EXHIBIT 10.4
 
 
[image7.jpg]

 
January 12, 2015
 
John Francis
   3041 W. Pasadena Dr.
   Boise, ID 83705
 
Dear John:
 
The Compensation Committee of the Board of Directors (the “Board”) of MWI
Veterinary Supply, Inc. (“MWI”) has authorized MWI Veterinary Supply Co. (the
“Company”) to offer you special severance benefits in the event that your
employment terminates in accordance with the terms of this letter agreement
(this “Agreement”). However, in the event that you become entitled to receive
any severance benefits under this Agreement, you shall not be entitled to
receive any severance benefits set forth in Section 1.5 of the MWI Veterinary
Supply Co. Non-Disclosure and Non-Competition Agreement, dated September 28,
2006, by and between you and the Company (the “Restrictive Covenant Agreement”).
Additionally, regardless of whether you become entitled to receive severance
benefits under this Agreement, from and after the date of this Agreement,
neither the Company, MWI nor any of their respective Affiliates may reduce your
severance benefits under Section 1.5 of the Restrictive Covenant Agreement or
any other agreement or arrangement by waiving all or a portion of the period
during which you are subject to non-competition, non-solicitation and/or any
other restrictive covenants. Other than as provided in this agreement, the
Restrictive Covenant Agreement shall remain in full force and effect.
 
Severance Benefits
 
In the event that your employment is terminated by the Company or any Affiliate
thereof for any reason other than for Cause (and not due to death), or is
terminated by you for Good Reason, in either case, within two years following
the occurrence of a Change in Control, then subject to your execution of the
release of claims attached hereto as Exhibit A, with updates only to the extent
necessary for purposes of enforceability of the release pursuant to applicable
law (the “Release”), such that it is effective and irrevocable within 60 days
after the date of such termination of employment, you will be entitled to
receive the following payments and benefits:
 
·      An amount (the “Severance Amount”) equal to one times the sum of:
 
 
o
the higher of (i) your annual base salary at the time of such termination of
employment and (ii) your annual base salary immediately prior to such Change in
Control, plus

 
 
o
the grant date value of the most recent annual incentive equity awards granted
to you prior to such Change in Control (calculated assuming all such awards are
vested), plus

 
 
 
 
 
[image8.jpg]

 
 

--------------------------------------------------------------------------------

 

 

 
  o
 the most recent annual cash bonus (base and stretch) paid to you prior to such
Change in Control that exceeded $0.00.

 
 
·
$25,000 of outplacement services, provided that such services are provided by no
later than the last day of the calendar year following the calendar year in
which such termination of employment occurred.

 
 
·
A cash bonus (the “Pro-Rata Maximum Bonus”) equal to the greater of your maximum
bonus opportunity for the year of such termination or your maximum bonus
opportunity as in effect immediately prior to such Change in Control, multiplied
by a fraction, the numerator of which equals the number of days you were
employed during the fiscal year in which such termination of employment occurred
and the denominator of which equals the number of days in such fiscal year.

 
 
·
Provided that doing so would not result in any fines or penalties as the result
of violating any non-discrimination healthcare rules, the Company shall
reimburse you for your and your eligible dependents’ medical, dental and vision
COBRA premiums for 18 months following such termination of employment, provided
that you timely elect COBRA coverage. Such reimbursements may be provided on an
after-tax basis if necessary to avoid violating any non-discrimination
healthcare rules.

 
The severance benefits described above shall be in addition to any earned but
unpaid base salary, any accrued but unused paid time off and any vested employee
benefits, in each case, as of such termination of employment, as well as any
other payments or benefits required by law to be provided.
 
Notwithstanding the foregoing, if a court of competent jurisdiction has
determined that you have intentionally and materially violated any
non-competition, non-solicitation and/or non-disclosure restrictive covenants in
any agreement between you and the Company or any of its Affiliates during any
period that you are entitled to receive any of the payments or benefits
described above, then the Company may cease providing any further payments and
benefits hereunder and you shall repay to the Company within 10 days after
request all such payments and benefits received by you after the first date on
which you were determined by such court to have intentionally and materially
violated such non-competition, non-solicitation and/or nondisclosure restrictive
covenants.
 
Timing of Payment of Severance Benefits
 
The Severance Amount shall be paid in equal installments in accordance with the
Company’s normal payroll practices as in effect from time to time during the 12
month period following such termination of employment, with the first such
payment to occur on the first payroll date following the effective date of the
Release and to include a catch-up payment for any payments that would have been
made had the Release been effective on the date of your termination of
employment; provided further, however, that if the 60 day Release period
overlaps two calendar years, then to the extent required by Code Section 409A,
any portion of the Severance Amount that would have been paid in such first
calendar year instead shall be withheld and paid on the

 
 

--------------------------------------------------------------------------------

 

 
first payroll date in such second calendar year (with all other payments to be
made as if no such delay had occurred).
 
The Pro-Rata Maximum Bonus shall be paid on the first payroll date following the
effective date of the Release; provided however, that if the 60 day Release
period overlaps two calendar years, then to the extent required by Code Section
409A, the Pro-Rata Maximum Bonus shall not be paid until such second calendar
year.
 
All COBRA reimbursements shall be made promptly after submission of the
incurrence of the expense thereof, and in all events by no later than the last
day of the month following the month to which such reimbursement relates.
 
Certain Reductions of Severance Benefits
 
Notwithstanding anything contained herein to the contrary, in the event that (i)
you become entitled to any payments or benefits hereunder or otherwise from the
Company or any of its Affiliates which constitute a “parachute payment” as
defined in Code Section 280G (the “Total  Payments”) and (ii) you are subject to
an excise tax imposed under Code Section 4999 (the “Excise Tax”), then, if and
only if, it would be economically advantageous for you on an after-tax basis,
the Total Payments shall be reduced by an amount that results in the receipt by
you on an after tax basis (including the applicable federal, state and local
income taxes, and the Excise Tax) of the greatest Total Payment, notwithstanding
that some or all of the portion of the Total Payment may be subject to the
Excise Tax. Any such reduction in payments and benefits shall be applied first
against the latest scheduled cash payments; then current cash payments; then any
equity or equity derivatives that are included under Section 280G of the Code at
full value rather than accelerated value (with the highest value reduced first);
then any non-cash benefits shall be reduced (applied first against the latest
scheduled benefits); and then any equity or equity derivatives included under
Section 280G of the Code at an accelerated value (and not at full value) shall
be reduced with the highest value reduced first (as such values are determined
under Treasury Regulation Section 1.280G-1, Q&A 24).
 
Definitions
 
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
 
 
·
“Affiliate” means, with respect to any person or entity, any other person or
entity that is controlling, controlled by, or under common control with, such
first person or entity. As used in this definition, “control” (including, with
its correlative meanings, “controlled by” and “under common control with”) shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).

 
 
·
“Cause” shall mean (i) the willful and continued failure by you to perform your
duties as reasonably directed by the Board or your supervisor (provided that
such duties are consistent with your position), which failure continues for ten
days after written notice of

 
 

--------------------------------------------------------------------------------

 

 
such failure is provided to you, (ii) willful misconduct by you in the
performance of your duties, which willful misconduct results in material harm to
the Company, (iii) your conviction of, or plea of guilty or no contest to, a
felony or (iv) your intentional and material breach of any non-competition,
non-solicitation or non-disclosure obligations in favor of the Company or its
Affiliates.
 
 
·
“Change in Control” means the first of the following events to occur after the
date of this Agreement:

 
 
o
the acquisition in one or more transactions by any “Person” (as such term is
used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange
Act of 1934, as amended (the “1934 Act”)) but excluding, for this purpose, MWI
or its Subsidiaries, any employee benefit plan of MWI or its Subsidiaries or any
entity owned by the stockholders of MWI in substantially the same proportions as
their ownership of MWI, of “beneficial ownership” (within the meaning of Rule
13d-3 under the 1934 Act) of more than fifty percent (50%) of the combined
voting power of MWI’s then outstanding voting securities;

 
 
o
the individuals who, as of the date of this Agreement, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that if the election, or nomination for election by
MWI’s stockholders, of any new director was approved by a vote of at least a
majority of the Incumbent Board, such new director shall be considered as a
member of the Incumbent Board, and provided further that any reductions in the
size of the Board that are instituted voluntarily by the Incumbent Board shall
not constitute a Change in Control, and after any such reduction the
“Incumbent  Board” shall mean the Board as so reduced;

 
 
o
a merger or consolidation involving MWI if the stockholders of MWI, immediately
before such merger or consolidation, do not own, directly or indirectly,
immediately following such merger or consolidation, at least fifty percent (50%)
of the combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation; or

 
 
o
the sale of all or substantially all of MWI’s assets (determined on a
consolidated basis), other than to any employee benefit plan of MWI or its
Subsidiaries or any entity owned by the stockholders of MWI in substantially the
same proportions as their ownership of MWI.

 
 
·
“Code” means the Internal Revenue Code of 1986, as amended.

 
 
·
“Good Reason” means, without your prior written consent (w) the failure of the
Company to cause any successor to its business to assume this Agreement in
writing at least 10 days prior to such succession, (x) a reduction in your base
salary or base or stretch bonus opportunity; (y) a requirement that you relocate
your primary office location such that your daily commute is increased by more
than 35 miles from that in effect as of the date of the

 
 

--------------------------------------------------------------------------------

 

 
Change in Control (provided that a relocation to anywhere in the State of Idaho
shall not constitute Good Reason) or (z) a material reduction in your duties or
responsibilities as they relate to your position with the Company immediately
prior to the Change in Control (provided that a reduction shall not be deemed to
occur due to a change in the person/board to whom you report or as the result of
the substitution of your duties performed as a result of the Company’s status as
a publicly traded company with other duties that are consistent with your status
as an executive of a non-publicly traded company). Prior to termination for Good
Reason under clauses (x), (y) or (z), you must provide the Company with written
notice of the event alleged to constitute Good Reason within 90 days after the
first occurrence thereof and the Company shall have failed to cure such event
within 30 days after receipt of such notice. You must terminate your employment
within 30 days after such failure to cure (or in the case of clause (w), within
30 days after such failure) in order for such termination to be treated as being
for Good Reason.
 
 
·
“Subsidiary” means any entity in which MWI owns, directly or indirectly, more
than 50% of the voting power of such entity’s outstanding voting securities.

 
Miscellaneous; WAIVER OF JURY TRIAL
 
This Agreement is intended to comply with Code Section 409A (to the extent
applicable) and the parties hereto agree to interpret, apply and administer this
Agreement in the least restrictive manner necessary to comply therewith and
without resulting in any increase in the amounts owed hereunder by the Company.
Notwithstanding anything herein to the contrary, neither the Company nor any
Affiliate thereof shall have any liability to you or to any other person if the
payments and benefits provided in this Agreement are not exempt from or
compliant with Code Section 409A. The phrase “termination of employment” and
similar phrases as used throughout the Agreement shall mean your “separation
from service” within the meaning of Code Section 409A, and any amounts payable
to you hereunder upon your termination of employment that are treated as
“non-qualified deferred compensation” under Code Section 409A shall not be paid
to you until you have incurred a separation from service within the meaning of
Code Section 409A. Notwithstanding any other provision of this Agreement, if (a)
you become entitled to receive payments or benefits under this Agreement or
otherwise as a result of your separation from service (within the meaning of
Code Section 409A), (b) you are a “specified employee” within the meaning of
Code Section 409A and (c) such payments or benefits would be subject to tax
under Code Section 409A if the payments or benefits are paid within six (6)
months after your separation from service, then any such payments or benefits
that are otherwise scheduled to be paid during such six (6) month period shall
be delayed for a period of six (6) months after your separation from service, as
required by Code Section 409A. The accumulated delayed amount shall be paid,
without interest, in a lump sum payment within ten (10) days after the end of
such six (6) month period (the “Delayed Payment Date”). In the event of your
death prior to the Delayed Payment Date, the payments and benefits delayed on
account of Code Section 409A shall be paid to your estate within thirty (30)
days after the date of your death (provided that no payment shall be paid to
your estate earlier than it was originally scheduled to be paid to you as the
result of your death). Each payment hereunder shall be treated as a separate
payment for purposes of Code Section 409A.

 
 

--------------------------------------------------------------------------------

 

 
This Agreement supersedes any and all previous or contemporaneous agreements or
other communications, in whatever medium, between the parties with respect to
the subject matter hereof (provided that except as otherwise provided in the
first paragraph of this Agreement, the Restrictive Covenant Agreement shall
continue to apply in accordance with its terms). Furthermore, for purposes of
any restrictive covenants that continue to apply to you, including, without
limitation, any non-compete, non-solicitation or nondisparagement covenants,
references to the “Company” shall be deemed to refer to the Company and its
affiliates.

 
This Agreement may be executed and delivered in separate counterparts (including
by means of facsimile), each of which is deemed to be an original and all of
which taken together constitute one and the same Agreement. All amounts payable
hereunder will be subject to applicable tax and other withholdings and
deductions as appropriate.
 
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver of such party’s
rights or deprive such party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. This Agreement may
be amended or modified only upon written agreement of the parties hereto.
 
If any provision of this Agreement is held to be invalid or unenforceable, it is
to that extent to be deemed omitted; and the remainder of the Agreement shall be
valid and enforceable to the maximum extent possible; provided, however, that
should a court of competent jurisdiction conclude that any restriction is
unenforceable because it is overbroad, then such restriction shall be enforced
to the maximum extent permitted by law and the court making such determination
shall have the power to modify such provision in order to conform it with
applicable law.
 
This Agreement shall not be assignable by a party without the consent of the
other party. Following a Change in Control, this Agreement shall be fully
binding on any successor to the Company should the Company cease to exist as a
result of such Change in Control, and the Company shall take all necessary
actions to ensure that any successor agrees to be bound by this Agreement.
 
This Agreement shall be governed by and construed in accordance with the laws of
the State of Idaho, without regard to its choice of laws provisions. You and the
Company agree that any action at law, suit in equity, or judicial proceeding
relating to the validity, construction, interpretation, and enforcement of this
Agreement, or any provision hereof, shall be instituted and determined
exclusively in the United States District Court for the District of Idaho (if
federal jurisdiction exists, or in the state courts located in Boise, Idaho if
federal jurisdiction does not exist), and you and the Company each hereby
consent to the personal jurisdiction of such courts for such purpose. YOU AND
THE COMPANY EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT OR ASSERTED BY EITHER
THE COMPANY OR YOU AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF
THIS AGREEMENT. In the event that you prevail in any litigation relating to this
Agreement, the Company shall reimburse you for all of your reasonable attorneys’
fees incurred in connection with such litigation, with such reimbursement to
occur within 30 days after your submission of evidence of the incurrence of such
expenses (and in all events by the last day of the year following the year in
which such expenses were incurred).
[signature page follows]

 
 

--------------------------------------------------------------------------------

 

 
IN WITNESSETH, WHEREOF, each of the parties hereto have executed and delivered
this Agreement, as of the date first written above.
 

MWI VETERINARY SUPPLY CO.
    /s/ James F. Cleary, Jr.  
By:  James F. Cleary, Jr.
Title:  President and Chief Executive Officer
      /s/ John Francis  
John Francis
       

 
 

--------------------------------------------------------------------------------

 

 
EXHIBIT A
 
GENERAL RELEASE OF CLAIMS
 
IN CONSIDERATION of the payments to be made to the undersigned individual (the
“Employee”) pursuant to the letter agreement between MWI Veterinary Supply Co.
(the “Company”) and Employee, dated January 12, 2015 (the “Letter Agreement”)
and for other good and valuable consideration, the receipt of which is hereby
acknowledged and to which Employee acknowledges he/she would not be entitled in
the event that Employee did not execute this General Release of Claims (the
“Release”), Employee agrees as follows:
 
1.          General Release. Employee (on behalf of Employee, his/her heirs,
executors and personal representatives) hereby releases the Company and all
other “Released Parties” (as defined below) from any and all manner of actions
and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments, charges, claims, attorney’s fees, costs, expenses, and
demands whatsoever (“Claims”), whether known or unknown, accrued or unaccrued,
which Employee may have or could claim to have against any of the Released
Parties arising at any time up through and including the date that Employee
signs this Release. These released Claims include, but are not limited to, all
Claims arising from or during Employee’s employment with the Company, or arising
from or relating to the terms and conditions of such employment (including all
wages, benefits, and other compensation), and/or relating to Employee’s
separation from such employment. Among the specific Claims released by this
Agreement are (without limitation): (i) all Claims of employment discrimination
or retaliation based upon any protected characteristic (such as age, race,
color, sex, national origin, religion, and disability), and all Claims arising
under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, 42 U.S.C. § 1981, the Age Discrimination in Employment Act of 1967,
the Older Workers Benefit Protection Act, the Family and Medical Leave Act of
1993, the Worker Adjustment and Retraining Notification Act of 1988, the Idaho
Human Rights Act (Title 67, Chapter 59 of the Idaho Code), Title 44, Chapter 17
of the Idaho Code, and/or any similar federal, state or local laws; (ii) all
Claims arising under the Employee Retirement Income Security Act of 1974, as
amended; (iii) all Claims arising under the common law of any jurisdiction,
including, but not limited to, all Claims for breach of contract, defamation,
interference with contractual/prospective economic advantage, invasion of
privacy, promissory estoppel, negligence, breach of the covenant of good faith
and fair dealing, fraud, emotional distress, and wrongful discharge/termination;
and (iv) all Claims in any jurisdiction growing out of any legal restrictions,
expressed or implied, on the Company’s right to terminate or control the
employment of its employees. Notwithstanding the foregoing, this Release does
not include any Claims (i) that Employee may have for unemployment or workers’
compensation benefits, (ii) that may not be released or waived as a matter of
law or (iii) arising under or relating to the Letter Agreement.
 
2.          Promise Not to Sue. Employee acknowledges and agrees that he/she
will not file (or join, or accept any relief in) a lawsuit against any of the
Released Parties pleading or asserting any Claims released in the above Release.
If Employee breaches this promise, and the action is found to be barred in whole
or in part by this Release, Employee agrees to pay the reasonable attorneys’
fees and costs, or the proportions thereof, incurred by the applicable Released
Party in defending against those Claims that are found to be barred by this
Release.

 
 

--------------------------------------------------------------------------------

 

 
Notwithstanding the foregoing, nothing in this Section precludes Employee from
challenging the validity of the release above under the requirements of the Age
Discrimination in Employment Act (“ADEA”), and Employee shall not be responsible
for reimbursing the attorneys’ fees and costs of the Released Parties in
connection with such a challenge to the knowing and voluntary nature of the
Release. However, Employee acknowledges that this Release applies to all Claims
the Employee has under the ADEA, and that, unless the Release is held to be
invalid, all of Employee’s Claims under the ADEA shall be extinguished. In
addition, nothing in this Release shall preclude or prevent Employee from filing
a charge with, participating in an investigation by or proceeding before, or
providing truthful information to the United States Equal Employment Opportunity
Commission or a similar state or local agency, but Employee acknowledges and
agrees that Employee shall not accept any relief obtained on his/her behalf in
any proceeding by any government agency, private party, class, or otherwise with
respect to any Claims covered by this Release.
 
3.           Definition of Released Parties. As used in this Release, the term,
“Released Parties” means (i) the Company; (ii) any and all parent companies,
subsidiaries (direct and indirect), affiliates, successor and assigns of the
Company; (iii) all of the foregoing entities’ directors, officers, employees,
agents, attorneys, advisors, insurers, representatives, and benefit plans
(including all such plans’ insurers, fiduciaries, administrators, and the like);
and (iv) all persons/entities claimed to be jointly and/or severally liable with
any of the foregoing persons or entities described in clauses (i) through (iii)
or through/by which the foregoing persons or entities described in clauses (i)
through (iii) have acted.
 
4.           No Admission. It is understood that nothing in this Release is to
be construed as an admission on behalf of any of the Released Parties of any
wrongdoing with respect to Employee, any such wrongdoing being expressly denied.
Each Released Party is an express third party beneficiary of this Release.
 
5.           Acknowledgements. Employee hereby acknowledges and agrees that:
 
A.           This is an important legal document and he/she is hereby advised to
consult with an attorney before signing it;
 
B.           Employee has been given a period of at least twenty-one (21)1 days
to consider whether to sign this Release;
 
C.           Employee may revoke this Release at any time within seven (7) days
of the date on which he/she signs it by providing written notice to the Company,
and this Release shall not be effective until after the revocation period has
expired without revocation;
 
D.           Changes made to this Release, whether material or nonmaterial, do
not restart the aforementioned twenty-one (21) day period;2 and
 
 
_________________________________
1 21 day review period to be increased to 45 days if necessary under ADEA.
 
2 21 day review period to be increased to 45 days if necessary under ADEA.

 
 

--------------------------------------------------------------------------------

 

 
E.           Employee has carefully read this Release, understands all the terms
of this Release, and enters into this Release freely, knowingly, and
voluntarily.
 
 INTENDING TO BE LEGALLY BOUND, EMPLOYEE SIGNS BELOW:
 

 

       
Signature
           
Name
           
Date