all outstanding
Options granted pursuant to the Plan, to the extent not theretofore
exercised or canceled, shall become exercisable in full for the
remainder of the applicable term of such Options, and (ii) all
restrictions applicable to all outstanding Options granted pursuant to
the Plan shall be deemed to have been satisfied and such Options shall
immediately vest in full.
(c) Except as otherwise provided in an Option agreement, upon the
occurrence of a Change of Control (as defined in Section 6(d)), the
Board may, in its sole discretion, provide for (i) the payment of a
cash amount in exchange for the cancellation of an Option which may
equal the excess, if any, of the fair market value of the shares
subject to such Option, as defined in Section 5(a), over the aggregate
exercise price of such Options or (ii) the issuance of substitute
Option awards that will substantially preserve the value, rights and
benefits of any affected Options previously granted hereunder.
(d) "Change of Control" means any one of the following:
(i) Individuals who, as of September 10, 2001, constitute the Board
of Directors of the Company (the "Incumbent Board"), cease for
any reason to constitute at least a majority of such Board;
provided, however, that any individual becoming a director
subsequent to the date hereof, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of the office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a "person" (as such
term is defined in Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended from time to time) other than
the Incumbent Board; or
(ii) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
then outstanding Shares of the Company (or its successor by
merger, consolidation or purchase of all or substantially all of
its assets) (the "Outstanding Common Stock") and the combined
voting power of the then outstanding voting securities of the
Company (or its successor by merger, consolidation or purchase of
all or substantially all of its assets) entitled to vote
generally in the election of directors (the "Outstanding Voting
Securities") immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then Outstanding Common Stock and the combined
voting power of the then Outstanding Voting Securities, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, and (B) at least a
majority of the members of the board of directors of the
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corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of such Incumbent Board
providing for such Business Combination; or
(iii) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
7. Miscellaneous Provisions
(a) Except as expressly provided for in the Plan, no Eligible Director or
other person shall have any claim or right to be granted an Option
under the Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any Eligible Director any right to be retained
in the service of the Company.
(b) Except as provided for under Section 5(d), an optionee'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 an optionee's death, by will or the laws of descent and
distribution), including, but not by way of limitations, 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.
Any Options held by such assignee or transferee shall be subject to
the terms of this Plan and the agreement pursuant to which such
Options were granted.
(c) No Common Stock shares shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in
compliance with applicable federal, state and other securities laws
and regulations.
(d) It shall be a condition to the obligation of the Company to issue
Common Stock shares upon exercise of an Option, that the optionee (or
any beneficiary or person entitled to act under subparagraph 5(e)(iv)
above) pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any liability
or obligation of the Company to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid,
the Company may refuse to issue Common Stock shares.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares upon exercise
of any Option under the Plan and issuance of shares upon exercise of
Options shall be subordinate to the claims of the Company's general
creditors.
(g) By accepting any Option or other benefit under the Plan, each optionee
and each person claiming under or through such person shall be
conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action taken under the Plan by the Company or
the Board.
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8. Amendment
The Plan may be amended at any time and from time to time by the Board as the
Board shall deem advisable, including, but not limited to amendments necessary
to qualify for any exemption or to comply with applicable law or regulations
provided, however, that except as provided in Paragraph 6 above, the Board may
not, without further approval by the shareholders of the Company in accordance
with Paragraph 10 below, increase the maximum number of shares of Common Stock
as to which Options may be granted under the Plan, increase the number of shares
subject to an Option, reduce the minimum Option exercise price described in
subparagraph 5(a) above, extend the period during which Options may be granted
or exercised under the Plan or change the class of persons eligible to receive
Options under the Plan. No amendment of the Plan shall materially and adversely
affect any right of any optionee with respect to any Option theretofore granted
without such optionee's written consent.
9. Termination
This Plan shall terminate upon the earlier of the following dates or events to
occur:
(a) upon the adoption of a resolution of the Board terminating the Plan;
or
(b) at earlier of (i) 11:59 pm, St. Paul, Minnesota time, on the date of
the tenth annual meeting of Shareholders of the Company held after
2001, or (ii) on December 31, 2011.
10. Effective Date of Plan
The Plan shall become effective as of September 10, 2001, or such later date as
the Board may determine, provided that the Company's shareholders shall have
adopted the Plan at the Company's 2001 Annual Meeting of Shareholders.
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