<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMISSION FILE NO. 0-20572
PATTERSON DENTAL COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which
transaction applies:
-----------------------------------------------------
2) Aggregate number of securities to which
transaction applies:
-----------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------
5) Total fee paid:
----------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
-----------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------
<PAGE>
PATTERSON DENTAL COMPANY
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
August 10, 1998
Dear Shareholder of Patterson Dental Company:
You are cordially invited to attend the Annual Meeting of Shareholders
of Patterson Dental Company (the "Company"), to be held at the Decathlon Club,
1700 East 79th Street, Bloomington, Minnesota, on Monday, September 14, 1998, at
4:30 p.m.
At the Annual Meeting you will be asked to vote for the election of two
directors and to ratify the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent public accountants for the fiscal year ending
April 24, 1999. I encourage you to vote FOR the nominees for director and FOR
ratification of the appointment of Ernst & Young LLP.
Whether or not you are able to attend the Annual Meeting in person, I
urge you to sign and date the enclosed proxy and return it promptly in the
enclosed envelope.
Very truly yours,
PATTERSON DENTAL COMPANY
/s/ Peter L. Frechette
-------------------------------------
Peter L. Frechette
President and Chief Executive Officer
<PAGE>
PATTERSON DENTAL COMPANY
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
-------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 14, 1998
--------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Patterson Dental Company (the "Company") will be held at the Decathlon Club,
1700 East 79th Street, Bloomington, Minnesota, on Monday, September 14, 1998, at
4:30 p.m. local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect two directors of the Company to have terms expiring
in 2001 and until their successors shall be elected and duly
qualified;
2. To ratify the selection of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending
April 24, 1999; and
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only shareholders of record at the close of business on July 20, 1998,
are entitled to notice of and to vote at the meeting. Whether or not you expect
to attend the meeting in person, please mark, date and sign the enclosed proxy
exactly as your name appears thereon and promptly return it in the envelope
provided, which requires no postage if mailed in the United States. Proxies may
be revoked at any time before they are exercised and, if you attend the meeting
in person, you may withdraw your proxy and vote personally on any matter brought
properly before the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Matthew L. Levitt
-------------------------------
Matthew L. Levitt
Secretary
Saint Paul, Minnesota
August 10, 1998
<PAGE>
PATTERSON DENTAL COMPANY
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
-------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 14, 1998
--------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Patterson Dental Company (the "Company")
for use at the Annual Meeting of Shareholders to be held at the Decathlon Club,
1700 East 79th Street, Bloomington, Minnesota, on Monday, September 14, 1997, at
4:30 p.m. local time, or at any adjournment or postponement thereof. All shares
of Common Stock represented by properly executed and returned proxies, unless
such proxies have previously been revoked, will be voted at the meeting and,
where the manner of voting is specified on the proxy, will be voted in
accordance with such specifications. Shares represented by properly executed and
returned proxies on which no specification has been made will be voted for the
election of the nominees for director listed herein and for ratification of the
selection of Ernst & Young LLP as the independent public accountants of the
Company. If any other matters are properly presented at the meeting for action,
including a question of adjourning or postponing the meeting from time to time,
the persons named in the proxies and acting thereunder will have discretion to
vote on such matters in accordance with their best judgment.
The Notice of Annual Meeting, this Proxy Statement and the related
proxy card are first being mailed to shareholders of the Company on or about
August 10, 1998.
RECORD DATE AND OUTSTANDING COMMON STOCK
The Board of Directors has fixed the close of business on July 20,
1998, as the record date for determining the holders of the Company's
outstanding voting shares entitled to notice of, and to vote at, the meeting. On
that date, the voting shares of the Company consisted of 33,303,143 shares of
Common Stock, each entitled to one vote.
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any
time before it is voted by giving written notice to the Secretary of the
Company, by executing a later-dated proxy and delivering it to the Secretary of
the Company, or by attending the meeting and giving oral notice to the Secretary
of the Company. Any written notice delivered to the Secretary of the Company
should be sent to Matthew L. Levitt, Secretary, Patterson Dental Company, 1031
Mendota Heights Road, St. Paul, Minnesota 55120.
<PAGE>
VOTING AND SOLICITATION
The Board of Directors recommends that an affirmative vote be cast in
favor of each of the proposals listed on the proxy card.
The Board of Directors knows of no other matters that may be brought
before the meeting which require submission to a vote of the shareholders. If
any other matters are properly brought before the meeting, however, the persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
Expenses incurred in connection with the solicitation of proxies will
be paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of Common Stock of the Company and will reimburse such
persons for their expenses so incurred.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of at least a
majority of the shares of Common Stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the meeting.
All votes will be tabulated by the inspector of election for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
If a properly executed proxy is returned and the shareholder has
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote, but will not be considered to have been
voted in favor of such matter.
If a properly executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares will
be considered present at the meeting for purposes of determining a quorum, but
will not be considered to be represented at the meeting for purposes of
calculating the vote with respect to such matter.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership
of the Company's Common Stock as of June 30, 1998 (unless noted otherwise), by
(i) each person known to the Company to own beneficially more than five percent
of its Common Stock, (ii) each director and nominee for director, (iii) each
executive officer named in the Summary Compensation Table, and (iv) the
directors and executive officers as a group. All share amounts reflect the
issuance of additional shares issued to shareholders of record on January 30,
1998, pursuant to a 3-for-2 stock split in the form of a 50% stock dividend
declared by the Board of Directors on January 12, 1998. Unless otherwise
indicated, each person in the table has sole voting and investment power as to
the shares shown.
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) STOCK
- ------------------------------------ ------------ -----
U.S. Bancorp............................ 4,016,754(2) 12.1%
601 Second Avenue South
Minneapolis, MN 55402
Ronald E. Ezerski....................... 2,720,570(3) 8.2
Peter L. Frechette...................... 2,672,659(3) 8.0
James W. Wiltz.......................... 459,642(3) 1.4
David K. Beecken........................ 135,690(4) *
Gary D. Johnson......................... 83,619(3) *
Andre B. Lacy........................... 52,425(4) *
Burt E. Swanson......................... 38,250(4) *
Brian S. Watson......................... 15,229(3) *
All directors and executive officers
as a group (11 persons).............. 6,262,946 18.8%
- ---------
*Less than 1%
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission (the "Commission")
and accordingly, may include securities owned by or for, among others, the
spouse, children or certain other relatives of such person as well as other
securities as to which the person has or shares voting or investment power
or has the right to acquire within 60 days. The same shares may be
beneficially owned by more than one person. Includes shares of Common Stock
held by the Patterson Dental Company Employee Stock Ownership Plan and
Trust (the "ESOP"). Shares reported as owned by the ESOP trustee are also
reported as beneficially owned by the executive officers to the extent that
shares have been allocated to the ESOP accounts of the named person.
Allocated shares are voted by the ESOP trustee in accordance with the
direction of ESOP participants. Generally, unallocated shares and allocated
shares as to which no direction is made by the participants are voted by
the ESOP trustee in the same percentage as the allocated shares as to which
directions are received by the ESOP trustee.
(2) As set forth in Schedule 13G filed with the Commission on February 13,
1998, includes (i) 52,725 shares over which sole voting power is claimed,
(ii) 3,964,029 shares over which shared voting power is claimed, (iii) 787
shares over which sole dispositive power is claimed, and (iv) 3,964,779
shares over which shared dispositive
3
<PAGE>
power is claimed. An affiliate of U.S. Bancorp acts as the ESOP trustee.
The number of shares reported as beneficially owned includes 3,960,722
shares held in the unallocated account of the ESOP, but excludes 1,760,983
shares held in the allocated account of the ESOP.
(3) Includes the following amounts of Common Stock allocated to the ESOP
account of the respective executive officers: Ronald E. Ezerski (1,295
shares); Peter L. Frechette (1,347 shares); James W. Wiltz (1,092 shares);
Gary D. Johnson (5,039 shares); and Brian S. Watson (3,846 shares).
(4) Includes shares purchasable by the named person under the Company's
Director Stock Option Plan: David K. Beecken (36,000 shares); Andre B. Lacy
(45,000 shares); and Burt E. Swanson (36,000 shares).
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation earned by the Company's
Chief Executive Officer and the four other most highly compensated executive
officers for the fiscal years ended April 1996, 1997 and 1998. No stock options
were granted to executive officers during the last fiscal year, nor were there
any options outstanding on April 25, 1998. The Company has no formalized
employment agreements with its executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1)
- --------------------------- ------ ---------- --------- -------------------
<S> <C> <C> <C> <C>
Peter L. Frechette.............................. 1998 299,159 198,900 1,500
President and Chief Executive Officer 1997 292,505 187,278 1,713
of the Company 1996 286,800 176,717 1,644
Ronald E. Ezerski............................... 1998 184,099 102,000 1,500
Executive Vice President, Treasurer and 1997 177,904 74,008 1,705
Chief Financial Officer of the Company 1996 183,732 75,379 1,636
James W. Wiltz.................................. 1998 193,785 93,750 1,500
Vice President of the Company and 1997 156,404 69,452 1,674
President of Patterson Dental Supply, Inc. 1996 152,004 62,735 1,606
Brian S. Watson................................. 1998 177,309 60,000 9,600
Vice President of Marketing of Patterson 1997 127,000 202,072 9,000
Dental Supply, Inc. 1996 96,000 201,791 9,000
Gary D. Johnson................................. 1998 148,967 60,000 8,938
Vice President of Sales of Patterson 1997 136,500 35,259 9,000
Dental Supply, Inc. 1996 116,835 33,422 9,000
- -------------------------
</TABLE>
(1) Consists of contributions by the Company to the executive officer's account
under the ESOP for the end of each ESOP plan year in April 1996, 1997 and
1998.
4
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors makes annual
recommendations to the Board respecting the appropriate levels of compensation
for the Company's senior executive officers for the following calendar year. The
Committee considers how the achievement of the overall goals and objectives of
the Company can be aided through adoption of an appropriate compensation
philosophy and effective compensation program elements. In addition to approving
the compensation arrangements for senior management, the Committee also reviews
and approves the adoption of any compensation plans in which officers and
directors are eligible to participate. The Company's three outside directors,
Messrs. Swanson, Beecken and Lacy, comprise the Compensation Committee. The
Committee reviews and makes recommendations to the Board with respect to the
base salary component on a calendar year basis and on a next fiscal year basis
with respect to the proposed bonus potential for the senior executives. The
bonus potential for each of the senior officers is directly affected by their
participation in the Management Incentive Compensation Plan ("MICP") which is
reviewed by the Committee and adopted by the Board on a fiscal year basis.
The Committee had discussions with the President and Executive Vice
President, reviewed the present salary ranges, current salaries and bonus
potential for each position, considered management's overall salary objectives
and discussed philosophy respecting the components of the compensation package
such as the amount of compensation to be placed at risk, short term versus
longer term incentives, the use of stock option programs, the alignment of
executive compensation with the enhancement of shareholder value and other
issues. The Committee also reviewed other information available to its members,
including an executive compensation pricing report prepared by the Company's
compensation manager. That report benchmarked the Company's base and total
compensation for officer positions against market rates from published surveys
by recognized firms and compensation consultants.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's executive compensation philosophy is to link such
compensation to the attainment of business objectives and earnings performance
which in turn will enable the Company to attract, retain and reward executive
officers who contribute to the long-term success of the Company. The MICP for
the fiscal year ending April 25, 1998 specifically ties incentive compensation
to the Company's earnings, and each participating officer's incentive
compensation, including incentive compensation for the senior officers,
increases in direct proportion to the Company's increase in profit. The
objective of the MICP is to encourage greater initiative, resourcefulness,
teamwork and efficiency on the part of all key employees whose performance and
responsibilities directly affect Company profits. The overall goal of the plan
is to reward these officers for achieving superior performance.
The Committee recognizes that the MICP, together with the bonus
potential for each officer, places a substantial amount of the total
compensation of an executive at risk. By reason of the restructuring of the
duties, reporting functions and responsibilities of the officers of the Company
and its subsidiaries accomplished in fiscal year 1997, no changes not previously
reported in the 1997 Proxy Statement were made in the bonus potential
percentages for fiscal year 1998. If the Company's goals are achieved, an
executive other than the Chief Executive Officer could obtain total compensation
at or near the competitive total compensation shown in the surveys for
comparable positions in companies having similar sales for fiscal year 1998.
Keeping base salaries relatively low with a higher portion of the total
compensation package dependent upon performance is compatible with the Company's
traditional executive compensation approach.
5
<PAGE>
EXECUTIVE COMPENSATION PROGRAM COMPONENTS
The Company's executive compensation program for the senior officers,
including the President and Chief Executive Officer, consists of a base salary
and an annual cash incentive in the form of a potential bonus measured as a
percentage of base salary. The particular elements of the compensation program
are discussed more fully below.
BASE SALARY. Annual base salary levels of executives are determined by
the potential impact of the individual on the Company and its performance, the
skills and experience required by the position, the individual performance of
the executive, in addition to the Company's overall performance, internal equity
and external pay practices.
INCENTIVE COMPENSATION. Annual cash bonuses are paid under the
Company's MICP and are designed to provide a direct financial incentive to
executives to achieve the Company's annual profit goals. The annual bonus
potential percentages of base salary range from 35% to 65% of base salary,
subject to increase in direct relation to the Company's increase in profit. Each
senior executive officer has the opportunity to increase his targeted bonus
potential as a percentage of base salary in accordance with the formula
contained in the MICP which allows a maximum of 150% of the targeted bonus
potential to be paid if 125% of the planned profit is achieved. Conversely, the
MICP allows 50% of the targeted bonus potential to be paid if 75% of the planned
profit is achieved. Accordingly, Peter L. Frechette, the Company's Chief
Executive Officer, who had a 65% bonus potential for fiscal year 1998, received
a bonus of 65% of base pay because the Company achieved 100% of its plan.
Because the Company achieved 100% of its profit goals for the fiscal year ending
April 25, 1998, the senior officers earned cash bonuses of 100% of their
targeted potential bonus percentage of base salary. Each year the MICP is
revised to set new performance goals for the Company and the key employee
participants in the plan.
The Company's base salary ranges remained unchanged for calendar 1997
and closely approximate the market averages described in the Company's
compensation pricing report benchmarked against outside survey reports.
Nevertheless, except for the Chief Executive Officer, the Committee believes
that total compensation is competitive in relation to market data, primarily
because a larger part of the Company's compensation package is at risk under the
MICP. For fiscal 1998, the hurdle rates under the MICP were a 27% increase in
net earnings and a 25% increase in operating income, both of which were
substantial targets to meet. Because the Company continues to reward the
performance of its executives through the profitability-oriented MICP, the
Committee believes that if the Company achieves its goals it can justify paying
more than competitive levels of total compensation.
Approximately 766 employees have subscribed to purchase Common Stock
under the Employee Stock Purchase Plan (adopted in 1992) and that plan together
with the Capital Accumulation Plan (approved by the shareholders in 1996) have,
in the Committee's view, provided an effective tool in motivating and
encouraging officers and other key employees to lessen the dependence of the
Company on annual compensation and bonuses in order to attract, retain and
motivate key personnel to grow the Company's sales and earnings. Since the
senior officers are also shareholders whose interests are aligned with the
long-term interests of shareholders, each of the senior officers currently has
long-term incentives which are directly linked to the interests of the Company's
other shareholders. The Committee continues to believe that longer term
incentive compensation which the Employee Stock Purchase Plan and the Capital
Accumulation Plan provide will be beneficial to key employees as well as the
Company and its shareholders.
CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A YEAR
The Company's income tax deduction for executive compensation is
limited by Code Section 162(m) to $1 million per executive per year, unless
compensation above that amount is "performance-based." This limit applies to the
Company's Chief Executive Officer and the other executive officers who are most
highly compensated. They are identified in the Summary Compensation Table. The
Company has not had any deductions limited by Section 162(m) to date.
6
<PAGE>
The Committee will make every reasonable effort to ensure that all
compensation paid to its executives is fully deductible, provided it determines
that application of this limit is consistent with the Company's needs and its
executive compensation philosophy.
Respectfully submitted,
/s/ David K. Beecken
/s/ Andre B. Lacy
/s/ Burt E. Swanson, Chairman
The Compensation Committee
COMPANY STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on
$100 invested on April 24, 1993, through April 25, 1998, with the cumulative
total return for the same time period on the same amount invested in the Nasdaq
Stock Market (U.S. Companies) Index and an index of peer companies selected by
the Company. The Peer Group Index consists of 23 companies (including the
Company) based on the same Standard Industrial Code.*
[PERFORMANCE GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
COMPANY/INDEX/MARKET FISCAL YEAR ENDING
-------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Patterson Dental 100 182.35 182.26 237.14 262.61 370.22
Industry Group Index 100 114.6 104.25 133.15 106.65 166.89
NASDAQ Market Index 100 112.24 122.56 171.08 182.36 270.85
- --------------------
* Allegiance Corporation, American HomePatient, Inc., Biora AB ADR, Cantel
Industries, Inc., Cyberonics, Inc., Electroscope, Inc., Elron Electronic
Industries Ltd., ESC Medical Systems Limited, Graham-Field Health Products,
Inc., Henry Schein, Inc., Horizon Medical Products, Inc., Innovative Medical
Services, Laminaire Corp., Netmed, Inc., Novoste Corporation, Owens & Minor,
Inc., Patterson Dental Company, Prime Capital Corp., Pro-Dex, Inc., PSS World
Medical Inc., Strategic Distribution, Inc., U.S. China Industrial Exchange,
Inc., and Vallen Corporation.
7
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, as nearly equal
in number as possible, with the term of office of a class expiring each year.
Directors are elected for staggered terms of three years. Peter L. Frechette and
David K. Beecken have been nominated to serve three-year terms expiring in 2001.
There are three other directors of the Company whose terms of office do not
expire in fiscal 1998.
The persons named in the accompanying proxy will vote for the election
of the above named nominees, unless authority to vote is withheld. The Board is
informed that the nominees are willing to serve as directors, however, if any
nominee is unable to serve or for good cause will not serve, the proxy may be
voted for such other person as the proxies shall, in their discretion,
determine.
Set forth below is certain information concerning the nominees for
election as directors of the Company and the three directors of the Company
whose terms of office will continue after the meeting.
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS
EXPIRING AT THE ANNUAL MEETING IN 2001
PETER L. FRECHETTE, age 60, has been President of the Company since
September 1982 and has been a director of the Company since March 1983. Prior to
joining Patterson Dental Company, Mr. Frechette was employed by American
Hospital Supply Corporation for 18 years, the last seven of which he served as
President of its Scientific Products Division. Mr. Frechette holds an M.B.A.
degree from Northwestern University and a B.S. degree in economics from the
University of Wisconsin. Mr. Frechette is also a director of FinishMaster, Inc.
where he serves on the compensation committee of the board.
DAVID K. BEECKEN, age 51, has been Managing Director of Beecken Petty &
Company, which is the General Partner of Healthcare Equity Partners, an
investment limited partnership, since September 1996. Mr. Beecken has also been
Senior Managing Director of ABN AMRO Incorporated (formerly The Chicago
Corporation), a broker-dealer, since February 1993. ABN AMRO Incorporated has
provided certain financial advisory services to the Company. From 1989 to
February 1993, Mr. Beecken was a Senior Vice President Managing Director of
First National Bank of Chicago. Mr. Beecken has been a director of Patterson
since 1985.
DIRECTOR WHOSE TERM EXPIRES
AT THE ANNUAL MEETING IN 2000
BURT E. SWANSON, age 70, is of counsel to the law firm of Briggs and
Morgan, Professional Association, legal counsel to the Company since its
acquisition from The Beatrice Companies, Inc. Mr. Swanson was a practicing
member of Briggs and Morgan from 1955 to 1995 and has been a director of
Patterson since 1989.
DIRECTORS WHOSE TERMS EXPIRE
AT THE ANNUAL MEETING IN 1999
RONALD E. EZERSKI, age 52, has been Vice President, Treasurer and Chief
Financial Officer of the Company since December 1982 and was President of its
subsidiary, Dental Capital Corporation, from December 1982 until October 1988
when it was merged into the Company. In September 1996, Mr. Ezerski was
appointed Executive Vice President of the Company. Mr. Ezerski has been a
director of the Company since March 1983.
8
<PAGE>
ANDRE B. LACY, age 58, has been President and Chief Executive Officer
of LDI Management, Inc. since 1986 and its Chairman since 1992. LDI Management,
Inc. is managing general partner of LDI, Ltd., an industrial and investment
limited partnership. Mr. Lacy is also a member of the boards of directors of the
following public companies: FinishMaster, Inc., IPALCO Enterprises, Inc.,
Tredegar Industries and Albemarle Corporation. Mr. Lacy has been a director of
Patterson since 1989.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings and took action by written
consent on three occasions during fiscal 1998. Each director attended all of the
Board meetings held.
The Board of Directors has established Executive, Audit, Compensation
and Stock Option Committees. There is no nominating committee of the Board. The
members of the Executive Committee are Messrs. Frechette and Ezerski. The
Executive Committee is granted the power to deal with important matters which
arise between Board meetings and upon which action must be taken or attention
given prior to the next scheduled Board meeting. The Executive Committee did not
meet in person in fiscal 1998, but took written action on three occasions.
The members of the Audit Committee are Messrs. Beecken, Swanson and
Lacy. The Audit Committee is empowered by the Board of Directors to review the
financial books and records of the Company in consultation with the Company's
accounting and auditing staff and its independent auditors and to review with
the accounting staff and independent auditors the scope of the audit, the audit
plan and any questions raised with respect to accounting and auditing policy and
procedure. The Audit Committee held three meetings during fiscal 1998.
The members of the Compensation and Stock Option Committee are Messrs.
Beecken, Swanson and Lacy. The Compensation and Stock Option Committee is
authorized by the Board of Directors to establish general levels of compensation
for officers of the Company, to set the annual compensation of each of the
executive officers of the Company, to grant options to employees under the
Company's option plans, and to review and approve compensation and benefit plans
of the Company. The Compensation and Stock Option Committee held three meetings
during fiscal 1998.
DIRECTORS' COMPENSATION
Directors of the Company who are not employees of the Company receive a
retainer of $10,000 per year. Out-of-pocket expenses incurred on behalf of the
Company are reimbursed for all directors.
REQUIRED VOTE
Election as a director requires the affirmative vote of the holders of
a majority of the shares represented in person or by proxy and entitled to vote
at the meeting. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
public accountants for the Company for the year ending April 24, 1999. A
proposal to ratify that appointment will be presented to shareholders at the
meeting. If the shareholders do not ratify the selection of Ernst & Young LLP,
another firm of independent public accountants will be selected by the Board.
Representatives of Ernst & Young LLP will be present at the meeting, will have
an opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions from shareholders in attendance.
9
<PAGE>
CERTAIN TRANSACTIONS
As an inducement to relocate to Company headquarters, the Company
loaned $75,000 to Brian S. Watson, the Vice President of Marketing of Patterson
Dental Supply, Inc., in January 1997. Assuming that Mr. Watson's employment with
the Company continues through January 1, 2007, the loan will become payable at
such time but will bear no interest. If Mr. Watson's employment with the Company
terminates prior to January 1, 2007, the loan will become payable at such time
and will bear interest at a rate no less favorable to the Company than could
have been obtained from unaffiliated third parties. As of June 30, 1998, there
had been no payments on the loan.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission and provide the Company
with copies of such reports. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no Forms 5 were required for those persons, the Company believes that,
during the past fiscal year its officers, directors and greater than ten percent
shareholders complied with applicable filing requirements.
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action by the
shareholders at the next annual meeting must present such proposals at the
principal offices of the Company not later than April 12, 1999. Due to the
complexity of the respective rights of the shareholders and the Company in this
area, any shareholder desiring to propose such an action is advised to consult
with his or her legal counsel with respect to such rights. It is suggested that
any such proposals be submitted by certified mail, return receipt requested.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended April 25, 1998, accompanies this Notice of Annual Meeting, Proxy
Statement and related proxy card. No part of the Annual Report to Shareholders
is incorporated herein and no part thereof is to be considered proxy soliciting
material.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peter L. Frechette
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Peter L. Frechette
President and Chief Executive Officer
Saint Paul, Minnesota
August 10, 1998
10
<PAGE>
PATTERSON DENTAL COMPANY
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Patterson Dental Company, a Minnesota
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement, each dated August 10, 1998,
and hereby appoints Ronald E. Ezerski and Peter L. Frechette, or either of
them, proxies and attorneys-in-fact, with full power to each of substitution
and resubstitution, on behalf and in the name of the undersigned, to represent
the undersigned at the 1998 Annual Meeting of Shareholders of the Company to be
held at the Decathlon Club, 1700 East 79th Street, Bloomington, Minnesota, on
Monday, September 14, 1998, at 4:30 p.m. local time, and at any adjournment or
postponement thereof, and to vote, as designated below, all shares of Common
Stock of the Company which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below.
1. To elect two directors of the Company to have terms expiring in 2001 and
until their successors shall be elected and duly qualified.
[_] FOR the nominees listed below (except as marked to the
contrary below)
[_] WITHHOLD AUTHORITY to vote for all
nominees listed below
PETER L. FRECHETTE, DAVID K. BEECKEN
INSTRUCTION: To withhold authority to vote for any individual, write that
nominee's name in the space provided below.
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2. To ratify the selection of Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending April 24, 1999.
[_] FOR[_] AGAINST[_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2. ABSTENTIONS WILL BE COUNTED TOWARDS THE
EXISTENCE OF A QUORUM.
Please sign exactly as name appears on this proxy. When shares are held by
joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
Dated: _____________________________
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(Signature)
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
