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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021
or
☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to _____________

Commission File Number: 001-38794

CVET-20210331_G1.GIF
COVETRUS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
83-1448706
(State or other jurisdiction of
incorporation)
(I.R.S. Employer
Identification No.)
7 Custom House Street
Portland, ME 04101
Tel: (888) 280-2221

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

    Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share CVET Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer ☒ Accelerated Filer ☐
Non-accelerated Filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☒
The registrant had 136,589,404 shares of common stock outstanding as of April 30, 2021.



TABLE OF CONTENTS
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Covetrus, Inc. 2021 Q1 Form 10-Q
2



Glossary of Defined Terms and Abbreviations

AAFCO Association of American Feed Control Officials
Acquisition* Our acquisition of Vets First Choice in an all-stock transaction
Adjusted EBITDA*
Adjusted EBITDA is the segment measure of profit or loss reported to the CODM. Adjusted EBITDA excludes share-based compensation, strategic consulting, transaction costs, formation of Covetrus expenses, separation programs and executive severance, carve-out operating expenses, certain IT infrastructure expenses necessary to establish ourselves as a newly public company, goodwill impairment charges, capital structure-related fees, operating lease right-of-use asset impairments, the proportionate share of the adjustments of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%, managed exits from businesses we are exiting or closing, and other income and expense items, net. Non-GAAP Adjusted EBITDA on a total segment basis is reconciled in Note 2 - Segment Data as required by ASC 280
AIP* Annual Incentive Plan
Investment and Shareholders Agreement*
The Investment and Shareholders Agreement of Distrivet, S.A. executed on January 13, 2020
Animal Health Business* Former Parent's spun-off animal-health business
Animal Owners* Patients of our Customers
APAC Asia Pacific
APVMA Australian Pesticides and Veterinary Medicines Authority
ASC Accounting Standards Codification
ASU Accounting Standards Update
BEAT Base Erosion & Anti-Abuse Tax
CEO Chief Executive Officer
CARES Coronavirus Aid, Relief, and Economic Security Act
CCPA California Consumer Privacy Act
CFO Chief Financial Officer
CODM Chief Operating Decision Maker
COVID-19 Novel Coronavirus Disease 2019
Credit Facilities*
On February 7, 2019, we entered into a $1.5 billion syndicated credit agreement with a group of lenders for a five-year term
Customers* Veterinarians and animal-health practitioners
CVM Center for Veterinary Medicine
DEA U.S. Drug Enforcement Administration
DGCL Delaware General Corporation Law
Defendants* The Company, our Former Parent, our former Chief Executive Officer and President, and our former Chief Financial Officer, collectively
Distribution* All the shares of our common stock that were then owned by our Former Parent were distributed to its stockholders of record as of January 17, 2019. Concurrent with the Distribution, we paid a cash dividend of $1.2 billion to our Former Parent from loan proceeds from our newly established Term Loan Facility
Distrivet* On April 30, 2020, we combined our subsidiary, SAHS, with Distrivet, S.A. to form a leading animal-health provider on the Iberian Peninsula. We own 50.01% of the new company, called Distrivet, a Covetrus company
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization
EFTA European Free Trade Area
EFSA European Food Safety Authority
EMA European Medicines Agency
EPA Environmental Protection Agency
EPS Basic earnings (loss) per common share
ESG Environmental, social, and corporate governance
ESPP Employee Stock Purchase Plan
Exchange Act Securities Exchange Act of 1934, as amended
FCMA Fellow Chartered Management Accountant
Covetrus, Inc. 2021 Q1 Form 10-Q
3

FDA U.S. Food and Drug Administration
FDII Foreign-derived Intangible Income
Form 10-K
Audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020
Form 10-Q or Report Quarterly Report on Form 10-Q
Former Parent* Henry Schein, Inc.
FTC Federal Trade Commission
GAAP Generally Accepted Accounting Principles in the United States of America
GDPR EU General Data Protection Regulation
GFI Guidance for Industry
GILTI Global Intangible Low-Taxed Income
Global Technology Solutions* The aggregation of our software services with our prescription management platform and related pharmacy services
IRS Internal Revenue Service
ITGC Information Technology General Controls
LIBOR London Interbank Offered Rate
NYSE New York Stock Exchange
NZ EPA New Zealand Environmental Protection Authority
Revolving Credit Facility*
$300 million revolving line of credit for working capital and general corporate purposes
RSA Restricted Stock Award
RSU Restricted Stock Unit
SAHS* Spain Animal Health Solutions S.L.U.
SEC Securities and Exchange Commission
Separation* In anticipation of the spin-off, affiliates of Covetrus purchased from certain minority holders their ownership interests in the applicable operating companies of the Animal Health Business. On February 7, 2019, our Former Parent completed the spin-off of its Animal Health Business and transferred the applicable assets, liabilities, and ownership interests to us
SG&A
Selling, general and administrative expenses
Share Sale* On February 7, 2019 and prior to the Distribution, we sold $361 million in shares to accredited institutional investors. The proceeds from the Share Sale were paid to us and distributed to our Former Parent
SMB Small or Medium-Sized Business
Term Loan Facility* $1.2 billion term loan facility
Transactions Collectively the following events, effective February 7, 2019, Vets First Choice became a wholly-owned subsidiary of Covetrus, Inc. (f/k/a HS Spinco, Inc.), a company formed by our Former Parent in connection with the spin-off of the Animal Health Business and combination with Vets First Choice
TSA Transition Service Agreements
U.K. United Kingdom
USDA U.S. Department of Agriculture
Vets First Choice* Direct Vet Marketing, Inc. (d/b/a Vets First Choice)
VMD Veterinary Medicines Directorate
VSG* Veterinary Study Groups, Inc.
Covetrus, Company, we, us, our, or ourselves Covetrus, Inc. and its consolidated subsidiaries, collectively
XBRL eXtensible Business Reporting Language
*Defined term or abbreviation is specific to CVET
Covetrus, Inc. 2021 Q1 Form 10-Q
4
Table of Contents


PART I

Item 1. Condensed Consolidated Financial Statements

COVETRUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
March 31, 2021 December 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 211  $ 290 
Accounts receivable, net of allowance of $5 and $5
518  507 
Inventories, net 555  530 
Other receivables 87  67 
Prepaid expenses and other 51  37 
Total current assets 1,422  1,431 
Non-current assets:
Property and equipment, net of accumulated depreciation of $112 and $106
118  116 
Operating lease right-of-use assets, net 111  117 
Goodwill 1,187  1,187 
Other intangibles, net of accumulated amortization of $497 and $470
516  555 
Investments and other 86  90 
Total assets $ 3,440  $ 3,496 
LIABILITIES, MEZZANINE EQUITY, AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 416  $ 405 
Current maturities of long-term debt and other borrowings 17  1 
Accrued payroll and related liabilities 57  67 
Accrued taxes 29  37 
Other current liabilities 163  181 
Total current liabilities 682  691 
Non-current liabilities:
Long-term debt and other borrowings, net 1,054  1,068 
Deferred income taxes 23  28 
Other liabilities 125  136 
Total liabilities 1,884  1,923 
Commitments and contingencies (Note 5)
Mezzanine equity:
Redeemable non-controlling interests (Note 10) 36  36 
Shareholders' equity:
Common stock, $0.01 par value per share, 675,000,000 shares authorized; 136,342,036 shares issued and outstanding as of March 31, 2021; 136,017,964 shares issued and outstanding as of December 31, 2020
1  1 
Accumulated other comprehensive loss (Note 9) (75) (66)
Additional paid-in capital 2,637  2,629 
Accumulated deficit (1,043) (1,027)
Total shareholders’ equity 1,520  1,537 
Total liabilities, mezzanine equity, and shareholders’ equity $ 3,440  $ 3,496 
See notes to unaudited condensed consolidated financial statements.
Covetrus, Inc. 2021 Q1 Form 10-Q
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Table of Contents

COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts) (Unaudited)
Three Months Ended March 31,
2021 2020
Net sales (Note 3) $ 1,102  $ 1,065 
Cost of sales 892  863 
Gross profit 210  202 
Operating expenses:
Selling, general and administrative 213  222 
Operating income (loss) (3) (20)
Other income (expense):
Interest income —  — 
Interest expense (9) (14)
Other, net —  (1)
Income (loss) before taxes and equity in earnings of affiliates (12) (35)
Income tax benefit (expense) (Note 6) (4) 2 
Net income (loss) (16) (33)
Net (income) loss attributable to redeemable non-controlling interests —  — 
Net income (loss) attributable to Covetrus $ (16) $ (33)
Earnings (loss) per share attributable to Covetrus: (Note 4)
Basic $ (0.11) $ (0.30)
Diluted $ (0.11) $ (0.30)
Weighted-average common shares outstanding:
Basic 136 112
Diluted 136 112
See notes to unaudited condensed consolidated financial statements.
Covetrus, Inc. 2021 Q1 Form 10-Q
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Table of Contents

COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions) (Unaudited)
Three Months Ended March 31,
2021 2020
Net income (loss) $ (16) $ (33)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (11) (22)
Gain (loss) on derivative instruments 2  (8)
Total other comprehensive income (loss) (9) (30)
Comprehensive income (loss) (25) (63)
Comprehensive (income) loss attributable to redeemable non-controlling interests:
Net (income) loss —  — 
Foreign currency translation (gain) loss (1) (1)
Comprehensive (income) loss attributable to redeemable non-controlling interests (1) (1)
Comprehensive income (loss) attributable to Covetrus $ (26) $ (64)
See notes to unaudited condensed consolidated financial statements.
Covetrus, Inc. 2021 Q1 Form 10-Q
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Table of Contents

COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions, except share amounts) (Unaudited)
Three Months Ended March 31, 2021
Common Stock Accumulated Other Comprehensive Income (Loss) Additional
Paid-in
Capital 		Accumulated Deficit Total Shareholders' Equity
Shares Amount
Balance at December 31, 2020 136,017,964  $ 1  $ (66) $ 2,629  $ (1,027) $ 1,537 
Net income (loss) attributable to Covetrus —  —  —  —  (16) (16)
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes 324,072  —  —  (3) —  (3)
Share-based compensation —  —  —  11  —  11 
Other comprehensive income (loss) —  —  (9) —  —  (9)
Balance at March 31, 2021 136,342,036  $ 1  $ (75) $ 2,637  $ (1,043) $ 1,520 

Three Months Ended March 31, 2020
Common Stock Accumulated Other Comprehensive Income (Loss) Additional
Paid-in
Capital 		Accumulated Deficit Total Shareholders' Equity
Shares Amount
Balance at December 31, 2019 111,620,507  $ 1  $ (86) $ 2,339  $ (1,001) $ 1,253 
Net income (loss) attributable to Covetrus —  —  —  —  (33) (33)
Issuance of shares in connection with share-based compensation plans, net of shares withheld for taxes 233,932  —  —  —  —  — 
Share-based compensation —  —  —  9  —  9 
Other comprehensive income (loss) —  —  (30) —  —  (30)
Balance at March 31, 2020 111,854,439  $ 1  $ (116) $ 2,348  $ (1,034) $ 1,199 
See notes to unaudited condensed consolidated financial statements.

Covetrus, Inc. 2021 Q1 Form 10-Q
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Table of Contents

COVETRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
Three Months Ended March 31,
2021 2020
Cash flows from operating activities:
Net income (loss) $ (16) $ (33)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization 43  40 
Amortization of right-of-use assets 3  6 
Gain on sale of property and equipment —  (1)
Share-based compensation expense 11  9 
Benefit for deferred income taxes (3) (5)
Amortization of debt issuance costs 1  1 
Other 3  1 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net (18) (112)
Inventories, net (33) 44 
Other assets and liabilities (51) 5 
Accounts payable and accrued expenses 1  (31)
Net cash provided by (used for) operating activities (59) (76)
Cash flows from investing activities:
Purchases of property and equipment (13) (11)
Proceeds from sale of property and equipment —  4 
Net cash provided by (used for) investing activities (13) (7)
Cash flows from financing activities:
Proceeds from revolving credit facility —  190 
Principal payments of debt —  (17)
Debt issuance and amendment costs —  (5)
Issuance of common shares in connection with share-based compensation plans, net of shares withheld for taxes (2) — 
Acquisition payment —  (9)
Acquisitions of non-controlling interests in subsidiaries (1) — 
Net cash provided by (used for) financing activities (3) 159 
Effect of exchange rate changes on cash and cash equivalents (4) (1)
Net change in cash and cash equivalents (79) 75 
Cash and cash equivalents, beginning of period 290  130 
Cash and cash equivalents, end of period $ 211  $ 205 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities $ 3  $ 46 
See notes to unaudited condensed consolidated financial statements.
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)

1. BUSINESS OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES

Business

We are a global animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets.

Basis of Presentation and Principles of Consolidation

The accompanying balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2021, have been prepared in accordance with applicable rules and regulations of the SEC for interim financial reporting. Pursuant to those rules and regulations, we omitted certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP.

In our opinion, the accompanying condensed consolidated financial statements reflect all recurring adjustments and transactions necessary for a fair statement of our financial position, results of operations, and cash flows for the interim periods presented. Such operating results are not necessarily indicative of annual or future results. These condensed consolidated financial statements and notes should be read in conjunction with the Form 10-K filed with the SEC on March 1, 2021.

The accompanying unaudited condensed consolidated financial statements include the operations of the Company, as well as those of our wholly-owned and majority-owned subsidiaries from their respective dates of inception or acquisition. All significant intercompany transactions and balances were eliminated in consolidation. Investments in unconsolidated affiliates, which are 20% to 50.01% owned, or investments of less than 20% in which we could influence the operating or financial decisions, are accounted for under the equity method.

Accounting Pronouncements

•As of January 1, 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes specific technical exceptions to general principles found in Topic 740, items that often produce information that investors have difficulty understanding and simplifies the accounting for income taxes. The adoption of this ASU did not have a material impact on the results of our condensed consolidated financial statements.

•ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference LIBOR. The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. Our debt agreements and interest rate swaps that utilize LIBOR have not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us. Because our interest rate swaps mature on July 31, 2021, we do not expect an accounting burden, or the relief provided by this ASU for hedging relationships, to impact the results of our condensed consolidated financial statements. The banking syndicate associated with our Credit Facilities intends to cease using the 1-week and 2-month USD LIBOR at the end of 2021, with the other USD Tenors to cease June 30, 2023. We will continue to monitor, and, to the extent our Credit Facilities require amendment to reflect a replacement rate prior to December 31, 2022, we will evaluate the benefits of adopting this ASU.
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)


2. SEGMENT DATA

The following tables reflect our segment and Corporate information and reconciles Adjusted EBITDA for reportable segments to consolidated Net income (loss) attributable to Covetrus:
At and For the Three Months Ended March 31, 2021
North America Europe APAC & Emerging Markets Corporate Eliminations Total
Net sales $ 635  $ 361  $ 112  $ —  $ (6) $ 1,102 
Adjusted EBITDA $ 52  $ 21  $ 10  $ (26) $ —  $ 57 
Total assets $ 2,948  $ 672  $ 189  $ 1,216  $ (1,585) $ 3,440 
Reconciliation of Net income (loss) attributable to Covetrus to Adjusted EBITDA:
Net income (loss) attributable to Covetrus $ (16)
Plus: Depreciation and amortization 43 
Plus: Interest expense, net 9 
Plus: Income tax (benefit) expense 4 
Earnings (loss) before interest, taxes, depreciation, and amortization 40 
Plus: Share-based compensation 11 
Plus: Strategic consulting 2 
Plus: Transaction costs (a)
1 
Plus: Formation of Covetrus (b)
2 
Plus: Equity method investment and non-consolidated affiliates (c)
1 
Adjusted EBITDA $ 57 
(a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(b) Includes professional and consulting fees, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company
(c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
At and For the Three Months Ended March 31, 2020
North America Europe APAC & Emerging Markets Corporate Eliminations Total
Net sales $ 550  $ 422  $ 95  $ —  $ (2) $ 1,065 
Adjusted EBITDA $ 41  $ 18  $ 7  $ (18) $ —  $ 48 
Total assets $ 3,063  $ 725  $ 128  $ 787  $ (1,216) $ 3,487 
Reconciliation of Net income (loss) attributable to Covetrus to Adjusted EBITDA:
Net income (loss) attributable to Covetrus $ (33)
Plus: Depreciation and amortization 40 
Plus: Interest expense, net 14 
Plus: Income tax (benefit) expense (2)
Earnings (loss) before interest, taxes, depreciation, and amortization 19 
Plus: Share-based compensation 9 
Plus: Strategic consulting 4 
Plus: Transaction costs (a)
7 
Plus: Separation programs and executive severance 1 
Plus: IT infrastructure (b)
1 
Plus: Formation of Covetrus (c)
6 
Plus: Capital Structure 1 
Adjusted EBITDA $ 48 
(a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures
(b) Includes certain IT infrastructure expenses necessary to establish ourselves as a newly public company
(c) Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company

See Note 3 - Revenue from Contracts with Customers for our revenue disaggregated by major product category and reportable segment.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The tables below present our revenue disaggregated by major product category and reportable segment.
Three Months Ended March 31, 2021
Supply Chain Services Software Services Prescription Management Eliminations Total
North America $ 525  $ 20  $ 112  $ (22) $ 635 
Europe 364  3  —  (6) 361 
APAC & Emerging Markets 109  3  —  —  112 
Eliminations (6) —  —  —  (6)
Total Net sales $ 992  $ 26  $ 112  $ (28) $ 1,102 
Three Months Ended March 31, 2020
Supply Chain Services Software Services Prescription Management Eliminations Total
North America $ 462  $ 20  $ 84  $ (16) $ 550 
Europe 424  2  —  (4) 422 
APAC & Emerging Markets 93  2  —  —  95 
Eliminations (2) —  —  —  (2)
Total Net sales $ 977  $ 24  $ 84  $ (20) $ 1,065 
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)

Contract Assets and Contract Liabilities

Contract asset balances as of March 31, 2021 and December 31, 2020 were not material. There have been no material changes in our current portion of contract liabilities since the end of fiscal year 2020, and the amounts related to non-current contract liabilities were not material as of March 31, 2021 and December 31, 2020. See Note 1 - Business Overview and Significant Accounting Policies and Note 5 - Revenue from Contracts with Customers of our Form 10-K.

Performance Obligations

Estimated future revenues expected to be generated from our long-term contracts with unsatisfied performance obligations as of March 31, 2021 were not material.


4. EARNINGS (LOSS) PER SHARE

EPS is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. In addition, the shares of common stock issuable pursuant to restricted stock awards, restricted stock units, performance stock units, and stock options outstanding under our 2019 Omnibus Incentive Compensation Plan and shares issuable under our Employee Stock Purchase Plan are included in the diluted EPS calculation to the extent they are dilutive.

The following is a reconciliation of the numerator and denominator of the basic and diluted EPS computation for net income (loss) per share:
Three Months Ended March 31,
(In millions, except per share amounts) 2021 2020
Numerator:
Net income (loss) available to common shareholders $ (16) $ (33)
Denominator:
Basic
Weighted-average common shares outstanding 136  112 
Diluted
Effect of dilutive shares —  — 
Weighted-average common shares outstanding 136  112 
Earnings (loss) per share attributable to Covetrus:
Basic $ (0.11) $ (0.30)
Diluted $ (0.11) $ (0.30)
Potentially dilutive securities (a)
6  7 
(a) Potentially dilutive securities attributable to outstanding stock options, restricted stock units, restricted stock awards, and performance stock units were excluded from the computation of diluted earnings per share because the securities would have had an antidilutive effect


5. COMMITMENTS AND CONTINGENCIES

We are involved in various legal proceedings that arise in the ordinary course of business. Substantial judgment is required in predicting the outcome of these legal proceedings, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and can be reasonably estimated. Legal fees are expensed as incurred. No material accrued loss contingencies were recorded as of March 31, 2021.




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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
Securities Litigation Matter

On September 30, 2019, the City of Hollywood (Florida) Police Officers' Retirement System filed a putative securities class action lawsuit in the United States District Court for the Eastern District of New York, purportedly on behalf of purchasers of Covetrus common stock from February 8, 2019 through August 12, 2019, against the Defendants. The complaint alleges that the Defendants violated Sections 10(b) and 20(a) of the Exchange Act, by making allegedly false and misleading statements and omissions, primarily regarding the Company’s financial prospects and the integration costs relating to the business combination involving the Animal Health Business and Vets First Choice. The suit seeks unspecified damages, fees, interest, and costs. We intend to defend the matter vigorously and have filed a motion to dismiss the lawsuit. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from this action.

Purchase Obligations

We are party to an exclusive supply arrangement for certain products within the U.S. market until 2025 with an aggregate remaining value of $34 million. Our unconditional purchase obligation for 2021 is $8 million. For the three months ended March 31, 2021, we paid $2 million for products purchased under this exclusive arrangement. Our forecasted sales for products under this exclusive supply arrangement exceed our purchase obligations.

In 2019, we engaged a third-party for services over a three-year period ending December 31, 2022. We considered the contract to be of a “take-or-pay” nature due to the termination fees embedded in the contract: fixed termination fees of $12 million until mid-November 2020 and $14 million thereafter, plus any variable performance fees through termination. The fixed portion of the contract was capped at $14 million while the variable portion of the contract was capped at $39 million over the term of the engagement. In April 2021, we amended this contract with the third-party service provider such that the terms of the original agreement were deemed fully satisfied by both parties. In connection with the contract amendment, we agreed to pay the third party $10 million for specific services to be performed throughout the remainder of 2021. This amendment resulted in a decrease of $18 million from the remaining commitments under the original terms of the agreement.


6. INCOME TAXES

Income tax expense for the three months ended March 31, 2021 was $4 million on a loss before taxes and equity in earnings of affiliates of $12 million. The difference between our tax expense and the tax expense using the statutory tax rates for the jurisdictions in which we operate, for this period, primary related to valuation allowances due to uncertainty regarding the realization of future tax benefits from certain U.S. deferred tax assets.

Income tax benefit for the three months ended March 31, 2020 was $2 million on a loss before taxes and equity in earnings of affiliates of $35 million. The difference between our tax expense and the tax expense using the statutory tax rates for the jurisdictions in which we operate, for this period, primarily related to valuation allowances due to uncertainty regarding the realization of future tax benefits from certain U.S. deferred tax assets and non-deductible expenses associated with share-based compensation.


7. FAIR VALUE

GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis, and certain financial assets and liabilities that are not measured at fair value in our condensed consolidated balance sheets, but the fair value is disclosed. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:

•Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities
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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
•Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
•Level 3 - Unobservable inputs for the asset or liability

There were no changes in valuation approaches or techniques during the three months ended March 31, 2021. See Note 11 - Fair Value in our Form 10-K for a description of our valuation techniques.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our financial instruments measured at fair value on a recurring basis and indicates the level within the fair value hierarchy:
Assets Level March 31, 2021 December 31, 2020
Distrivet call option 3 $ 2  $ 2 
Total assets $ 2  $ 2 
Liabilities Level March 31, 2021 December 31, 2020
Interest rate swap contracts 2 $ 3  $ 5 
Distrivet put option 3 1  1 
Total liabilities $ 4  $ 6 

Interest Rate Swap Contracts

Our derivatives at March 31, 2021 consisted of five interest rate swap contracts which are over-the-counter and not traded through an exchange. The fair values of our swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. These interest rate swap contracts mature on July 31, 2021. See Note 8 - Derivatives.

Distrivet Options

The Distrivet options fair value was derived from a Monte Carlo simulation methodology. The significant unobservable inputs utilized in this Level 3 fair value measurement includes the enterprise value of Distrivet ($156 million), volatility (30%), and cost of capital (15%). We regularly evaluate each of the assumptions used in establishing the asset and liability. Significant changes in assumptions could result in significantly lower or higher fair value measurements.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring basis primarily relate to Property and equipment, net, Operating lease right-of-use assets, net, Goodwill, and Other intangibles, net. We do not periodically adjust carrying value to fair value for these assets; rather, the carrying value of the asset is reduced to its fair value when we determine that impairment has occurred. We did not have any assets or liabilities measured at fair value on a nonrecurring basis during the three months ending March 31, 2021.

Assets and Liabilities Not Measured at Fair Value

Financial Assets and Liabilities

The carrying amounts reported on the condensed consolidated balance sheets for Cash and cash equivalents, Accounts receivable, net, Other receivables, Accounts payable, and accrued expenses approximate their fair value due to the short maturity of those instruments.

Long-term Debt

Our long-term debt is classified as a level 2 instrument. The carrying amount of the term loan approximates fair value given the underlying interest rate applied to such amounts outstanding is currently reset to the prevailing monthly market rate.

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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)

8. DERIVATIVES

We are exposed to the impact of changes in interest rates in the normal course of business. Our financial risk management program is designed to manage the exposure arising from this cash flow risk and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes.
In July and August 2019, we executed interest rate swap contracts with notional amounts aggregating $500 million that are designated as cash flow hedges to manage interest rate risk on our floating rate debt. These interest rate swap contracts effectively fix the borrowing rates on a portion of our floating rate debt. The base notional amounts mature on July 31, 2021. On the interest rate swap inception dates, we designated the swaps as a hedge of the variability in cash flows we pay on our variable rate borrowings.
Our interest rate swap agreements exchange payment streams based on the notional principal amount. These agreements fix our future interest rates ranging from 1.63% to 1.70% plus the applicable margin as provided in our debt agreement on an amount of our debt principal equal to the then-outstanding swap notional amount.

The following table discloses the fair value and balance sheet location of our derivative instruments:
Liability Derivatives
Cash Flow Hedging Instruments Balance Sheet Location March 31, 2021 December 31, 2020
Interest rate swap contracts Other liabilities $ 3  $ 5 

At inception of the hedging contract, we used statistical regression to assess the effectiveness of the interest rate hedges. The hedging contracts were deemed highly effective and are expected to be highly effective throughout the hedge period. Therefore, we perform a qualitative assessment of the hedge effectiveness at each subsequent quarterly reporting date. As of March 31, 2021, derivative gains and losses were reported as a component of Other comprehensive income (loss) and will subsequently be recorded in the condensed consolidated statements of operations when the hedged transaction is recognized in earnings.

The effect of cash flow hedges on Other comprehensive income (loss) was as follows:
Three Months Ended March 31,
Cash Flow Hedging Instruments Location 2021 2020
Interest rate swap contracts Interest (income) expense $ 2  $ — 

The net amount of deferred losses on cash flow hedges that are expected to be reclassified from Accumulated other comprehensive income (loss) into Interest expense within the next 12 months is $3 million.




















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COVETRUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions) (Unaudited)
9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the changes in Accumulated other comprehensive loss, net of applicable taxes, by component:
 Derivative Gain (Loss) Foreign Currency Translation Gain (Loss) Total
Balance at December 31, 2019 $ —  $ (86) $ (86)
Other comprehensive loss before reclassifications
(8) (22) (30)
Reclassified from Accumulated other comprehensive loss to earnings —  —  — 
Period Change (8) (22) (30)
Balance at March 31, 2020 (8) (108) (116)
Balance at December 31, 2020 $ (3) $ (63) $ (66)
Other comprehensive loss before reclassifications
—  (11) (11)
Reclassified from Accumulated other comprehensive loss to earnings 2  —  2 
Period Change 2  (11) (9)
Balance at March 31, 2021 $ (1) $ (74) $ (75)

Comprehensive income (loss) includes certain gains and losses that are excluded from Net income (loss) under GAAP as these amounts are recorded directly as an adjustment to total equity. We recognize foreign currency translation losses as a component of comprehensive income (loss) due to changes in foreign exchange rates from the beginning of the period to the end of the period. The condensed consolidated financial statements are denominated in the U.S. dollar. Fluctuations in the value of foreign currencies as compared to the U.S. dollar may have a significant impact on Comprehensive income (loss).

The tax effect on accumulated unrealized losses on derivative instruments was not material for the periods presented. See Note 8 - Derivatives.


10. REDEEMABLE NON-CONTROLLING INTERESTS

Some minority equity owners in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities. We initially record our Redeemable non-controlling interests at fair value on the date of acquisition and subsequently adjust to redemption value.

The following table presents the components of change and balances of Redeemable non-controlling interests within the condensed consolidated balance sheets as follows:
Three Months Ended March 31, 2021 Year Ended
December 31, 2020
Balance at beginning of period $ 36  $ 10 
Decrease due to redemptions —  (4)
Increase due to business acquisitions —  24 
Net income (loss) attributable to redeemable non-controlling interests —  2 
Effect of foreign currency translation (gain) loss attributable to redeemable non-controlling interests (1) (2)
Change to redemption value 1  6 
Balance at end of period $ 36  $ 36 

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

Certain matters discussed in this Form 10-Q, and in particular, this management’s discussion and analysis of financial condition and results of operations, contain statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws and involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future,” and the negative of these or similar terms and phrases are intended to identify forward-looking statements. Such statements are subject to numerous risks and uncertainties, and actual results could differ materially from those anticipated due to a number of factors including but not limited to:

•the effect of health epidemics, including the COVID-19 pandemic, on our business and the success of any measures we have taken or may take in the future in response thereto, including our ability to continue operations at our distribution centers and pharmacies
•the ability to successfully integrate operations and employees
•the ability to continue to execute on our strategic plan
•the ability to retain key personnel
•the ability to achieve performance targets, including managing our growth effectively
•the ability to manage relationships with our supplier and distributor network, including negotiating acceptable pricing and other terms with these partners
•the ability to attract and retain customers in a price sensitive environment
•the ability to maintain quality standards in our technology product offerings as well as associated customer service interactions to minimize loss of existing Customers and attract new Customers
•changes in financial markets, interest rates, and foreign currency exchange rates
•changes in the legislative landscape in which we operate, including potential corporate tax reform, and our ability to adapt to those changes as well as adaptation by the third-parties we are dependent upon for supply and distribution
•the impact of litigation
•the impact of accounting pronouncements, seasonality of our business, leases, expenses, interest expense, and debt
•sufficiency of cash and access to liquidity
•cybersecurity risks, including risk associated with our dependence on third-party service providers as a large portion of our workforce is working from home
•additional risks and factors discussed under the heading Risk Factors in this Report, in our Form 10-K filed on March 1, 2021, and in our other SEC filings

Our forward-looking statements are based on current beliefs and expectations of our management team and, except as required by law, we undertake no obligations to make any revisions to the forward-looking statements contained in this Report or to update them to reflect events or circumstances occurring after the date of this Report, whether as a result of new information, future developments, or otherwise.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. These expectations may or may not be realized. Some of these expectations may be based upon assumptions, data, or judgments that prove to be incorrect. Actual events, results, and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties, and other factors. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those set forth in this Form 10-Q and under the caption Item 1A. Risk Factors in our Form 10-K.
We operate in a very competitive and rapidly changing market. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of what our operating results for the full fiscal year will be. For the foregoing reasons, you are cautioned against relying on any forward-looking statements.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes thereto appearing elsewhere in this Form 10-Q and our consolidated financial statements and the related notes and other financial information included in our Form 10-K.

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Rounding adjustments applied to individual numbers and percentages shown in this Report may result in these figures differing immaterially from their absolute values and certain tables may not foot or cross foot.

Overview

We are a global, animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets. Our mission is to provide the best products, services, and technology to veterinarians and animal-health practitioners across the globe, so they can deliver exceptional care to their patients when and where it is needed. In February 2019, we combined the complementary capabilities of the Animal Health Business, previously operated by our Former Parent, and Vets First Choice, bringing together leading practice management software and supply chain distribution businesses with a technology-enabled prescription management platform and related pharmacy services.

We are organized based upon geographic region and focus on delivering our platform of products and services to our Customers on a geographical basis. Our reportable segments are (i) North America, (ii) Europe, and (iii) APAC & Emerging Markets. Our major product groups that we disaggregate within our reportable segments are (i) supply chain services, (ii) software services, and (iii) prescription management. See Note 2 - Segment Data and Note 3 - Revenue from Contracts with Customers.

Across our segments and major product groups, the willingness of Animal Owners to spend with their veterinarians on preventative and therapeutic treatments and procedures is critical to our financial performance. In the companion-animal market specifically, there is an ongoing trend of owners humanizing, or providing the best possible lives for, their pets. Across the companion-animal, equine, and large-animal markets, we anticipate that for us to succeed on our strategic roadmap, we should seek to strengthen the relationship between Customers and Animal Owners, enable our Customers to provide proactive healthcare options to Animal Owners, as well as invest in technology solutions, proprietary brand products, and compounding.

Key Factors and Trends Affecting our Results

Growth continues following the onset of the COVID-19 pandemic

During 2020, the animal-health market largely benefited from the lockdowns instituted in response to the COVID-19 pandemic, including the benefit to veterinary practices, including our Customers, from an increase in visits driven by people adopting more pets during 2020 as well as companion Animal Owners increasing their per-visit spend with their veterinarians. This is expected to be a multi-year effect as these Animal Owners seek care from veterinary practices for their newly adopted pets. Additionally, the required responses to mitigate the spread of the COVID-19 pandemic shifted customer and animal-owner demand to our prescription management and online pharmacy services. However, we did not experience this COVID-19 driven growth on a straight-line basis: there was a spike in supply chain services sales in March 2020 that we consider a pull-forward effect, followed by a significant weakening of sales in April 2020 as that pull-forward effect balanced out; our growth in supply chain services and prescription management then accelerated for the remainder of the second quarter before normalizing in the third and fourth quarters. On a year-over-year basis, the surge of sales in March 2020 provided a difficult comparable for our first quarter of 2021 performance. The net sales growth in the first quarter of 2021 reflects the continued resiliency of the companion- animal end-market, our improved sales execution which was furthered by our commercial organization realignment in North America as of January 1, 2021, and elevated purchasing patterns from our prescription management and online pharmacy service users continuing into 2021. The retention of Customers brought to us during the COVID-19 pandemic in 2021 and beyond, our continued market penetration, and the introduction of product and service offerings aimed at driving higher utilization post enrollment could lead to long-term net sales growth.

Foreign Currency Effects

Our performance was positively affected by the appreciation of other currencies as compared to the U.S. dollar in the first quarter of 2021 as compared to the first quarter of 2020. However, this effect may be temporary.

Investing in Innovation and Corporate Infrastructure

During 2020, we undertook certain temporary cost-containment measures to help us manage the uncertainty created by the COVID-19 pandemic as well as experienced a continuing beneficial effect on our SG&A from decreased travel and in-person trade shows and conferences. Those cost-cutting measures we instituted in 2020 are still lowering certain SG&A items in the first quarter of 2021. However, we continue to spend on our corporate functions to build out the structure necessary to support our business today. Our strategic initiatives in the near and long-term are focused on accelerating the contribution provided by our higher margin technology, e-commerce, and proprietary products and solutions. SmartPak and Covetrus-branded products and
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proprietary brands like Kruuse, Vi, and Calibra are included within our supply chain services major product category. Our prescription management platform and compounding services are included within our prescription management major product category. To support these strategic initiatives, our corporate infrastructure spending will likely further increase to scale our internal environment to support our continued acquisitive and organic growth in the animal-health market. We also expect to invest in internal initiatives to develop technology to be used across our business to drive greater efficiency as well as coordination of our global employee base.

Terms with Key Suppliers, Customers, and Partners

Each year, suppliers in the veterinary channel engage in negotiations with us regarding pricing terms, including performance rebates and other growth incentives. Our supply chain services are dependent upon third-party suppliers, and the results of these negotiations, including whether the contractual relationship remains in place, can have a material impact on the financial performance of our business.

Effective January 1, 2021, we no longer are partnered with Merck & Co., in the U.K., which contributed to a decrease in our U.K. Net sales in the current quarter, and which we expect will also result in decreases for the remainder of this fiscal year. We also are no longer partnered with one of our customers in the U.K., which further decreased our U.K. Net sales, which we expect to continue throughout 2021. We are pursuing options to mitigate the effects of the supplier and customer loss in the U.K., and we do not expect the profitability impact to be significant. Our U.K. net sales as a percentage of our consolidated net sales decreased from 14% in the first quarter of 2020 to 9% in the first quarter of 2021.

The transition of our supply chain operations in Germany to a third-party in late 2020 has resulted in disruption to our supply chain, including a reduction in customer sales volumes. We are making progress on stabilizing our customer base and improving service levels in this market. However, we are likely to experience lower sales volume for the near term. Our German operations represent 1% of our Net sales in the first quarter of 2021.

Our supplier relationships are currently concentrated because five suppliers accounted for approximately 50% of our purchases for the three months ended March 31, 2021 and for the year ended December 31, 2020. If we were to lose one of these five major manufacturing relationships, our global financial performance could be materially affected. As these contracts are largely annual and separated between supply chain and prescription management, our ability to exercise influence over the terms is currently limited and negatively impacting our gross profit margin. We expect our future success necessitates achieving better terms and stronger relationships with our manufacturers and suppliers as we work with these partners on global initiatives. However, if a competitor is able to obtain better terms with suppliers in the veterinary channel or obtain exclusivity on products we typically sell to our Customers within the global animal-health market, our business could be impacted beyond the short term. We expect to also utilize our strategic growth initiatives to influence Customer and Animal-Owner brand loyalty, based on product launches on our prescription management platform, including launches of our own higher-margin proprietary products.

Acquisition-driven Amortization

As we pursue a growth strategy through acquisitions, we are likely to acquire intangible assets, such as customer relationships, trademarks, patents, product development (including formulas), and non-compete agreements. Our intangibles are predominately comprised of intangibles acquired through our acquisition of Vets First Choice. These acquired intangibles have useful lives of 5 years for trademarks and trade names, 11 years for product formulas, 11 years for customer relationships, and 5 years for developed technologies.

The amortization of these intangibles has a long-term effect on our expense recognition. Product formulas are amortized to Cost of sales as these formulas are directly tied to the production of compounded products as alternatives to back-ordered solutions, patient-specific customized medications, and in-clinic use medications. Amortization expense for our other intangible assets not directly related to sales-generating activities, is included in SG&A.

Three Months Ended March 31,
Location 2021 2020
Cost of sales $ 1  $ 1 
Selling, general and administrative 34  33 
Total amortization expense $ 35  $ 34 


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Seasonality

Our quarterly sales and operating results have varied from period to period in the past and will likely continue to do so in the future. In the companion-animal market, sales of parasite protection products have historically tended to be stronger during the spring and summer months, primarily due to an increase in vector-borne diseases during that time, which correlates with our second and third quarters given that most of our business is in the northern hemisphere. Buying patterns can also be affected by manufacturers’ and distributors’ marketing programs or price increase announcements, which can cause veterinarians to purchase animal-health products earlier than when those products are needed. This kind of early purchasing may reduce our sales in the quarters these purchases would have otherwise been made. The sales of animal products can also vary due to changes in the price of commodities used in manufacturing the products and weather patterns, which may also affect period-over-period financial results. We expect our historical seasonality trends to continue in the foreseeable future.

Definition of Non-GAAP Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization

Adjusted EBITDA is a non-GAAP financial measure used to (i) aid management and investors with year-over-year comparability, (ii) determine management performance under our compensation plans, (iii) plan and forecast, (iv) communicate our financial performance to our Board of Directors, shareholders, and investment analysts, and (v) understand our operating performance without regard to items we do not consider a component of our core ongoing operating performance. Adjusted EBITDA has certain limitations in that it does not consider the impact of certain expenses to our consolidated statements of operations. Adjusted EBITDA excludes share-based compensation, strategic consulting, transaction costs, formation of Covetrus expenses, separation programs and executive severance, carve-out operating expenses, certain IT infrastructure expenses necessary to establish ourselves as a newly public company, goodwill impairment charges, capital structure-related fees, operating lease right-of-use asset impairments, the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%, managed exits from businesses we are exiting or closing, and other income and expense items, net. Currently, we do not allocate expenses managed at the corporate level, such as corporate wages and related benefits, corporate occupancy costs, professional services utilized at the corporate level, and non-recurring expenses to our operating segments. Other companies may not define or calculate Adjusted EBITDA in the same way. We provide Adjusted EBITDA by segment as a supplemental measure to GAAP as well as on a consolidated, non-GAAP basis. Non-GAAP Adjusted EBITDA on a total segment basis is reconciled in Note 2 - Segment Data as required by ASC 280.


Results of Operations
Three Months Ended
(In millions) March 31, 2021 March 31, 2020 $ Increase (Decrease) % Increase (Decrease)
Net sales $ 1,102  $ 1,065  $ 37  3  %
Cost of sales 892  863  29  3 
Gross profit 210  202  8  4 
Operating expenses:
Selling, general and administrative 213  222  (9) (4)
Operating income (loss) $ (3) $ (20) $ (17) (85) %
Interest expense, net $ (9) $ (14) $ (5) (36) %
Other, net $ —  $ (1) $ 1  (100) %
Net income (loss) $ (16) $ (33) $ (17) (52) %
Net income (loss) attributable to Covetrus $ (16) $ (33) $ (17) (52) %

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Year-Over-Year Period Comparisons

Net Sales
Three Months Ended
(In millions) March 31, 2021 March 31, 2020 $ Change % Change
North America $ 635  $ 550  $ 85  15  %
Europe 361  422  (61) (14)
APAC & Emerging Markets 112  95  17  18 
Eliminations (6) (2) (4) 200 
Total Net sales $ 1,102  $ 1,065  $ 37  3  %

Net sales for the three months ended March 31, 2021 increased compared to the three months ended March 31, 2020 primarily due to favorable foreign exchange, prescription management growth, and supply chain organic growth. Consolidated supply chain organic growth was heavily affected by the decrease in Europe, largely driven by the loss of Merck & Co. as a supply partner as well as a loss of a customer, both in the U.K., and disruption in our supply chain operations resulting from our transition to a third- party logistics provider in Germany. The overall increase in net sales was partially offset by net sales that are no longer being contributed following our disposition of scil, the deconsolidation of a subsidiary in Spain, and the managed exit of our French distribution business, all of which occurred after the first quarter of 2020. The drivers by segment are detailed below:

•North America increased primarily due to $59 million in net supply chain organic growth and a $28 million increase from prescription management growth, partially offset by $3 million in net sales related to our divestiture of scil in the second quarter of 2020.

•Europe decreased primarily due to a $46 million decrease in net supply chain sales and a $39 million decrease from divestitures that occurred in 2020 as the divested businesses contributed net sales for the entirety of the first quarter of 2020. These decreases were partially offset by a favorable foreign exchange impact of $27 million, positive organic growth in several markets including the Netherlands, Ireland, and Belgium, and strong performance in proprietary brands of Kruuse and Vi.

•APAC & Emerging Markets increased primarily due to favorable foreign exchange of $10 million and strong underlying supply chain organic growth in the region contributing to $6 million in net sales growth.
Gross Profit and Gross Profit Margin
Three Months Ended
(In millions) March 31, 2021 Gross Margin % March 31, 2020 Gross Margin % $ Change Gross Profit % Change
North America $ 131  20.6  % $ 119  21.6  % $ 12  10  %
Europe 55  15.2  64  15.2  (9) (14)
APAC & Emerging Markets 24  21.4  19  20.0  5  26 
Total Gross profit $ 210  19.1  % $ 202  19.0  % $ 8  4  %

During the three months ended March 31, 2021, the increase in gross profit compared to the three months ended March 31, 2020 was largely driven by favorable foreign exchange, prescription management growth, supply chain organic growth, and an increase from our acquisition of VSG in the fourth quarter of 2020, which is contributing gross profit in 2021 but has no comparable basis in the same period of 2020. Consolidated supply chain gross profit was heavily affected by the decrease in Europe, largely due to disruption in our supply chain operations resulting from our transition to a third-party logistics provider in Germany and the loss of Merck & Co. as a supply partner as well as a loss of a customer, both in the U.K. These increases in gross profit were partially offset by the disposition of scil, the deconsolidation of a subsidiary in Spain, and the managed exit of our French distribution business, as the divested businesses contributed gross profit for the entirety of the first quarter of 2020. The drivers of the increase in our gross profit are further detailed below by segment:

•North America increased primarily due to the growth of our prescription management business of $6 million, $4 million from supply chain organic growth, and $2 million from our acquisition of VSG in the fourth quarter of 2020, which is contributing gross profit in 2021 but has no comparable basis in same period of 2020.
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•Europe decreased primarily due to $9 million from divestitures that occurred in 2020 as the divested businesses contributed gross profit for the entirety of the first quarter of 2020 and a $4 million decrease in supply chain gross profit, partially offset by favorable foreign exchange of $4 million. Our proprietary brands are also contributing higher gross profit which is lessening the impact from the disruptions noted above.
•APAC & Emerging Markets increased due to the contribution of $3 million from organic growth, primarily related to supply chain, and favorable foreign exchange of $2 million.
SG&A
Three Months Ended
(In millions) March 31, 2021 March 31, 2020 $ Change % Change
North America $ 124  $ 121  $ 3  2  %
Europe 42  53  (11) (21)
APAC & Emerging Markets 14  13  1  8 
Corporate 33  35  (2) (6)
Total SG&A $ 213  $ 222  $ (9) (4) %

SG&A expenses for the three months ended March 31, 2021 decreased compared to prior year period primarily due to a decrease in expenses that are no longer being incurred following our disposition of scil, the deconsolidation of a subsidiary in Spain, and the managed exit of our French distribution business, a decrease in transaction costs largely driven by the absence of divestitures in 2021, decreased travel and advertising expense, a decrease in expense related to the formation of Covetrus, and decreased strategic consulting fees. These decreases were partially offset by increased costs to support the growth in our prescription management business, an unfavorable foreign exchange effect, increased costs incurred as we continue to invest in innovation and corporate infrastructure to enable our growth, and increased expense from VSG following our acquisition in the fourth quarter of 2020. The drivers by segment and at Corporate are detailed below:

•North America increased primarily due to an increase of $3 million from our acquisition of VSG and $3 million of increased costs to support the growth in our prescription management business, partially offset by a decrease in travel and advertising expense of $3 million. Acquisition-related intangible amortization was 25% of North America SG&A in 2021 and 24% in 2020.

•Europe decreased primarily due to $9 million from expenses that are no longer being incurred following divestitures that occurred in 2020, reduced transaction costs of $2 million largely from the absence of divestitures in 2021, a $1 million decrease in travel and advertising expense, and $1 million in decreased expenses related to the formation of Covetrus. These decreases were partially offset by an increase of $3 million due to unfavorable foreign exchange.

•APAC & Emerging Markets increased primarily due to unfavorable foreign exchange.

•Corporate decreased primarily due to a $4 million decrease in transaction costs, a $3 million decrease in expenses related to the formation of Covetrus, and decreased strategic consulting fees of $2 million. These decreases were partially offset by $3 million of increased costs incurred as we continue to invest in innovation and our corporate infrastructure to enable our growth and $1 million from increased short-term incentive bonus attributable to Corporate.

Income Taxes

Income tax expense for the three months ended March 31, 2021 was $4 million on a loss before taxes and equity in earnings of affiliates of $12 million. The difference between our tax expense and the tax expense using the statutory tax rates for the jurisdictions in which we operate, for this period, primarily related to valuation allowances due to uncertainty regarding the realization of future tax benefits from certain U.S. deferred tax assets.

The income tax benefit for the three months ended March 31, 2020 was $2 million on a loss before taxes and equity in earnings of affiliates of $35 million. The difference between our tax expense and the tax expense using the statutory tax rates for the jurisdictions in which we operate, for this period, primarily related to valuation allowances due to uncertainty regarding the realization of future tax benefits from certain U.S. deferred tax assets and non-deductible expenses associated with share-based compensation.
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Adjusted EBITDA
Three Months Ended
(In millions) March 31, 2021 March 31, 2020 $ Change % Change
North America $ 52  $ 41  $ 11  27  %
Europe 21  18  3  17 
APAC & Emerging Markets 10  7  3  43 
Corporate (26) (18) (8) NA
Total Adjusted EBITDA $ 57  $ 48  $ 9  19  %

Total non-GAAP Adjusted EBITDA for the three months ended March 31, 2021 increased 19% compared to the same period in 2020, largely due to improved performance across certain of our markets, including increased contribution from higher margin businesses, and a favorable foreign exchange impact, partially offset by increasing costs incurred as we continue to invest in innovation and our corporate infrastructure to enable our growth. The changes by segment and at Corporate are detailed below:

•North America increased primarily due to $6 million in supply chain services from organic growth, $2 million growth in our prescription management business, and the contribution of adjusted EBITDA from VSG's operations in 2021.

•Europe experienced a $5 million increase in contribution from our higher margin proprietary brands that was offset by $5 million decreases comprised of the loss of Merck & Co. as a supply partner and a loss of a customer, both in the U.K., and the disruption from our transition to a third-party logistics provider in Germany. Following these offsetting effects, Europe increased $2 million from favorable foreign exchange as well as the continuing impact of cost containment actions.

•APAC & Emerging Markets increased primarily due to $2 million in organic growth mainly related to supply chain.

•Corporate contributed an $8 million decrease primarily due to $3 million in increased expenses incurred as we continue to invest in innovation and our corporate infrastructure to enable our growth, $2 million from unfavorable foreign exchange transaction loss related to intercompany notes, and $1 million from increased short-term incentive bonus attributable to Corporate.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our business, and available borrowing capacity under our Credit Facilities. Our principal uses of cash include working capital-related items, capital expenditures, debt service, and strategic investments.

Credit Facilities

The Credit Facilities include a Term Loan Facility and a Revolving Credit Facility. There were no borrowings from the Revolving Credit Facility as of March 31, 2021 and December 31, 2020.

Short-Term

Our liquidity fluctuates during the year due to sales seasonality. Generally, our sales of parasite protection products in the companion-animal market peak during the spring and summer months, which are hemisphere dependent, as vector-borne diseases typically increase during these seasons. This seasonality also affects the timing and amount of our inventory purchases, and subsequently our accounts payable balances.

We also operate on a disciplined, global approach to inventory management, including replenishing stock as sales deplete inventory to lower holding levels, executing inventory buy-ins only when price discounts make economic sense with no outsized working capital effect, or when vendor rebate targets are within reasonable reach with incremental purchases and no meaningful impact on cash forecasts.

Planned investments included in our near-term strategic plan:
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•Pharmacy innovation and operational capacity in Arizona and Maine
•Enhancing the consumer experience through continuous improvements in e-Commerce, appointment management, and veterinarian to pet owner connectivity
•Cloud-based practice management software development and coordination with select existing service offerings
•Business-to-business ordering capabilities focused on our compounding services, distribution, and inventory management services
•Optimizing our distribution network in North America, including investments in the systems that support our network like our warehouse management system
•Implementing a regional-wide enterprise resource planning system in Europe to reduce complexity in our global enterprise resource planning landscape
•We continuously evaluate external growth opportunities that support our strategic objectives and may make acquisitions and investments earlier or later than we expect, including that some acquisitions and investments may not come to fruition. In connection with our creation of Distrivet in 2020, we were contractually obligated to pay $12 million to the former owners of Distrivet S.A. on the one-year anniversary of closing, or April 30, 2021

Trends

Our operational plans to manage our liquidity continue to involve seeking opportunities to reduce non-critical capital expenditures, sharpening our focus on collecting supplier rebates and amounts owed to us by customers, managing opportunistic inventory purchases as we carefully monitor sales forecasts and timing of projected price increases, quickly reducing our other costs, and maximizing our payment terms wherever possible. We also continue to monitor cash flow projections and will consider additional borrowings, if needed, based on availability under our Revolving Credit Facility from time to time.

In December 2020, we fully prepaid the 2021 Term Loan Facility's amortization payments which reduced our outstanding balance and lowered the applicable monthly floating interest rates. The next quarterly principal amortization payment of $15 million is due on March 31, 2022.

Our interest rate swap contracts, which effectively fix the borrowing rates on a portion of our floating rate debt, mature on July 31, 2021. Based on the current floating interest rate environment, we anticipate that we will incur lower interest expense, at least for a period of time, following the maturity of our interest rate swap contracts.

We were in compliance with the covenants in our Credit Facilities as of March 31, 2021. Based on our expected Credit Facilities-defined leverage as of March 31, 2021, once the quarterly compliance filing is made, the current applicable margin on our borrowings outstanding will remain unchanged at least until the next compliance filing is made for the three months ended June 30, 2021. Based on the revised schedule contained in the 2020 amendment to our Credit Facilities, we are required to remain compliant with a Credit Facilities-defined leverage covenant that is currently set at 5.50x, but will decrease by 0.5x as of June 30, 2021, then an additional 0.5x as of December 31, 2021, and finally to 3.75x as of June 30, 2022 through maturity of the Credit Facilities. The decrease in this particular financial covenant and our required compliance may influence our investment decisions.

The duration of the COVID-19 pandemic continues to be unknown. Should the pandemic extend throughout 2021 and beyond, or the severity of variant strains increase that reduces the effectiveness of vaccines and negatively impacts global economic conditions, then we may experience a negative impact on our liquidity position. Therefore, we continuously assess steps we can take to improve working capital and increase cash on our balance sheet, investigate government sponsored financing or tax holiday programs that may be available to us or to our customers, and closely monitor the capital markets for additional opportunities to improve our liquidity position.

Long-term

Our long-term liquidity is expected to be aligned with our strategic development, and the needs of our growing business in terms of investment to fund growth, as well as availability of financing. We currently anticipate the following long-term liquidity trends for our business:

Uses of liquidity:
•Investing in our expansion of global sales and marketing efforts
•Launching new products and services
•Pursuit of strategic, higher-margin acquisition and investment targets
•Increasing our pharmaceutical compounding operations capacity
•International development of presence, product, and service offerings
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•Term Loan Facility amortization payments (beginning again in March 2022)
•Ongoing operating lease payments
•Capital investments in current and future facilities
•Pursuit and maintenance of appropriate regulatory clearances, approvals for existing products, and any new products that may be developed

Sources of liquidity:
•Operations-driven cash generation
•Borrowings on our Revolving Credit Facility
•Availability of financing through the capital markets

Our Term Loan Facility and Revolving Credit Facility bear interest on a floating rate basis at our option, which are referenced to LIBOR. The banking syndicate associated with our Credit Facilities intends to cease using the 1-week and 2-month USD LIBOR at the end of 2021, with the other USD Tenors to cease June 30, 2023. Our Credit Facilities, with which we primarily elect to reference 1-month USD LIBOR for our borrowings, will be amended to reflect the replacement basis rate accordingly, when identified.

Longer term, if we desire to access alternative sources of funding through the capital and credit markets, challenging global economic conditions, such as a long-lasting COVID-19 pandemic or economic downturn, could adversely impact our ability to do so.

Cash and Cash Equivalents

As of March 31, 2021, we had Cash and cash equivalents of $211 million. We consider all highly liquid short-term investments with an original maturity of three months or less to be cash equivalents. Due to the short-term maturity of such investments, the carrying amounts are a reasonable estimate of fair value.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities:
Three Months Ended
(In millions) March 31, 2021 March 31, 2020 $ Change
Net cash provided by (used for) operating activities $ (59) $ (76) $ 17 
Net cash provided by (used for) investing activities (13) (7) (6)
Net cash provided by (used for) financing activities (3) 159  (162)
Total net cash flows $ (75) $ 76  $ (151)

Cash inflows and outflows from changes in operating activities

For the three months ended March 31, 2021, net cash used for operating activities decreased over the three months ended March 31, 2020, primarily due to improved profitability.

Cash inflows and outflows from changes in investing activities

For the three months ended March 31, 2021, net cash used for investing activities increased compared to net cash used for investing activities for the three months ended March 31, 2020, primarily due to $4 million in proceeds from the sale of property and equipment in the prior year period which reduced the net cash used for investing activities in 2020 with no comparable inflows from property and equipment sales in 2021 and a $2 million increase in purchases of property and equipment in the current period.
    
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Cash inflows and outflows from changes in financing activities

For the three months ended March 31, 2021, net cash used for financing activities increased compared to net cash provided by financing activities for the three months ended March 31, 2020, primarily due to net inflows in the prior year related to $190 million we borrowed under our Revolving Credit Facility as a precaution in 2020 to increase our cash balance on hand in response to COVID-19 uncertainty, partially offset by $31 million comprised of principal payments for our Term Loan Facility, debt issuance and amendment costs for our Credit Facilities, and acquisition payments.
    
Contractual Obligations

We had a material change in our contractual obligations since the end of fiscal year 2020 due to a decrease of $18 million in our purchase obligations. See Note 5 - Commitments and Contingencies.

Off-balance Sheet Arrangements
We did not have any material changes in our off-balance sheet arrangements since the end of fiscal year 2020 outside of activities in the ordinary course of business.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts in our condensed consolidated financial statements. There have been no material changes in our critical accounting estimates from those disclosed in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K. For a discussion of critical accounting policies and estimates as well as accounting policies adopted, see Note 1 - Business Overview and Significant Accounting Policies of our Form 10-K.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 1 - Business Overview and Significant Accounting Policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We continuously evaluate our exposure to foreign currency exchange rate and interest rate risk. There have been no meaningful changes in our exposure to risk associated with fluctuations in foreign currency exchange rates and interest rates related to our variable-rate borrowings under the Credit Facilities from that discussed in our Form 10-K.


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Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) at March 31, 2021. Based on this evaluation, the CEO and CFO concluded that as of that date, our disclosure controls and procedures required by paragraph (b) of Rules 13a-15 or 15d-15 were not effective, at a reasonable assurance level, because of a material weakness in internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures.

Ongoing Remediation of Previously Identified Material Weakness

As previously disclosed in our Form 10-K, management identified deficiencies in our internal control over financial reporting which related to the accounting for income taxes and determined that the impact of these deficiencies resulted in a material weakness. This material weakness stemmed from issues associated with the transition to expanded in-house tax capabilities and utilization of new tax consultants. As a result of these issues, our controls to review and analyze our income tax provision and deferred income tax balances were not effective.

We developed remediation plans for this material weakness as follows:

•Increasing oversight by our management in the calculation and reporting of certain tax balances of our global operations

•Enhancing policies, procedures, and controls relating to significant judgments impacting our income tax accounts

•Augmenting our tax accounting resources

•Increasing communication to information providers for tax jurisdiction specific information and

•Strengthening communication and information flows between the tax department and the finance group

While Management has made progress to expand our in-house tax resource capabilities and further formalize our internal controls framework, the material weakness in our internal control over financial reporting has not been remediated as of March 31, 2021. It will not be considered remediated until (i) the controls are fully implemented and existing controls are reinforced, (ii) the incremental controls are in operation for a sufficient period of time, and (iii) the controls are tested and concluded by management to be designed and operating effectively. We cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

Changes in Internal Control over Financial Reporting

There have been no other changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See Item 1A. Risk Factors.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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PART II

Item 1. Legal Proceedings

Refer to Note 5 - Commitments and Contingencies for information relating to legal proceedings.


Item 1A. Risk Factors
    
In addition to the information set forth in the Forward-looking Statements in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, you should carefully consider the factors discussed in our Form 10-K. There have been no material changes to the risk factors disclosed in our Form 10-K. If any of the events described in our Form 10-K actually occur, our business, financial condition, results of operations, and cash flows could be materially and adversely affected, and the trading price of our common stock could decline. Our business could also be affected by additional factors that are not presently known to us or that we currently consider not material. The reader should not consider these factors to be a complete statement of all risks and uncertainties.


Item 2. Unregistered Sales of Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

The following table sets forth information about our purchases of our outstanding common stock during the quarter ended March 31, 2021:
Period
Total Number of Shares Purchased (a)
Average Price Paid Per Share (a)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
January 2021 53,696  $ 38.54  —  $ — 
February 2021 17,170  36.93  —  — 
March 2021 22,876  31.84  —  — 
93,742  $ 36.61  —  $ — 
(a) Shares of common stock we purchased were solely for the cancellation of shares of stock withheld for related tax obligations that occur upon vesting of restricted shares

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Item 5. Other Information

On May 4, 2021, the Company entered into an amended and restated employment agreement with Michael Ellis. The agreement is attached hereto as Exhibit 10.1.

The Company approved and amended certain performance stock unit agreements which are attached hereto as Exhibits 10.2, 10.3, and 10.4.


Item 6. Exhibits
Exhibit
Number 		Exhibit Description Form Date No.
10.1†*
10.2†*
10.3†*
10.4†*
31.1*
31.2*
32.1**
32.2**
101.INS* Inline XBRL Instance Document - the instance
document does not appear in the Interactive Data
File because its XBRL tags are embedded within the
Inline XBRL document.
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

* Filed herewith
** Furnished herewith
†     Indicates management contract or compensatory plan

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COVETRUS, INC.
Date: May 6, 2021 By: /s/ Benjamin Wolin
Name:  Benjamin Wolin
Title: President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: May 6, 2021 By: /s/ Matthew Foulston
Name:  Matthew Foulston
Title: Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT


THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on May 4, 2021 (the “Effective Date”) between Covetrus, Inc., a Delaware corporation (the “Company”) and Michael Ellis (the “Executive” and collectively with the Company, the “Parties”). All references herein to the Company shall include the Company’s subsidiaries, where applicable.
WHEREAS on February 7, 2019 the Executive and the Company entered into that certain Employment Agreement setting the terms of the Executive’s employment by the Company (the “Prior Agreement”); and

WHEREAS, on February 7, 2019, the Executive agreed to certain confidentiality, non-competition and non- solicitation covenants pursuant to the Restrictive Covenant Agreements (as defined herein); and

WHEREAS, the Executive and the Company desire to enter into this Agreement to amend, restate and supersede the Prior Agreement in its entirety.
    
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and agreed, including the Executive’s promotion effective January 1, 2020, the adjusted compensation, and further mutual promises and covenants contained herein, the Company and the Executive, intending to be legally bound, hereby agree as follows:

1.    Employment.
(a)    Term. This Agreement shall commence on the Effective Date and shall continue until December 31, 2022, unless sooner terminated pursuant to the terms of this Agreement (the “Term”). The Executive’s employment with AH Animal Health Pvt Ltd. prior to the Executive’s employment under the Prior Agreement counts towards the Executive’s period of continuous employment with the Company.
(b)    Garden Leave. The Executive recognizes and acknowledges that the Company has commenced a search for two positions: (i) a head of international operations, and (ii) a head of global proprietary brands. The Executive agrees to work with the Company, and each such new executive, to successfully transition the Executive’s duties and responsibilities to such new executive. The period from the effective date of such transition to December 31, 2022 shall be referred to as the “Garden Leave Period.” Notwithstanding any term or condition in this
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Agreement to the contrary, your duties and responsibilities during the Garden Leave Period will be to provide reasonable consultation and assistance on an as-needed basis.
(c)    Duties. During the Term, the Executive shall be employed by the Company as its Executive Vice President and President, Europe and shall serve the Company faithfully and to the best of the Executive’s ability. The Executive shall devote the Executive’s full business time, attention, skill and efforts to the performance of the duties required by or appropriate for the Executive’s position with the Company. The Executive shall report to the Chief Executive Officer and shall perform such duties commensurate with the Executive’s office as contained in the bylaws of the Company or as the Executive shall reasonably be directed by the Chief Executive Officer. The Executive shall perform such services at the Executive’s home office as in effect on the Effective Date and the Executive shall engage in such reasonable business travel as may be required to perform the Executive’s duties and shall, at the reasonable request of the Company from time to time, also report to and work out of the Company’s London, United Kingdom offices as may be necessary for meetings and other general business.
(d)    Best Efforts. Except for vacation, absences due to temporary illness and absences resulting from Disability (as hereinafter defined), the Executive shall devote the Executive’s business time, attention and energies on a full-time basis to the performance of the duties and responsibilities referred to in subsection (c) above. The Executive shall not during the Term be engaged in any other business activity which, in the reasonable judgment of the Company, would conflict with the ability of the Executive to perform the Executive’s duties under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Nothing in this Section shall prevent Executive from engaging in additional activities in connection with personal investments and community affairs, including serving on corporate, civic, or charitable boards, subject to the approval by the Company, that are not materially inconsistent with Executive’s duties under this Agreement. The Executive’s normal hours of work are between 9.00 am and 5.30 pm, Mondays to Fridays inclusive, with a lunch break of one hour. The Executive will be required to work such additional hours as are necessary for the proper performance of his duties without extra compensation.
2.    Base Salary. During the Term, the Company shall pay to the Executive a base salary of $550,000 annually (the “Base Salary”). The Base Salary shall be paid in pound sterling (GBP) and converted from US dollars in accordance with Schedule I. The Base Salary shall be payable in accordance with the Company’s normal payroll practices.
3.    Incentive Compensation
(a)    Annual Incentive Compensation. The Executive shall be entitled to participate in an annual bonus program established by the Company for each of 2020, 2021 and, in certain circumstances as outlined below, 2022, with a target annual bonus amount, which for the 2020 fiscal year of the Company was equal to 75% of the Executive’s Base Salary, and for each subsequent fiscal year of the Term shall be determined by the Compensation Committee, subject in all respects to achievement of performance goals to be established by the Company including a “quality of transition” multiplier based upon the CEO’s assessment of your achievements
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relating to the quality of the transition referred to in Paragraph 1(b) of this Agreement (the “Annual Bonus”). The Executive shall be entitled to participate in the 2022 Annual Bonus only if the Garden Leave Period commences after January 1, 2022. If the Executive is so eligible, the 2022 Annual Bonus shall be pro-rated for the period from January 1, 2022 through the commencement of the Garden Leave Period. In addition, for fiscal year 2020, the Executive is eligible for a special annual bonus with a target of $300,000 subject in all respects to the performance goals established by the Company with respect to the performance of North American customer operations (“Special 2020 Bonus”). Any bonus earned by the Executive shall be paid after the end of the fiscal year to which it relates, at the same time and under the same terms and conditions as other executives of the Company; provided that, with respect to the 2021 Annual Bonus, the Executive remains employed by the Company on the date the bonus is paid. In no event shall the Executive’s bonus be paid later than March 15 of the fiscal year following the fiscal year for which it was earned. Any Annual Bonus or Special 2020 Bonus earned by the Executive will be paid in GBP and converted from US dollars in accordance with Schedule I.
(b)    Long-Term Incentive Compensation. The Executive shall be eligible to participate in the equity compensation plan and programs in place at the Company for 2021. For the avoidance of doubt, the Executive will not be entitled to participate in the 2022 equity compensation plan or otherwise participate in any plan or program except as specifically outlined in this Agreement.
(i)    For the 2021 fiscal year, the Executive shall participate in the Company’s long-term incentive compensation program, with a target award determined by the Compensation Committee based on applicable benchmarked data. The 2021 award shall be comprised of restricted stock units which shall vest in full on December 31, 2022, subject to the Executive’s continued employment with the Company.
(ii)    Notwithstanding his separation from the Company at the end of the Term, or anything in the agreement evidencing such equity grant to the contrary, if the Executive remains with the Company in good standing through the end of the Term, the Executive will be entitled to any equity, either referenced herein or previously granted, which he is otherwise entitled to but for his separation from the Company and which by its terms vests through March 31, 2023, including, but not limited to, the 2020 NWOW PSU grant and the 2020 RSU grant. The equity grants shall be paid at the dates specified in the applicable grant agreements.
4.    Benefits. During the Term, the Executive shall be eligible to participate in certain retirement, welfare and death benefit plans and programs made available to the Company’s executives as a group, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any incentive, equity compensation, retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate. If applicable, the Company will comply with the employer pension duties in accordance with Part 1 of the Pensions Act 2008. For the avoidance of doubt, the Executive shall continue to be entitled to any payments made in respect of locally
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available benefits, including any car allowance or life insurance benefits, as well as any payment in lieu of pension contributions presently made by the Company through the end of the Term.
5.    Holiday and Sickness. During the Term, the Executive shall be entitled to 26 days' paid holiday during each holiday year. In addition, the Executive is entitled to take the usual public holidays in England and Wales. The Company's holiday year runs between 1 January and 31 December. If the Executive’s employment starts or finishes part way through the holiday year, the Executive’s holiday entitlement during that year shall be calculated on a pro-rata basis rounded up to the nearest half day. The Company shall not pay the Executive in lieu of untaken holiday except on termination of employment. The amount of such payment in lieu shall be 1/260th of the Executive’s base salary for each untaken day of his entitlement. If the Executive has taken more holiday than his accrued entitlement at the date the Executive’s employment terminates, the Company shall be entitled to deduct the excess holiday pay from any payments due to the Executive calculated at 1/260th of his salary for each excess day. During the Term, the Executive shall be entitled to sick leave in accordance with the Company’s policy which can be found on the Company’s employee handbook.
6.    Reimbursement of Expenses. During the Term, the Company shall reimburse the Executive, in accordance with the policies and practices of the Company in effect from time to time, for all reasonable and necessary traveling expenses and other disbursements incurred by the Executive for or on behalf of the Company in connection with the performance of the Executive’s duties hereunder upon presentation by the Executive to the Company of appropriate documentation therefore.
7.    Voluntary Termination. The Executive may voluntarily terminate the Executive’s employment for any reason upon thirty (30) days’ prior written notice. In such event, after the effective date of such termination, no payments shall be due under this Agreement, except that the Executive shall be entitled to the Accrued Obligations.
8.    Death; Disability. If the Executive’s employment is terminated by the Company by reason of death or, subject to the requirements of applicable law, Disability (as defined below), upon the Executive’s date of termination or death, no payments shall be due under this Agreement, except that the Executive (or in the event of the Executive’s death, the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable), shall be entitled to the Accrued Obligations.
9.    Cause. The Company may terminate the Executive’s employment at any time for Cause upon written notice to the Executive, in which event all payments under this Agreement shall cease, except for the Accrued Obligations.
10.    Disciplinary & Grievance Procedures. The disciplinary and grievance procedures applicable to the Executive’s employment can be found on the Company’s Intranet. These procedures do not form part of your contract of employment. If the Executive wishes to appeal against a disciplinary decision, he may apply in writing in accordance with the disciplinary
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procedure. If the Executive wishes to raise a grievance he may apply in writing in accordance with our grievance procedure.
11.    Change of Control.
(a)    Termination without Cause or Resignation for Good Reason in connection with a Change of Control. Notwithstanding anything to the contrary herein, if there is both a Change of Control and the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason during the period commencing on the date that is two months prior to (or the earlier date of execution of a definitive agreement with respect to such Change of Control) and ending twelve (12) months following such Change of Control (a “CIC Termination”), then, in addition to the Accrued Obligations, the Executive shall be entitled to receive the following:
(i)    Severance benefits in an amount equal to one times (1x) the sum of the Executive’s Base Salary plus the Executive’s Target Incentive Bonus in effect immediately prior to the Executive’s termination date, which amount shall be paid in regular payroll installments over the applicable twelve (12) month period following the Executive’s termination date; and
(ii)    All outstanding equity grants held by the Executive immediately prior to the CIC Termination which vest based upon the Executive’s continued service over time shall accelerate, become fully vested and/or exercisable, as the case may be, as of the later of (A) the date of the CIC Termination and (B) the consummation of a Change of Control (the later of (A) or (B) the “CIC Vesting Event”). All outstanding equity grants held by the Executive immediately prior to the CIC Termination which vest based upon attainment of performance criteria shall accelerate, become vested and/or exercisable, as the case may be, as of the date of the CIC Vesting Event at the greater of (x) the target level of performance and (y) the actual level of performance through the CIC Vesting Event. Notwithstanding anything to the contrary in this Section 11(a)(ii), all performance stock unit awards (PSUs) will be subject exclusively to the “change of control” vesting provisions, if any, set forth in the award agreement for such PSU.
    The foregoing severance benefits shall be subject to the Executive’s execution and non-revocation of the Release and the Executive’s continued compliance with the provisions of Section 14 below, and the Restrictive Covenant Agreements, as applicable.

12.    Definitions.
(a)    Cause. For purposes of this Agreement, “Cause” shall mean any of the following grounds for termination of the Executive’s employment listed: (i) the Executive’s knowing and material dishonesty or fraud committed in connection with the Executive’s employment; (ii) theft, misappropriation or embezzlement by the Executive of the Company’s funds and/or property; (iii) the Executive repeatedly negligently performing or repeatedly negligently failing to perform, or willfully refusing to perform, the Executive’s duties to the Company (other than a failure resulting from Executive’s incapacity due to physical or mental
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illness); (iv) the Executive’s conviction of or a plea of guilty to any crime involving fraud or misrepresentation, or any other crime (whether or not connected with his employment) the effect of which is likely to adversely affect the Company or its affiliates; (v) a material breach by the Executive of any of the provisions or covenants set forth in this Agreement; or (vi) a material breach by the Executive of the Company’s Code of Conduct. Prior to any termination for Cause pursuant to each such event listed in (i), (iii), (v) or (vi) above, to the extent such event(s) is capable of being cured by the Executive, the Company shall give the Executive written notice thereof describing in reasonable detail the circumstances constituting Cause and the Executive shall have the opportunity to remedy same within thirty (30) days after receiving written notice.
(b)    Change of Control. For purposes of this Agreement, a “Change of Control” shall have the same meaning ascribed to such term under the Company’s 2019 Omnibus Incentive Compensation Plan, as in effect on the date hereof and as may be amended from time to time, or such successor plan.
(c)    Disability. For purposes of this Agreement, “Disability” shall mean the Executive has been unable to perform the essential functions of the Executive’s position with the Company by reason of physical or mental incapacity for a period of six consecutive months, subject to any obligations or limitations imposed by federal, state or local laws, including any duty to make any reasonable adjustments under the Equality Act 2010.
(d)    Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of one or more of the following, without the Executive’s consent: (i) a material diminution in the Executive’s Base Salary; or (ii) any action or inaction that constitutes a material breach by the Company of a material provision of this Agreement. The Executive must provide written notice of termination for Good Reason to the Company within thirty (30) days after the event constituting Good Reason first occurs, which notice shall state such Good Reason in reasonable detail. The Company shall have a period of thirty (30) days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in the Executive’s notice of termination. If the Company does not correct the act or failure to act, the Executive must terminate the Executive’s employment for Good Reason within sixty (60) days after the end of the cure period, in order for the termination to be considered a Good Reason termination.
(e)    Target Incentive Bonus. For purposes of this Agreement, “Target Incentive Bonus” shall mean the Executive’s target annual incentive bonus amount (measured at the target level, identified “goal” target or other similar target, without taking into account any incentive override for above goal performance, or any project-specific or other non-standard incentives) as in effect under the Company’s applicable annual incentive plan for the year of termination. For fiscal year 2020, the Target Incentive Amounts shall include the Annual Bonus and the Special 2020 Bonus.
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13.    Representations, Warranties and Covenants of the Executive.
(a)    Restrictions. The Executive represents and warrants to the Company that:
(i)    There are no restrictions, agreements or understandings whatsoever to which the Executive is a party which would prevent or make unlawful the Executive’s execution of this Agreement or the Executive’s employment hereunder, which is or would be inconsistent or in conflict with this Agreement or the Executive’s employment hereunder, or would prevent, limit or impair in any way the performance by the Executive of the obligations hereunder; and
(ii)    The Executive has disclosed to the Company all restraints, confidentiality commitments, and other employment restrictions that the Executive has with any other employer, person or entity.
(b)    Obligations to Former Employers. The Executive covenants that in connection with the Executive’s provision of services to the Company, the Executive shall not breach any obligation (legal, statutory, contractual, or otherwise) to any former employer or other person, including, but not limited to, obligations relating to confidentiality and proprietary rights.
(c)    Obligations Upon Termination. Upon and after the Executive’s termination or cessation of employment with the Company and until such time as no obligations of the Executive to the Company hereunder exist, the Executive shall (i) provide a complete copy of the Restrictive Covenant Agreements to any person, entity or association which the Executive proposes to be employed, affiliated, engaged, associated or to establish any business or remunerative relationship prior to the commencement of any such relationship and (ii) shall notify the Company of the name and address of any such person, entity or association prior to the commencement of such relationship.
14.    Restrictive Covenant Agreements. The Executive agrees to be bound by the terms of the Restrictive Covenant Agreements, each of which are incorporated by reference herein. The provisions of the Restrictive Covenant Agreements shall survive the term of this Agreement pursuant to the terms set forth in the Invention and Non-Disclosure Agreement and/or Non-Competition and Non-Solicitation Agreement, as applicable.
15.    Miscellaneous Provisions.
(a)    Entire Agreement; Amendments.
(i)    This Agreement and the other agreements referred to herein contain the entire agreement between the Parties hereto and supersede any and all prior agreements and understandings concerning the Executive’s employment by the Company. There is no collective agreement that affects the Executive’s employment.
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(ii)    This Agreement shall not be altered or otherwise amended, except pursuant to an instrument in writing signed by each of the Parties hereto.
(b)    Descriptive Headings. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provisions of this Agreement. When the context admits or requires, words used in the masculine gender shall be construed to include the feminine, the plural shall include the singular, and the singular shall include the plural.
(c)    Notices. All notices or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(i)    if to the Company, to:
    7 Custom House Street, Suite 2
    Portland, ME 04101
    Attention: General Counsel


(ii)    if to the Executive, to the address in the Company’s personnel records.
All such notices and other communications shall be deemed to have been delivered and received (A) in the case of personal delivery, on the date of such delivery, (B) in the case of delivery by telecopy, on the date of such delivery, (C) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch, and (D) in the case of mailing, on the third Business Day following such mailing. As used herein, “Business Day” shall mean any day that is not a Saturday, Sunday or a day on which banking institutions in the state of Maine are not required to be open.
(d)    Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. This Agreement may be executed and delivered by facsimile.
(e)    Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of England & Wales applicable to contracts made and performed wholly therein without regard to rules governing conflicts of law.
(f)    Non-Exclusivity of Rights; Resignation from Boards; Clawback.
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(i)    Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in or rights under any benefit, plan or program provided by the Company and for which the Executive may qualify; provided, however, that, the Executive hereby waives the Executive’s right to receive payments under any severance plan or similar program applicable to employees of the Company.
(ii)    If the Executive’s employment with the Company terminates for any reason, the Executive shall immediately resign from all boards of directors of the Company, any affiliates of the Company and any other entities for which the Executive serves as a representative of the Company and any committees thereof.
(iii)    The Executive agrees that the Executive will be subject to any compensation claw back, recoupment and anti-hedging policies that may be applicable to the Executive as an executive of the Company, as in effect from time to time and as approved by the board of directors of the Company or a duly authorized committee thereof.
(g)    Benefits of Agreement; Assignment. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the Parties hereto, except that the duties and responsibilities of the Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within fifteen (15) days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place and the Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Sections 13 or 14, will continue to apply in favor of the successor.
(h)    Waiver of Breach. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.
(i)    Severability. In the event that any provision of this Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding effect and enforce ability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the Parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not invalidate or render unenforceable such provision in any other jurisdiction.
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(j)    Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. The Executive acknowledges that in the event of a breach of any of the Executive’s covenants contained in Sections 13 or 14, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim.
(k)    Survival. The respective rights and obligations of the Parties hereunder shall survive the termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
(l)    Jurisdiction. Each of the Parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the courts of England & Wales, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any related agreement or for recognition or enforcement of any judgment. Each of the Parties hereto hereby irrevocably and unconditionally agrees that jurisdiction and venue in such courts would be proper, and hereby waive any objection that such courts are an improper or inconvenient forum. Each of the Parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of the Parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any related agreement in any court in England & Wales. Each of the Parties hereto irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(m)    Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.
(n)    Indemnification. The Company hereby agrees, to the maximum extent permitted by law, to indemnify and hold the Executive harmless against any costs and expenses, including reasonable attorneys’ fees, judgments, fines, settlements and other amounts incurred in connection with any proceeding arising out of, by reason of or relating to the Executive’s good faith performance of the Executive’s duties and obligations with the Company. The Company shall also provide the Executive with coverage as a named insured under a directors and officers liability insurance policy maintained for the Company’s directors and officers. This obligation to provide insurance and indemnify the Executive shall survive expiration or termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions of
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the Executive occurring during the Executive’s employment with the Company or with any of its affiliates. Such obligations shall be binding upon the Company’s successors and assigns and shall inure to the benefit of the Executive’s heirs and personal representatives.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.

By: /s/ Benjamin Wolin            
Name: Benjamin Wolin
Title: President and CEO

EXECUTIVE
By: /s/ Michael Ellis                                                                     

Michael Ellis

















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Schedule I

Base Salary and earned Annual Bonus Conversion from USD to GBP

In furtherance of Paragraph 2 of the Agreement, on or before January 15th of each year during the Term, the treasury department of the Company shall establish the exchange rate (FX), employing a six-month look back, which shall be used to convert the Executive’s Base Salary, and Annual Bonus, if any, from US dollars (USD) to pound sterling (GBP) for the ensuing



EXHIBIT A


INVENTION AND NON-DISCLOSURE AGREEMENT

This Agreement is made by and between Covetrus, Inc. a Delaware corporation (hereinafter referred to collectively with its subsidiaries as the “Company”) and Michael Ellis (the “Employee”).    In consideration of the employment or the continued employment of the Employee by the Company, the Company and the Employee agree as follows:

1.    Condition of Employment. The Employee’s employment and the continuance of that employment with the Company is contingent upon Employee’s agreement to sign and adhere to the provisions of this Agreement. The Employee further acknowledges that the nature of the Company’s business is such that protection of its proprietary and confidential information is critical to the business’ survival and success.

2.    Proprietary and Confidential Information.

a.    The Employee understands and acknowledges during the course of employment by the Company, he/she will have access to and learn about confidential, strategic, secret, and proprietary documents, materials, data, and other information, in tangible and intangible form, of and relating to the Company and its businesses and existing and prospective customers, suppliers, investors, and other associated third parties (referred to herein as “Proprietary Information”), which Proprietary Information is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include discoveries, inventions, products, product improvements, product enhancements, processes, methods, techniques, formulas, compositions, compounds, negotiation strategies and positions, projects, developments, plans (including sales costs, profits, pricing methods), personnel data, computer programs (including software used pursuant to a license agreement), customer, prospect and supplier lists and contacts. The Employee understands that the above list is not exhaustive, and that Proprietary Information also includes any information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. Proprietary Information also includes trade secrets (whether owned by the Company or a third party) as defined under the United States Defend Trade Secrets Act of 2016, 18 U.S.C. Chapter 90.

b.    Employee covenants, both during and after his/her employment with the Company: (i) to treat all Proprietary Information as strictly confidential and use best efforts to safeguard and prevent unauthorized access, use or disclosure of Proprietary Information; (ii) not to directly or indirectly disclose, publish, communicate or make available any Proprietary Information to any person or entity other than employees of the Company (on a need-to-know basis) or use the same for any purpose other than in the performance of his/her duties as an employee of the Company) without prior written approval of the Company; and (iii) not to copy any documents, records,
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files, media, or other resources containing any Proprietary Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company except in the performance of his/her duties as an employee of the Company.

c.    All files, documents, letters, memoranda, reports, records, data, sketches, drawings, models, laboratory notebooks, program listings, computer equipment or devices, computer programs or other written, photographic, or other tangible or intangible material containing Proprietary Information, whether created by the Employee or others, which shall come into his/her custody or possession, shall be Proprietary Information and are the exclusive property of the Company to be used by the Employee only in the performance of his/her duties for the Company and shall not be copied or removed from the Company premises except in the pursuit of the business of the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of the Employee shall be delivered to the Company, upon the earlier of the (i) a request by the Company or (ii) termination of his/her employment. After such delivery, the Employee shall not retain any such materials or copies thereof or any such tangible property.

d.    Nothing in this Agreement shall be construed to prevent disclosure of Proprietary Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation or order. If allowed by law, the Employee shall promptly provide written notice of any such order to an authorized officer of the Company.

e.    Employee’s obligations under this Agreement with regard to any particular Proprietary Information will commence immediately upon the Employee first having access to such Proprietary Information (whether before or after he/she begins employment by the Company) and shall continue during and after employment by the Company until such time as such Proprietary Information has become public knowledge other than as a result of the Employee's breach of this Agreement or breach by those acting in concert with the Employee or on the Employee's behalf.

3.    Developments.

a.    The Employee will make full and prompt disclosure to the Company of all discoveries, inventions, improvements, enhancements, processes, methods, techniques, research, developments, ideas, concepts, software, works of authorship, and all other work product of any nature whatsoever, whether patentable or not, which are created, made, authored, amended, conceived, or reduced to practice by him/her or under his/her direction or jointly with others during his/her employment by the Company, whether or not during normal working hours or on the premises of the Company (all of which are collectively referred to in this Agreement as “Developments”).

b.    The Employee acknowledges that the Company is and shall be the owner of all right, title and interest in and to the Developments, including all patents, trademarks, trade secrets,
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copyrights and other intellectual property rights or proprietary rights embodied therein or related thereto (“IP Rights”). In any event, for no additional consideration, Employee agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all of his/her right, title, and interest throughout the world in and to all Developments, including all IP Rights, effective as of the date and time of creation of such Developments, and including any goodwill and the right to sue for damages and other relief for any past, present, and future infringement of the foregoing.

c.    Paragraph 3(b) shall not apply to Developments which do not relate to the business or contemplated business, products, or research and development conducted or planned to be conducted by the Company at the time such Development is created, made, conceived or reduced to practice and which are made and conceived by the Employee not during normal working hours, not on the Company’s premises and not using the Company’s tools, devices, equipment or Proprietary Information. The Employee understands that, to the extent this Agreement shall be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, paragraph 3(b) shall be interpreted not to apply to any invention which a court rules and/or the Company agrees fall within such classes. Employee hereby irrevocably waives, to the extent permitted by applicable law, or otherwise agrees not to enforce, any and all claims the Employee may now or hereafter have in any jurisdiction to all rights of paternity, integrity, disclosure, and withdrawal and any other rights that may be known as "moral rights" with respect to all Developments and all IP Rights therein. Employee understands that this Agreement does not, and shall not be construed to, grant to Employee any license or right of any nature with respect to any Developments or IP Rights or any Proprietary Information, materials, software, or other tools made available to him/her by Company.

d.    The Employee has attached as Schedule I to this Agreement a list describing with particularity any IP Rights owned by the Employee, whether solely or jointly with any third party, that were created or invented by the Employee prior to the period of his/her employment with the Company and that relate in any way to the business or contemplated business, products, activities, or research and development of the Company (the “Pre-Existing IP Rights”). The Pre- Existing IP Rights shall be retained by the Employee and shall not be owned by or assigned to the Company under this Agreement. If no list of Pre-Existing IP Rights is attached as Schedule I, the Employee represents that there are no Pre-Existing IP Rights. To the extent that the Employee incorporates any Pre-Existing IP Rights into any Developments during the period of his/her employment with the Company, the Employee hereby irrevocably grants to the Company a royalty-free, fully paid-up, perpetual, transferable, worldwide non-exclusive license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, offer to sell, sell, import, and otherwise distribute such Pre-Existing IP Rights as part of or in connection with such Developments and the operation of the Company’s business, and to practice any method related thereto. Employee shall not incorporate any Pre-Existing IP Rights or any IP Rights that are owned by any third party, including any previous employer, into any Developments without obtaining the prior written consent of the Company.

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e.    The Employee agrees to cooperate fully with the Company, both during and after his/her employment with the Company, with respect to the procurement, maintenance and enforcement of copyrights, patents and other IP Rights (both in the United States and foreign jurisdictions) relating to Developments. The Employee shall sign all papers, including, without limitation, copyright applications, patent applications, declaration, oaths, formal assignments, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Development and such IP Rights. The Employee further agrees that if the Company is unable, after reasonable effort, to secure the signature of the Employee on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the agent and attorney-in-fact of the Employee, and the Employee hereby irrevocably designates and appoints each executive officer of the Company as his/her agent and attorney-in-fact to execute any such papers on his/her behalf, and take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Development and related IP Rights, under the conditions described in this sentence. The foregoing power of attorney is coupled with an interest and shall not be impacted by the Employee's subsequent incapacity.

4.    Other Agreements. The Employee represents that, except as the Employee has disclosed in writing to the Company and set forth on Schedule I, the Employee is not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of his/her employment with the Company, to refrain from competing, directly or indirectly, with the business of such previous employer or any other party or to refrain from soliciting employees, customers or suppliers of such previous employer or other party. The Employee further represents that his/her performance of all the terms of this Agreement and the performance of his/her duties as an employee of the Company do not and will not conflict with or breach any agreement with any prior employer or other party to which the Employee is a party (including without limitation any nondisclosure or non-competition agreement), that the Employee will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others, and that the Developments will not infringe, misappropriate, or otherwise violate the IP Rights or any other rights of any third party.


5.    Publicity. Employee hereby consents to any and all uses and displays, by the Company and its agents, of the Employee's name, voice, likeness, image, appearance, biographical information and other personal characteristics in, on or in connection with any pictures, photographs, audio, and video recordings, digital images, websites, television programs, and advertising and all other printed and electronic forms and media throughout the world, whether now known or later created, at any time during or after the period of employment by the Company, for all legitimate business purposes of the Company ("Permitted Uses"). Employee hereby forever releases the Company and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of employment by the Company, in connection with any Permitted Use.

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6.    Non-disparagement. Employee agrees and covenants that he/she will not at any time make, publish, or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company products or services and existing and prospective customers, suppliers, investors, and other associated third parties, or make any maliciously false statements about the Company employees and officers.

7.    Acknowledgment. Employee acknowledges and agrees that the services to be rendered by him/her to the Company are of a special and unique character; that the Employee will obtain knowledge and skill relevant to the Company's industry, methods of doing business, and marketing strategies by virtue of the Employee's employment; and that the terms and conditions of this Agreement are reasonable under these circumstances. Employee further acknowledges that the amount of his/her compensation reflects, in part, his/her obligations and the Company's rights under this Agreement; that he/she has no expectation of any additional compensation, royalties, or other payment of any kind not otherwise referenced herein; and that he/she will not be subject to undue hardship by reason of his/her full compliance with the terms and conditions of this Agreement or the Company's enforcement thereof.

8.    Miscellaneous.

a.    Equitable Remedies. The restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of this Agreement is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Employee agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Agreement without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. Employee hereby waives the adequacy of a remedy at law as a defense to such relief.

b.    Obligations to Third Parties. The Employee acknowledges and represents that this agreement and the Employee’s employment with the Company will not violate any continuing obligation the Employee has to any former employer or other third party.

c.    Disclosure of this Agreement. The Employee hereby authorizes the Company to notify others, including but not limited to customers of the Company and any of the Employee’s future employers or prospective business associates, of the terms and existence of this Agreement and the Employee’s continuing obligations to the Company hereunder.

d.    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Company’s assets or business, provided, however, that the obligations of the Employee are personal and shall not be assigned by him or her. The Employee expressly consents to be bound by the provisions of this
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Agreement for the benefit of the Company or any subsidiary or affiliate thereof to whose employ the Employee may be transferred without the necessity that this Agreement be re-signed at the time of such transfer.

e.    Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.

f.    Waivers. No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

g.    Governing law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding which is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the State of Maine (or, if appropriate, a federal court located within Maine), and the Company and the Employee each consents to the exclusive jurisdiction of such a court.

h.    Entire Agreement; Amendment. This Agreement, and Schedule I attached hereto and made part hereof, supersedes all prior agreements, written or oral, between the Employee and the Company relating to the subject matter of this Agreement. This Agreement may not be modified, changed, or discharged in whole or in part, except by an agreement in writing signed by the Employee and the Company. The Employee agrees that any change or changes in his/her duties, salary or compensation after the signing of this Agreement shall not affect the validity or scope of this Agreement.

i.    Waiver of Jury Trial. The Company and the Employee each hereby irrevocably waive any right to a trial by jury in any action, suit, or other legal proceeding arising under or relating to any provision of this Agreement.
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j.    Captions. The captions of sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

k.    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile, email in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document has the same effect as delivery of an executed original of this Agreement.

THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT (INCLUDING SCHEDULE I) AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
                    
Employee Company Representative
Michael Ellis Benjamin Shaw
Printed Name Printed Name
/s/ Michael Ellis /s/ Benjamin Shaw
Signature Signature
5th February 2019 5th February 2019
Date Date
















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Schedule I
Invention and Non-Disclosure Agreement

1.    The following is a complete list of all IP Rights that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company.


2.    The following is a complete list of all agreement with any previous employer or other party which restricts in any way my use or disclosure of information or my engagement in any business on behalf of the Company. I have delivered to the Company true and complete copies of any agreements listed below.


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EXHIBIT B    
NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Agreement is made between Covetrus, Inc. a Delaware corporation (hereinafter referred to collectively with its subsidiaries as the “Company”) and Michael Ellis (the “Employee”). For good consideration, including but not limited to the employment or continued employment of the Employee by the Company, the Employee and the Company agree as follows:

1.    Acknowledgements. Employee understands and acknowledges that the nature of Employee’s position gives him/her access to and knowledge of confidential, strategic, secret, and proprietary documents, materials, data, and other information, in tangible and intangible form, of and relating to the Company and its businesses and existing and prospective customers, suppliers, investors, and other associated third parties (referred to herein as “Proprietary Information” and as further defined in the Invention and Non-Disclosure Agreement between the Employee and the Company) and places him/her in a position of trust and confidence with the Company. Employee understands and acknowledges that the intellectual, artistic, proprietary, creative, or inventive services he/she provides to the Company are unique, special or extraordinary because they directly relate to the development, production, marketing, and sales of the Company’s products and services and are unknown to the Company’s competitors. Employee further understands and acknowledges that the Company’s ability to reserve its Proprietary Information, in addition to its goodwill, for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by Employee is likely to result in unfair or unlawful competitive activity.

2.    Non-Competition and Non-Solicitation. While the Employee is employed by the Company and for a period of one year after the termination or cessation of such employment for any reason, the Employee will not (i) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as hereinafter defined) directly competing with the business of the Company, whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or other participant in any Competing Business, (ii) assist others in engaging in any Competing Business in the manner described in clause (i) above, (iii) induce or solicit other employees or consultants of the Company (including any individual who was employed or engaged as an independent contractor during the three- month period immediately prior to such inducement or solicitation) with whom the Employee had material contact during the 12 months before the termination of the Employee’s employment with the Company to terminate or alter their employment or service relationship with the Company or hire any such individual or (iv) induce or solicit any other entity or person with which the Company has a business relationship and with whom the Employee had material contact during the 12 months before the termination of the Employee’s employment with the Company to terminate or alter such business relationship with the Company. As used herein, “Competing Business” shall mean any (i) business in which the Company engages, including, without limitation, as a technology-enabled service and supply chain provider of veterinary solutions, veterinary software and client engagement services, veterinary pharmacy services and other animal health products and
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services, and (ii) any additional substantive business activities with respect to which the Company is, at the time of termination of the Employee’s employment, taking, or has taken, steps to engage in or pursue, and, with respect to the activities described in each of (i) and (ii), which the Employee directly or indirectly oversees, or in which the Employee participates or has otherwise had material involvement, in each case during the 12 months before termination of the Employee’s employment with the Company. Notwithstanding the foregoing restrictions, it shall not be a violation of this Section 2 for the Employee to own a three (3%) percent or smaller interest in any corporation required to file period reports with the United States Securities and Exchange Commission, so long as the Employee performs no services for and does not lend any assistance to such corporation. If the Employee violates the provisions of this Section 2, the Employee shall continue to be bound by the restrictions set forth in such section until a period of one year has expired without any violation of such provisions.

3.    Miscellaneous.

a.    Equitable Remedies. The restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such a purpose. The Employee agrees that any breach of this Agreement is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any such breach or threatened breach, the Employee agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Agreement without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. Employee hereby waives the adequacy of a remedy at law as a defense to such relief.

b.    Obligations to Third Parties. The Employee acknowledges and represents that this agreement and the Employee’s employment with the Company will not violate any continuing obligation the Employee has to any former employer or other third party.

c.    Disclosure of this Agreement. The Employee hereby authorizes the Company to notify others, including but not limited to customers of the Company and any of the Employee’s future employers or prospective business associates, of the terms and existence of this Agreement and the Employee’s continuing obligations to the Company hereunder.


d.    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to the Company’s assets or business, provided, however, that the obligations of the Employee are personal and shall not be assigned by him or her. The Employee expressly consents to be bound by the provisions of this Agreement for the benefit of the Company or any subsidiary or affiliate thereof to whose employ the Employee may be transferred without the necessity that this Agreement be re-signed at the time of such transfer.
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e.    Interpretation. If any restriction set forth in Section 2 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

f.    Severability. In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality, and enforce ability of the remaining provisions shall in no way be affected or impaired thereby.


g.    Waivers. No delay or omission by the Com p any in exercising any right under this Agreement will operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

h.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without reference to the conflicts of laws provisions t hereof). Any action, suit, or other legal proceeding which is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the State of Maine (or, if appropriate, a federal court located within Maine), and the Company and the Employee each consents to the jurisdiction of such a court.

i.    Waiver of Jury Trial. The Company and the Employee each hereby irrevocably waive any right to a trial by jury in any action, suit, or other legal proceeding arising under or relating to any provision of this Agreement.

j.    Entire Agreement Amendment. This Agreement supersedes all prior agreements, written or oral, between the Employee and the Company relating to the subject matter of this Agreement. This Agreement may not be modified, changed, or discharged in whole or in part, except by an agreement in writing signed by the Employee and the Company. The Employee agrees that any change or changes in his/her duties,salary, or compensation after signing this Agreement shall not affect the validity or scope of this Agreement.

k.    Captions. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

I.    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile, email in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document has the same effect as delivery of an executed original of this Agreement.
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THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT

Employee Company Representative
Michael Ellis Benjamin Shaw
Printed Name Printed Name
/s/ Michael Ellis /s/ Benjamin Shaw
Signature Signature
5th February 2019 5th February 2019
Date Date



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EXHIBIT 10.2

COVETRUS, INC. 2019 OMNIBUS INCENTIVE COMPENSATION PLAN
AMENDED
TRANSFORMATION PERFORMANCE STOCK UNIT AGREEMENT
This AMENDED TRANSFORMATION PERFORMANCE STOCK UNIT AGREEMENT (the “Agreement”), dated as of_________, is delivered by Covetrus, Inc. (the “Company”) to the person to whom this Agreement is made pursuant to the terms of the Plan (the “Participant”).
The Company awarded Participant transformation performance stock units pursuant to a Transformation Performance Stock Unit Agreement and a Transformation Performance Stock Unit Award Statement in 2020 (collectively, the “Original Agreements”). The Company and Participant desire to amend the Original Agreements with respect to the 2021 and 2022 Performance Periods (as defined below). This Agreement does not affect the 2020 Performance Period, and any award amount for the 2020 Performance Period shall be calculated and paid according to the terms of the Original Agreements.
This Agreement amends the Original Agreements with respect to the 2021 Performance Period and 2022 Performance Period and sets forth the amended terms of the transformation performance stock unit award with respect to such Performance Periods.
RECITALS
The Covetrus, Inc. 2019 Omnibus Incentive Compensation Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. The Committee made a grant of restricted stock units with specific performance criteria as an inducement for the Participant to perform against transformational adjusted EBITDA run rates established by the Company for the first performance period (i.e., January 1, 2020 through December 31, 2020) (“2020 Performance Period”) and against adjusted EBITDA for the second and third performance periods (i.e., January 1, 2021 through December 31, 2021 and January 1, 2022 through December 31, 2022) (“2021 Performance Period” and “2022 Performance Period,” respectively). The term “Performance Period” means the 2020 Performance Period, 2021 Performance Period or 2022 Performance Period, as applicable. This Agreement is made pursuant to the Plan and is subject in its entirety to all applicable provisions of the Plan. Capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.
1.    Grant of PSUs. Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company made a grant of performance restricted stock units to the Participant with a target value as described on Exhibit A hereto, subject to the restrictions set forth below and in the Plan (the “PSUs”). Each PSU represents the right of the Participant to receive a share of common stock of the Company (“Company Stock”) on the applicable payment date set forth in Section 5 below.


2.    Stock Unit Account. PSUs represent hypothetical shares of Company Stock, and not actual shares of stock. The Company shall establish and maintain a Stock Unit account, as a bookkeeping account on its records, for the Participant and shall record in such account the number of PSUs granted to the Participant. No shares of Company Stock shall be issued to the Participant at the time the grant is made, and the Participant shall not be, and shall not have any of the rights or privileges of, a stockholder of the Company with respect to any PSUs recorded in the Stock Unit account. The Participant shall not have any interest in any fund or specific assets of the Company by reason of this award or the Stock Unit account established for the Participant.
3.    Vesting. The PSUs shall become vested in accordance with the terms and conditions set forth on Exhibit A, which are incorporated herein by reference.
4.    Termination of PSUs. Except as set forth in this Agreement, if the Participant ceases to be employed by, or provide service to, the Employer for any reason before any of the PSUs vest, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of employment or service. No payment shall be made with respect to any unvested PSUs that terminate as described in this Section 4.
5.    Payment of PSUs and Tax Withholding.
(a)    If and when the PSUs vest, the Company shall issue to the Participant one share of Company Stock for each vested PSU. Subject to Sections 5(b) and 13 below, payment shall be made within the period set forth on Exhibit A with respect to the applicable Performance Period.
(b)    All obligations of the Company under this Agreement shall be subject to the rights of the Employer as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable. At such time as the Committee may determine in its discretion under the Plan, at the time of payment in accordance with Section 5(a) above, or if applicable, at the time the PSUs vest, the number of shares issued to the Participant may be reduced by a number of shares of Company Stock with a Fair Market Value (measured as of the vesting date) equal to an amount of the FICA, federal income, state, local and other tax liabilities required by law to be withheld with respect to the payment of the PSUs. To the extent not withheld in accordance with the immediately preceding sentence, the Participant shall be required to pay to the Employer, or make other arrangements satisfactory to the Employer to provide for the payment of, any federal, state, local or other taxes that the Employer is required to withhold with respect to the PSUs.
(c)    The obligation of the Company to deliver Company Stock shall also be subject to the condition that if at any time the Board shall determine in its discretion that the listing, registration or qualification of the shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares, the shares may not be issued in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. The issuance of shares, if any, to the Participant pursuant to this Agreement is subject to any applicable taxes
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and other laws or regulations of the United States or of any state, municipality or other country having jurisdiction thereof.
6.    No Stockholder Rights; Dividend Equivalents. Neither the Participant, nor any person entitled to receive payment in the event of the Participant’s death, shall have any of the rights and privileges of a stockholder with respect to shares of Company Stock, including voting or dividend rights, until certificates for shares have been issued upon payment of PSUs. The Participant acknowledges that no election under Section 83(b) of the Code is available with respect to PSUs. Notwithstanding the foregoing, the Committee may grant to the Participant Dividend Equivalents on the shares underlying the PSUs prior to the vesting date, which shall be credited to the Stock Unit account for the Participant and will be paid or distributed in in accordance with this Agreement and the Plan.
7.    Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and payment of the PSUs are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the shares of Company Stock, (c) changes in capitalization of the Company and (d) other requirements of applicable law. The Committee shall have the authority to interpret and construe the PSUs pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
8.    No Employment or Other Rights. The grant of the PSUs shall not confer upon the Participant any right to be retained by or in the employ or service of any Employer and shall not interfere in any way with the right of any Employer to terminate the Participant’s employment or service at any time. The right of any Employer to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.
9.    Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Participant under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Participant, by will or by the laws of descent and distribution. In the event of any attempt by the Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of the PSUs or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the PSUs by notice to the Participant, and the PSUs and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.
10.    Applicable Law; Jurisdiction. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. Any action arising out of, or relating to, any of the provisions of this Agreement shall be brought only in the United
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States District Court for the District of Maine, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Portland, Maine, and the jurisdiction of such court in any such proceeding shall be exclusive. Notwithstanding the foregoing sentence, on and after the date a Participant receives shares of Company Stock hereunder, the Participant will be subject to the jurisdiction provision set forth in the Company’s bylaws.
11.    Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the General Counsel at the corporate headquarters of the Company, and any notice to the Participant shall be addressed to such Participant at the current address shown on the payroll of the Employer. Any notice shall be delivered by hand, or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service or by the postal authority of the country in which the Participant resides or to an internationally recognized expedited mail courier.
12.    Recoupment Policy. The Participant agrees that, subject to the requirements of applicable law, the PSUs, and the right to receive and retain any Company Stock covered by this Agreement, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of the Company in effect on the date of grant of Grant or that may be established thereafter.
13.    Application of Section 409A of the Code. This Agreement is intended to be exempt from or otherwise comply with the provisions of Section 409A of the Code. Notwithstanding the foregoing, if the PSUs constitute “deferred compensation” under Section 409A of the Code and the PSUs become vested and settled upon the Participant’s termination of employment, payment with respect to the PSUs shall be delayed for a period of six months after the Participant’s termination of employment if the Participant is a “specified employee” as defined under Section 409A of the Code and if required pursuant to Section 409A of the Code. If payment is delayed, the PSUs shall be settled and paid within thirty (30) days after the date that is six (6) months following the Participant’s termination of employment. Payments with respect to the PSUs may only be paid in a manner and upon an event permitted by Section 409A of the Code, and each payment under the PSUs shall be treated as a separate payment, and the right to a series of installment payments under the PSUs shall be treated as a right to a series of separate payments. In no event shall the Participant, directly or indirectly, designate the calendar year of payment. The Company may change or modify the terms of this Agreement without the Participant’s consent or signature if the Company determines, in its sole discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder. Notwithstanding the previous sentence, the Company may also amend the Plan or this Agreement or revoke the PSUs to the extent permitted by the Plan.
[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement.
                    COVETRUS, INC.


                                            
                    Name:
                    Title:

BY ACCEPTING THE PSU AWARD, THE PARTICIPANT AGREES TO BE BOUND BY THE TERMS OF THE PLAN AND THIS AGREEMENT, AND AGREES THAT ALL DECISIONS AND DETERMINATIONS OF THE COMMITTEE WITH RESPECT TO THE PSUS SHALL BE FINAL AND BINDING.

































5



EXHIBIT A
PSU TERMS
1.    Target PSUs. The target number of PSUs granted under the award is set forth in the Participant’s Transformation Performance Stock Unit Award Statement for this PSU grant.
2.    Vesting of PSUs.
a.    The PSUs are eligible to become earned and payable with respect to one third of the award based on performance for the 2020 Performance Period according to the terms of the Original Agreements.
b.    Subject to the terms of this Exhibit A, the PSUs shall be eligible to become earned with respect to one third of the award based on performance for each of the 2021 Performance Period and 2022 Performance Period pursuant to Section 3 below, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date (as defined below). Except as set forth in Section 5 below, there shall be no proportionate or partial vesting of PSUs. All earned awards ultimately vest at the Payment Date. The following terms of this Exhibit A shall apply to the 2021 Performance Period and 2022 Performance Period and shall supersede the terms of the Original Agreements with respect to the 2021 Performance Period and 2022 Performance Period.
3.    Performance Periods and Performance Goals. The PSUs shall vest for each of the 2021 Performance Period and the 2022 Performance Period based on the Company’s adjusted EBITDA for the applicable Performance Period as certified by the Committee (the “Performance Goal”), and continued employment or service through the Payment Date. The actual number of PSUs that may become vested may be more or less than that the target number, or even zero, based on the achievement of the Performance Goal over the Performance Period.
For purposes of this Agreement, the following terms shall have the meanings set forth below:
EBITDA: earnings before interest, taxes, depreciation and amortization, as determined under generally accepted accounting principles, applied on a basis consistent with prior financial statements.
Adjusted EBITDA: as reported in the Company’s financial statements, total segment (consolidated) adjusted EBITDA, within the Segment footnote, as filed with the Securities and Exchange Commission. Adjusted EBITDA shall be subject to such adjustments as the Committee deems appropriate in good faith to take into account events such as acquisitions, divestitures, and other unusual or infrequently occurring items.
6


4.    Achievement of Performance Goals. As soon as administratively practicable following the end of a Performance Period and no later than March 15 of the calendar year immediately following the end of each Performance Period, the Committee will determine whether and to what extent the Performance Goal has been met and certify the number of PSUs that may vest, if any. The number of PSUs that may vest with respect to each Performance Period shall be equal to (a) one third of the total Target Value, (b) multiplied by the weighting relative to each Performance Goal and the Earned Percentage for such Performance Goal.
The “Earned Percentage” for each of the Performance Goals shall be determined as follows; straight-line interpolation will be used for performance achievement between the Performance Levels for each of the Performance Periods.
2021 Performance Period (1/1/2021 through 12/31/2021)
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Earned as a
% of Target
[ ]% Maximum
Target Range
90% of Target
Threshold

2022 Performance Period (1/1/2022 through 12/31/2022)
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Earned as a
% of Target
[ ]% Maximum
Target Range
90% of Target
Threshold
*All numbers are in millions.
Any PSUs that are earned for a Performance Period will vest and be paid on the date specified by the Committee for payment of vested PSUs, which shall be between January 1 and March 15 of the calendar year immediately following the end of each Performance Period (each, a “Payment Date”), if the Participant continues to be employed by, or provide services to, the Employer through the Payment Date. If the Participant ceases to be employed by, or provide service to, the Employer for any reason before the Payment Date with respect to any Performance Period, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of employment or service, except as set forth in Section 5(b) below. No payment shall be made with respect to any unvested PSUs that terminate as described in this Section 4.
5.    Change of Control.
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a.    COC Amount. In the event of a Change of Control before the end of a Performance Period, the PSUs with respect to such Performance Period shall be eligible to vest with respect to a portion of the award that is eligible to vest with respect to such Performance Period, pro-rated for the portion of the Performance Period elapsed prior to the Change of Control, based on the actual achievement of the Performance Goals during such portion of the Performance Period, adjusted in such manner as the Committee shall determine in good faith (the “COC Amount”). Except as provided in Section 5(b) below, if the Participant ceases to be employed by, or provide service to, the Employer for any reason before the Change of Control, no payment shall be made with respect to any unvested PSUs.
The PSUs shall cease to vest based on performance as of the date of the Change of Control, and any unvested PSUs in excess of the COC Amount shall be forfeited. The COC Amount shall vest and be paid on the Payment Date for the applicable Performance Period, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date.
b.    Involuntary Termination Without Cause; Good Reason. In the event the Participant’s employment or service is involuntarily terminated by the Company without Cause or the Participant terminates for Good Reason (each as defined in the Participant’s employment agreement with the Company) within two months prior to the Change of Control or upon or after the Change of Control, but prior to the applicable Payment Date, the COC Amount shall become vested. Such vested PSUs shall be paid within thirty (30) days after the Participant’s termination of employment or service, or, if later, the date of the Change of Control, subject to the requirements of Section 409A of the Code. If the Participant ceases to be employed by, or provide service to, the Employer for any reason other than as described above in this subsection (b), no payment shall be made with respect to any COC Amount, and the unvested PSUs shall be forfeited. Notwithstanding the foregoing, if the Participant’s employment agreement with the Company has a pre-Change of Control protection period of three months, instead of two months, the reference above to “two months prior to a Change of Control” shall be changed to “three months prior to a Change of Control.”
c.    Employment Agreement. Notwithstanding anything in the terms of any employment agreement to the contrary, the terms of this Agreement with respect to vesting of PSUs in connection with a Change of Control shall supersede and replace the terms of any employment agreement with the Participant relating to vesting in connection with a Change of Control, and the Participant agrees to such replacement. For the avoidance of doubt, this Agreement does not supersede more favorable terms of an employment agreement relating to vesting in a situation where no Change of Control occurs, subject to the requirements of Section 409A.
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EXHIBIT 10.3

COVETRUS, INC. 2019 OMNIBUS INCENTIVE COMPENSATION PLAN
2021 PERFORMANCE STOCK UNIT GRANT AGREEMENT
This 2021 PERFORMANCE STOCK UNIT GRANT AGREEMENT (the “Agreement”), dated as of ___________ (the “Date of Grant”), is delivered by Covetrus, Inc. (the “Company”) to the person to whom this Agreement is made pursuant to the terms of the Plan (the “Participant”).
RECITALS
The Covetrus, Inc. 2019 Omnibus Incentive Compensation Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. The Committee has decided to make this grant of restricted stock units with specific performance criteria as an inducement for the Participant to perform against specific performance goals established by the Company. This Agreement is made pursuant to the Plan and is subject in its entirety to all applicable provisions of the Plan. Capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.
1.    Grant of PSUs. Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby makes a grant of performance restricted stock units to the Participant with a target number as set forth on Exhibit A hereto, subject to the restrictions set forth below and in the Plan (the “PSUs”). Each PSU represents the right of the Participant to receive a share of common stock of the Company (“Company Stock”) on the applicable payment date set forth in Section 5 below.
2.    Stock Unit Account. PSUs represent hypothetical shares of Company Stock, and not actual shares of stock. The Company shall establish and maintain a Stock Unit account, as a bookkeeping account on its records, for the Participant and shall record in such account the number of PSUs granted to the Participant. No shares of Company Stock shall be issued to the Participant at the time the grant is made, and the Participant shall not be, and shall not have any of the rights or privileges of, a stockholder of the Company with respect to any PSUs recorded in the Stock Unit account. The Participant shall not have any interest in any fund or specific assets of the Company by reason of this award or the Stock Unit account established for the Participant.
3.    Vesting. The PSUs shall become vested in accordance with the terms and conditions set forth on Exhibit A, which are incorporated herein by reference.
4.    Termination of PSUs. Except as set forth in this Agreement, if the Participant ceases to be employed by, or provide service to, the Employer for any reason before any of the PSUs vest, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of employment or service. No payment shall be made with respect to any unvested PSUs that terminate as described in this Section 4.


5.    Payment of PSUs and Tax Withholding.
(a)    If and when the PSUs vest, the Company shall issue to the Participant one share of Company Stock for each vested PSU. Subject to Sections 5(b) and 13 below and Exhibit A, payment shall be made within the period set forth on Exhibit A.
(b)    All obligations of the Company under this Agreement shall be subject to the rights of the Employer as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable. At such time as the Committee may determine in its discretion under the Plan, at the time of payment in accordance with Section 5(a) above, the number of shares issued to the Participant may be reduced by a number of shares of Company Stock with a Fair Market Value equal to an amount of the FICA, federal income, state, local and other tax liabilities required by law to be withheld with respect to the payment of the PSUs, as determined by the Company. To the extent not withheld in accordance with the immediately preceding sentence, the Participant shall be required to pay to the Employer, or make other arrangements satisfactory to the Employer to provide for the payment of, any federal, state, local or other taxes that the Employer is required to withhold with respect to the PSUs.
(c)    The obligation of the Company to deliver Company Stock shall also be subject to the condition that if at any time the Board shall determine in its discretion that the listing, registration or qualification of the shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares, the shares may not be issued in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. The issuance of shares, if any, to the Participant pursuant to this Agreement is subject to any applicable taxes and other laws or regulations of the United States or of any state, municipality or other country having jurisdiction thereof.
6.    No Stockholder Rights; Dividend Equivalents. Neither the Participant, nor any person entitled to receive payment in the event of the Participant’s death, shall have any of the rights and privileges of a stockholder with respect to shares of Company Stock, including voting or dividend rights, until certificates for shares have been issued upon payment of PSUs. The Participant acknowledges that no election under Section 83(b) of the Code is available with respect to PSUs. Notwithstanding the foregoing, the Committee may grant to the Participant Dividend Equivalents on the shares underlying the PSUs prior to the payment date, which shall be credited to the Stock Unit account for the Participant and will be paid when and to the extent the underlying PSUs vest and are paid in accordance with this Agreement and the Plan.
7.    Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and payment of the PSUs are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the shares of Company Stock, (c) changes in capitalization
2


of the Company and (d) other requirements of applicable law. The Committee shall have the authority to interpret and construe the PSUs pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
8.    No Employment or Other Rights. The grant of the PSUs shall not confer upon the Participant any right to be retained by or in the employ or service of any Employer and shall not interfere in any way with the right of any Employer to terminate the Participant’s employment or service at any time. The right of any Employer to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.
9.    Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Participant under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Participant, by will or by the laws of descent and distribution. In the event of any attempt by the Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of the PSUs or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the PSUs by notice to the Participant, and the PSUs and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.
10.    Applicable Law; Jurisdiction. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. Any action arising out of, or relating to, any of the provisions of this Agreement shall be brought only in the United States District Court for the District of Maine, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Portland, Maine, and the jurisdiction of such court in any such proceeding shall be exclusive. Notwithstanding the foregoing sentence, on and after the date a Participant receives shares of Company Stock hereunder, the Participant will be subject to the jurisdiction provision set forth in the Company’s bylaws.
11.    Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the General Counsel at the corporate headquarters of the Company, and any notice to the Participant shall be addressed to such Participant at the current address shown on the payroll of the Employer. Any notice shall be delivered by hand, or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service or by the postal authority of the country in which the Participant resides or to an internationally recognized expedited mail courier.
12.    Recoupment Policy. The Participant agrees that, subject to the requirements of applicable law, the PSUs, and the right to receive and retain any Company Stock covered by this Agreement, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to
3


the extent so provided under any “clawback” or similar policy of the Company in effect on the Date of Grant or that may be established thereafter.
13.    Application of Section 409A of the Code. This Agreement is intended to be exempt from or otherwise comply with the provisions of Section 409A of the Code. Notwithstanding the foregoing, if the PSUs constitute “deferred compensation” under Section 409A of the Code and the PSUs become vested and settled upon the Participant’s termination of employment, payment with respect to the PSUs shall be delayed for a period of six months after the Participant’s termination of employment if the Participant is a “specified employee” as defined under Section 409A of the Code and if required pursuant to Section 409A of the Code. If payment is delayed, the PSUs shall be settled and paid within thirty (30) days after the date that is six (6) months following the Participant’s termination of employment. Payments with respect to the PSUs may only be paid in a manner and upon an event permitted by Section 409A of the Code, and each payment under the PSUs shall be treated as a separate payment, and the right to a series of installment payments under the PSUs shall be treated as a right to a series of separate payments. In no event shall the Participant, directly or indirectly, designate the calendar year of payment. The Company may change or modify the terms of this Agreement without the Participant’s consent or signature if the Company determines, in its sole discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder. Notwithstanding the previous sentence, the Company may also amend the Plan or this Agreement or revoke the PSUs to the extent permitted by the Plan.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, effective as of the Date of Grant.
                    COVETRUS, INC.


                                            
                    Name:
                    Title:


BY ACCEPTING THE PSU AWARD, THE PARTICIPANT AGREES TO BE BOUND BY THE TERMS OF THE PLAN AND THIS AGREEMENT, AND AGREES THAT ALL DECISIONS AND DETERMINATIONS OF THE COMMITTEE WITH RESPECT TO THE PSUS SHALL BE FINAL AND BINDING.





4



EXHIBIT A
PSU VESTING AND PAYMENT TERMS
1.    Target PSUs. The target number of PSUs granted under the award is set forth below.
Participant Name: ______________________________
Award Type Performance Stock Units (PSU)
Grant Date
Total Target Number of PSUs
Target Number of PSUs for Performance Period: 01/01/2021 – 12/31/2021
Target Number of PSUs for Performance Period: 01/01/2022 – 12/31/2022
Target Number of PSUs for Performance Period: 01/01/2023 – 12/31/2023

2.    Vesting of PSUs. Subject to the terms of this Exhibit A, the PSUs shall be eligible to become earned with respect to one-third of the award based on performance for each of the Performance Periods (as defined below) ending on December 31, 2021, December 31, 2022 and December 31, 2023, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date (as defined below). All earned awards ultimately vest at the Payment Date.
3.    Performance Periods and Performance Goals. The PSUs shall be earned for each of the periods January 1, 2021–December 31, 2021, January 1, 2022–December 31, 2022, and January 1, 2023–December 31, 2023 (each, a “Performance Period”) based on the Company’s Revenue Growth Rate Percentage and Adjusted EBITDA Margin Percentage for each Performance Period as certified by the Committee (the “Performance Goals”). The actual number of PSUs that may be earned may be more or less than that the target number, or zero, based on the achievement of the Performance Goals over the applicable Performance Period.
For purposes of this Agreement, the following terms shall have the meanings set forth below:
EBITDA: earnings before interest, taxes, depreciation and amortization, as determined under generally accepted accounting principles, applied on a basis consistent with prior financial statements.
The Company’s Revenue Growth Rate Percentage and Adjusted EBITDA Margin Percentage shall be based on the Company’s financial statements, subject to such adjustments as the Committee deems appropriate in good faith to take into account events such as acquisitions, divestitures, and other unusual or infrequently occurring items.
Revenue: net sales as reported in the Company’s financial statements as filed with Securities and Exchange Commission.
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Revenue Growth Rate Percentage: Net sales as calculated Performance Period over Performance Period and divided by the net sales from the earlier of the Performance Periods.
Adjusted EBITDA: as reported in the Company’s financial statements, total segment (consolidated) adjusted EBITDA, within the Segment footnote, as filed with the Securities and Exchange Commission.
Adjusted EBITDA Margin Percentage: Adjusted EBITDA as percent of net sales for the Performance Period.
4.    Achievement of Performance Goals. As soon as administratively practicable following the end of a Performance Period, the Committee will determine whether and to what extent the Performance Goals have been met for the Performance Period and will certify the number of PSUs that are earned for the Performance Period. Any earned PSUs will vest if the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date. The number of PSUs that will be earned for each Performance Period shall be equal to (a) the target number of PSUs for that Performance Period (which is one-third of the total target number of PSUs), multiplied by (b) the weighting relative to each Performance Goal and the Earned Percentage for such Performance Goal for the Performance Period.
There are discrete Performance Goals for each of the three one-year Performance Periods. The “Earned Percentage” for each of the Performance Goals shall be determined based on the table below, with straight-line interpolation used for performance achievement between the Threshold and Maximum Performance Levels for each of the Performance Periods. PSUs earned, if any, for a Performance Period will remain unvested until paid on the Payment Date, subject to the Participant’s continued employment or service with the Employer through the Payment Date.


Performance Period #1 (1/1/2021 thru 12/31/2021) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum
6



Performance Period #2 (1/1/2022 thru 12/31/2022) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum

Performance Period #3 (1/1/2023 thru 12/31/2023) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum


Any PSUs that are earned for a Performance Period will vest and be paid on the date specified by the Committee for payment of vested PSUs after the final Performance Period, which shall be between January 1, 2024 and March 15, 2024 (the “Payment Date”), if the Participant continues to be employed by, or provide services to, the Employer through the Payment Date. If the Participant ceases to be employed by, or provide service to, the Employer for any reason before the Payment Date, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of employment or service, except as provided in Section 5(b) below. No payment shall be made with respect to any unvested PSUs that are forfeited or not earned.
5.    Change of Control
7


(a)    COC Amount. In the event of a Change of Control, the Committee shall calculate the number of PSUs that may vest under this Agreement on or after the Change of Control for each Performance Period (the “COC Amount”), as follows:
(i)    For any Performance Period that ended on or before the date of the Change of Control, the COC Amount is the number of PSUs calculated based on performance as described in Section 4 above.
(ii)     For the Performance Period in which the Change of Control occurs, and for any Performance Period that would otherwise begin after the Change of Control, the COC Amount is the target number of PSUs for that Performance Period.
The PSUs shall cease to vest based on performance as of the date of the Change of Control, and any PSUs in excess of the COC Amount shall be forfeited. The COC Amount for each Performance Period shall vest and be paid on the Payment Date, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date.
(b)    Involuntary Termination Without Cause; Good Reason. In the event the Participant’s employment or service is involuntarily terminated by the Company without Cause or the Participant terminates for Good Reason (each as defined in the Participant’s employment agreement with the Company) within two months prior to the Change of Control or upon or after the Change of Control, but prior to the Payment Date, a prorated portion of the COC Amount for each Performance Period shall become vested. The prorated portion shall be determined by multiplying the COC Amount for the applicable Performance Period by a fraction, the numerator of which is the number of days the Participant was employed by or in the service of the Company during the Performance Period and the denominator of which is 365. Such vested PSUs shall be paid within thirty (30) days after the Participant’s termination of employment or service, or, if later, the date of the Change of Control, subject to the requirements of Section 409A of the Code. If the Participant ceases to be employed by, or provide service to, the Employer for any reason other than as described above in this subsection (b), no payment shall be made with respect to any COC Amount, and the PSUs shall be forfeited. Notwithstanding the foregoing, if the Participant’s employment agreement with the Company has a pre-Change of Control protection period of three months, instead of two months, the reference above to “two months prior to a Change of Control” shall be changed to “three months prior to a Change of Control.”
(c) Employment Agreement. Notwithstanding anything in the terms of any employment agreement to the contrary, the terms of this Agreement with respect to vesting of PSUs in connection with a Change of Control shall supersede and replace the terms of any employment agreement with the Participant relating to vesting in connection with a Change of Control, and the Participant agrees to such replacement. For the avoidance of doubt, this Agreement does not supersede more favorable terms of an employment
8


agreement relating to vesting in a situation where no Change of Control occurs, subject to the requirements of Section 409A.
9



EXHIBIT 10.4

Non-U.S. Form

COVETRUS, INC. 2019 OMNIBUS INCENTIVE COMPENSATION PLAN
2021 PERFORMANCE STOCK UNIT GRANT AGREEMENT-
This 2021 PERFORMANCE STOCK UNIT GRANT AGREEMENT (the “Agreement”), dated as of___________ (the “Date of Grant”), is delivered by Covetrus, Inc. (the “Company”) to the person to whom this Agreement is made pursuant to the terms of the Plan (the “Participant”).
RECITALS
The Covetrus, Inc. 2019 Omnibus Incentive Compensation Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. The Committee has decided to make this grant of restricted stock units with specific performance criteria as an inducement for the Participant to perform against specific performance goals established by the Company. This Agreement is made pursuant to the Plan and is subject in its entirety to all applicable provisions of the Plan. Capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.
1.    Grant of PSUs. Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby makes a grant of performance restricted stock units to the Participant with a target number as set forth on Exhibit A hereto, subject to the restrictions set forth below and in the Plan (the “PSUs”). Each PSU represents the right of the Participant to receive a share of common stock of the Company (“Company Stock”) on the applicable payment date set forth in Section 5 below.
2.    Stock Unit Account. PSUs represent hypothetical shares of Company Stock, and not actual shares of stock. The Company shall establish and maintain a Stock Unit account, as a bookkeeping account on its records, for the Participant and shall record in such account the number of PSUs granted to the Participant. No shares of Company Stock shall be issued to the Participant at the time the grant is made, and the Participant shall not be, and shall not have any of the rights or privileges of, a stockholder of the Company with respect to any PSUs recorded in the Stock Unit account. The Participant shall not have any interest in any fund or specific assets of the Company by reason of this award or the Stock Unit account established for the Participant.
3.    Vesting. The PSUs shall become vested in accordance with the terms and conditions set forth on Exhibit A, which are incorporated herein by reference.
4.    Termination of PSUs. Except as set forth in this Agreement, if the Participant ceases to be employed by, or provide service to, the Employer for any reason before any of the PSUs vest, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the




Participant’s termination of employment or service. No payment shall be made with respect to any unvested PSUs that terminate as described in this Section 4.
5.    Payment of PSUs and Tax Withholding.
(a)    If and when the PSUs vest, the Company shall issue to the Participant one share of Company Stock for each vested PSU. Subject to Sections 5(b) and 13 below and Exhibit A, payment shall be made within the period set forth on Exhibit A.
(b)    All obligations of the Company under this Agreement shall be subject to the rights of the Employer as set forth in the Plan to withhold amounts required to be withheld, collected or accounted for with respect to any income taxes, employment taxes, social insurance, social security, national insurance contributions, other contributions, payroll taxes, payment on account obligations and other amounts (“Taxes”), if applicable. At such time as the Committee may determine in its discretion under the Plan, at the time of payment in accordance with Section 5(a) above, the number of shares issued to the Participant may be reduced by a number of shares of Company Stock with a Fair Market Value equal to an amount of Taxes required by law to be withheld, collected or accounted for with respect to the payment of the PSUs, as determined by the Company. If shares are withheld to cover the obligation for Taxes, then for tax purposes, the Participant shall be deemed to have been issued the full number of shares of Company Stock with respect to the vested PSUs, notwithstanding that a number of shares are held back for purposes of paying Taxes. To the extent not withheld in accordance with the immediately preceding sentence or to the extent the number of shares withheld is not sufficient to cover the obligation for Taxes, the Participant shall be required to pay to the Employer, or make other arrangements satisfactory to the Employer to provide for the payment of, any Taxes required to be withheld, collected or accounted for with respect to the PSUs.
(c)    The Participant acknowledges that regardless of any action the Company (or any subsidiary employing or retaining the Participant) takes with respect to any or all Taxes, the ultimate liability for all Taxes legally due by the Participant is and remains the Participant’s responsibility and that the Company (and its subsidiaries) (i) make no representations or undertakings regarding the treatment of any Taxes in connection with any aspect of the PSUs, including the grant, vesting or settlement of the PSUs, and the subsequent sale of any shares of Company Stock acquired at settlement; and (ii) do not commit to structure the terms of the grant or any aspect of the PSUs to reduce or eliminate the Participant’s liability for Taxes. Further, if the Participant is subject to taxation in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Participant's employer (or former employer, as applicable) may be required to withhold, collect or account for Taxes in more than one jurisdiction.
(d)    The obligation of the Company to deliver Company Stock shall also be subject to the condition that if at any time the Board shall determine in its discretion that the listing, registration or qualification of the shares upon any securities exchange or under any state or
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federal law or foreign law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares, the shares may not be issued in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. The issuance of shares, if any, to the Participant pursuant to this Agreement is subject to any applicable laws or regulations of the United States or of any state, municipality or other country having jurisdiction thereof.
6.    No Stockholder Rights; Dividend Equivalents. Neither the Participant, nor any person entitled to receive payment in the event of the Participant’s death, shall have any of the rights and privileges of a stockholder with respect to shares of Company Stock, including voting or dividend rights, until certificates for shares have been issued upon payment of PSUs. The Participant acknowledges that no election under Section 83(b) of the Code is available with respect to PSUs. Notwithstanding the foregoing, the Committee may grant to the Participant Dividend Equivalents on the shares underlying the PSUs prior to the payment date, which shall be credited to the Stock Unit account for the Participant and will be paid when and to the extent the underlying PSUs vest and are paid in accordance with this Agreement and the Plan.
7.    Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and payment of the PSUs are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the shares of Company Stock, (c) changes in capitalization of the Company and (d) other requirements of applicable law. The Committee shall have the authority to interpret and construe the PSUs pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
8.    No Employment or Other Rights. The grant of the PSUs shall not confer upon the Participant any right to be retained by or in the employ or service of any Employer and shall not interfere in any way with the right of any Employer to terminate the Participant’s employment or service at any time. The right of any Employer to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.
9.    Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Participant under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Participant, by will or by the laws of descent and distribution. In the event of any attempt by the Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of the PSUs or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the PSUs by notice to the Participant, and the PSUs and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any
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successors or assigns of the Company and to the Company’s parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Participant’s consent.
10.    Applicable Law; Jurisdiction. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. Any action arising out of, or relating to, any of the provisions of this Agreement shall be brought only in the United States District Court for the District of Maine, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Portland, Maine, and the jurisdiction of such court in any such proceeding shall be exclusive. Notwithstanding the foregoing sentence, on and after the date a Participant receives shares of Company Stock hereunder, the Participant will be subject to the jurisdiction provision set forth in the Company’s bylaws.
11.    Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the General Counsel at the corporate headquarters of the Company, and any notice to the Participant shall be addressed to such Participant at the current address shown on the payroll of the Employer. Any notice shall be delivered by hand, or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service or by the postal authority of the country in which the Participant resides or to an internationally recognized expedited mail courier.
12.    Recoupment Policy. The Participant agrees that, subject to the requirements of applicable law, the PSUs, and the right to receive and retain any Company Stock covered by this Agreement, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of the Company in effect on the Date of Grant or that may be established thereafter.
13.    Application of Section 409A of the Code. This Agreement is intended to be exempt from or otherwise comply with the provisions of Section 409A of the Code. Notwithstanding the foregoing, if the PSUs constitute “deferred compensation” under Section 409A of the Code and the PSUs become vested and settled upon the Participant’s termination of employment, payment with respect to the PSUs shall be delayed for a period of six months after the Participant’s termination of employment if the Participant is a “specified employee” as defined under Section 409A of the Code and if required pursuant to Section 409A of the Code. If payment is delayed, the PSUs shall be settled and paid within thirty (30) days after the date that is six (6) months following the Participant’s termination of employment. Payments with respect to the PSUs may only be paid in a manner and upon an event permitted by Section 409A of the Code, and each payment under the PSUs shall be treated as a separate payment, and the right to a series of installment payments under the PSUs shall be treated as a right to a series of separate payments. In no event shall the Participant, directly or indirectly, designate the calendar year of payment. The Company may change or modify the terms of this Agreement without the Participant’s consent or signature if the Company determines, in its sole discretion, that such change or
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modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder. Notwithstanding the previous sentence, the Company may also amend the Plan or this Agreement or revoke the PSUs to the extent permitted by the Plan.
14.    Nature of Grant; No Entitlement; No Claim for Compensation. In accepting the grant of this award for the number of PSUs as specified in Exhibit A, the Participant acknowledges the following:
(a)    The Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time.
(b)    The grant of the PSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of awards, or benefits in lieu of awards, even if awards have been granted repeatedly in the past.
(c)    All decisions with respect to future awards, if any, will be at the sole discretion of the Committee.
(d)    The Participant is voluntarily participating in the Plan.
(e)    The PSUs and any shares of Company Stock acquired under the Plan are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or its subsidiaries (including, as applicable, the Participant’s employer) and which are outside the scope of the Participant’s employment contract, if any.
(f)    The PSUs and any shares of Company Stock acquired under the Plan are not part of the Participant’s normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits, welfare benefits or similar payments.
(g)    The PSUs and any shares of Company Stock subject to the award are not intended to replace any pension rights or compensation.
(h)    In the event that the Participant’s employer is not the Company, the grant of the PSUs will not be interpreted to form an employment contract or relationship with the Company and, furthermore, the grant of the PSUs will not be interpreted to form an employment contract with the Participant’s employer or any subsidiary.
(i)    The future value of the underlying shares of Company Stock is unknown and cannot be predicted with certainty. The Participant understands that the Company is not responsible for any foreign exchange fluctuation between the United States Dollar and the Participant's local currency that may affect the value of the PSUs.
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(j)    In consideration of the grant of the PSUs, no claim or entitlement to compensation or damages shall arise from termination of the PSUs or diminution in value of the PSUs or any of the shares of Company Stock issuable under the PSUs from termination of the Participant’s employment by the Company or the Participant’s employer, as applicable (and for any reason whatsoever and whether or not in breach of contract or local labor laws), and the Participant irrevocably releases the Participant’s employer, the Company and its subsidiaries, as applicable, from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Participant shall be deemed to have irrevocably waived his or her entitlement to pursue such claim.
15.    Data Privacy.
(a)    The Participant hereby acknowledges and understands that the Participant’s personal data is collected, retained, used, processed, disclosed and transferred, in electronic or other form, as described in this Agreement by and among, as applicable, the Participant’s employer, the Company and its subsidiaries, and third parties assisting in the implementation, administration and management of the Plan for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.
(b)    The Participant understands that the Company and its subsidiaries (including his or her employer), as applicable, hold certain personal information about him or her regarding the Participant’s employment, the nature and amount of the Participant’s compensation and the fact and conditions of the Participant’s participation in the Plan, including, but not limited to, his or her name, home address, telephone number and e-mail address, date of birth, social insurance number or other identification number, salary, nationality, job title, any equity or directorships held in the Company and details of all options or any other entitlement to equity awarded, canceled, exercised, vested, unvested or outstanding in his or her favor, for the purpose of the implementation, management and administration of the Plan (the “Data”).
(c)    The Participant understands that the Data may be transferred to the Company, its subsidiaries and any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in his or her country, or elsewhere (including countries outside the European Union/United Kingdom, such as the United States of America), and that the recipient’s country may have a different or lower standard of data privacy rights and protections than his or her country. Where the Data will be transferred outside the Participant’s work location, and where there is not a European Commission adequacy decision in place, the transfers will be in accordance with Chapter V of the GDPR. The Participant understands that he or she may request a list of categories of any recipients of the Data by contacting the Participant’s local human resources representative. The Participant understands that the recipients receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing his or her participation in the Plan, including transfers of such Data to a broker or other third party. The Participant understands that the Data will be held only as long as is necessary to implement, administer and manage his or her participation in the Plan in accordance with applicable law. The Participant
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understands that he or she may, at any time, exercise the rights granted to him/her by the GDPR including the right to: request to access or be provided with a copy of the Data relating to him/her, request additional information about the storage and processing of the Data, require any corrections or amendments to the Data or object to the processing of his/her Data, in any case without cost and to the extent permitted by law. The above rights can be exercised by contacting in writing his or her local human resources representative. The Participant understands, however, that objecting to the processing of his or her Data may affect the Participant’s ability to participate in the Plan. For more information on the processing of his or her Data and other personal data, the Participant is referred to the Privacy Notice provided to him/her by his/her employer.
16.    Country-Specific Terms. Notwithstanding anything to the contrary herein, the PSUs shall be subject to the Country-Specific Terms attached hereto as Addendum A. In addition, if the Participant relocates to one of the countries included in the Country-Specific Terms, the special terms and conditions for such country will apply to the Participant to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Country-Specific Terms constitute part of this Agreement and are incorporated herein by reference.
























[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, effective as of the Date of Grant.
                    COVETRUS, INC.


                                            
                    Name:
                    Title:



BY ACCEPTING THE PSU AWARD, THE PARTICIPANT AGREES TO BE BOUND BY THE TERMS OF THE PLAN AND THIS AGREEMENT, AND AGREES THAT ALL DECISIONS AND DETERMINATIONS OF THE COMMITTEE WITH RESPECT TO THE PSUS SHALL BE FINAL AND BINDING.




























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Non-U.S. Form
ADDENDUM A
COUNTRY-SPECIFIC TERMS
These Country-Specific Terms include additional terms and conditions that govern the PSUs granted to the Participant under the Plan if the Participant resides in one of the countries listed below. Capitalized terms used but not defined in these Country-Specific Terms are defined in the Agreement and have the meanings set forth therein.

DENMARK
Tax Information. If the Participant holds Company Stock acquired under the Plan in a brokerage account with a broker or bank outside Denmark, the Participant is required to inform the Danish Tax Administration about the account. The Danish tax authorities no longer offer an official form. Instead, the Participant can send the information by logging on to his/her online Danish tax folder (www.skat.dk).
Reporting. The Participant may hold Company Stock acquired under the Plan in a non-Danish brokerage account. The Participant may be required to inform the Danish Tax Administration about such brokerage account. Participant should consult with his or her own advisors with respect to this requirement.

UNITED KINGDOM

PSUs Payable Only in Shares. Notwithstanding any discretion in the Plan or anything to the contrary in the Agreement, the grant of PSUs does not provide the Participant any right to receive a cash payment and the PSUs may be settled only in shares of Company Stock.

Termination of Service. The Participant has no right to compensation or damages on account of any loss in respect of PSUs under the Plan where the loss arises or is claimed to arise in whole or part from: (a) the termination of the Participant’s office or employment; or (b) notice to terminate the Participant’s office or employment. This exclusion of liability shall apply however termination of office or employment, or the giving of notice, is caused, and however compensation or damages are claimed. For the purpose of the Plan, the implied duty of trust and confidence is expressly excluded.

Tax Withholding. The Participant indemnifies the Company and the Employer for any Taxes that may be payable with respect to the full number of shares of Company Stock vested and issued (including these shares of Company Stock that are deemed issued). To the extent any shares of Company Stock are withheld by the Company in accordance with Section 5(b) of the Agreement, the Company shall pay over to the Participant’s Employer sufficient moneys to satisfy the Participant’s liability under such indemnity.
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EXHIBIT A
PSU VESTING AND PAYMENT TERMS
1.    Target PSUs. The target number of PSUs granted under the award is set forth below.
Participant Name: ______________________________
Award Type Performance Stock Units (PSU)
Grant Date
Total Target Number of PSUs
Target Number of PSUs for Performance Period: 01/01/2021 – 12/31/2021
Target Number of PSUs for Performance Period: 01/01/2022 – 12/31/2022
Target Number of PSUs for Performance Period: 01/01/2023 – 12/31/2023

2.    Vesting of PSUs. Subject to the terms of this Exhibit A, the PSUs shall be eligible to become earned with respect to one-third of the award based on performance for each of the Performance Periods (as defined below) ending on December 31, 2021, December 31, 2022 and December 31, 2023, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date (as defined below). All earned awards ultimately vest at the Payment Date.
3.    Performance Periods and Performance Goals. The PSUs shall be earned for each of the periods January 1, 2021–December 31, 2021, January 1, 2022–December 31, 2022, and January 1, 2023–December 31, 2023 (each, a “Performance Period”) based on the Company’s Revenue Growth Rate Percentage and Adjusted EBITDA Margin Percentage for each Performance Period as certified by the Committee (the “Performance Goals”). The actual number of PSUs that may be earned may be more or less than that the target number, or zero, based on the achievement of the Performance Goals over the applicable Performance Period.
For purposes of this Agreement, the following terms shall have the meanings set forth below:
EBITDA: earnings before interest, taxes, depreciation and amortization, as determined under generally accepted accounting principles, applied on a basis consistent with prior financial statements.
The Company’s Revenue Growth Rate Percentage and Adjusted EBITDA Margin Percentage shall be based on the Company’s financial statements, subject to such adjustments as the Committee deems appropriate in good faith to take into account events such as acquisitions, divestitures, and other unusual or infrequently occurring items.
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Revenue: net sales as reported in the Company’s financial statements as filed with Securities and Exchange Commission.
Revenue Growth Rate Percentage: Net sales as calculated Performance Period over Performance Period and divided by the net sales from the earlier of the Performance Periods.
Adjusted EBITDA: as reported in the Company’s financial statements, total segment (consolidated) adjusted EBITDA, within the Segment footnote, as filed with the Securities and Exchange Commission.
Adjusted EBITDA Margin Percentage: Adjusted EBITDA as percent of net sales for the Performance Period.
4.    Achievement of Performance Goals. As soon as administratively practicable following the end of a Performance Period, the Committee will determine whether and to what extent the Performance Goals have been met for the Performance Period and will certify the number of PSUs that are earned for the Performance Period. Any earned PSUs will vest if the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date. The number of PSUs that will be earned for each Performance Period shall be equal to (a) the target number of PSUs for that Performance Period (which is one-third of the total target number of PSUs), multiplied by (b) the weighting relative to each Performance Goal and the Earned Percentage for such Performance Goal for the Performance Period.
There are discrete Performance Goals for each of the three one-year Performance Periods. The “Earned Percentage” for each of the Performance Goals shall be determined based on the table below, with straight-line interpolation used for performance achievement between the Threshold and Maximum Performance Levels for each of the Performance Periods. PSUs earned, if any, for a Performance Period will remain unvested until paid on the Payment Date, subject to the Participant’s continued employment or service with the Employer through the Payment Date.


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Performance Period #1 (1/1/2021 thru 12/31/2021) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum

Performance Period #2 (1/1/2022 thru 12/31/2022) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum

Performance Period #3 (1/1/2023 thru 12/31/2023) – 1/3 of the PSUs
Performance Metrics Performance
Metric Weightings 		Performance Levels Performance
Level Goals 		PSUs Payout Score %
[ ]% Threshold
Target
Maximum
[ ]%
Threshold
Target
Maximum


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Any PSUs that are earned for a Performance Period will vest and be paid on the date specified by the Committee for payment of vested PSUs after the final Performance Period, which shall be between January 1, 2024 and March 15, 2024 (the “Payment Date”), if the Participant continues to be employed by, or provide services to, the Employer through the Payment Date. If the Participant ceases to be employed by, or provide service to, the Employer for any reason before the Payment Date, any unvested PSUs shall automatically terminate and shall be forfeited as of the date of the Participant’s termination of employment or service, except as provided in Section 5(b) below. No payment shall be made with respect to any unvested PSUs that are forfeited or not earned.
5.    Change of Control
(a)    COC Amount. In the event of a Change of Control, the Committee shall calculate the number of PSUs that may vest under this Agreement on or after the Change of Control for each Performance Period (the “COC Amount”), as follows:
(i)    For any Performance Period that ended on or before the date of the Change of Control, the COC Amount is the number of PSUs calculated based on performance as described in Section 4 above.
(ii)     For the Performance Period in which the Change of Control occurs, and for any Performance Period that would otherwise begin after the Change of Control, the COC Amount is the target number of PSUs for that Performance Period.
The PSUs shall cease to vest based on performance as of the date of the Change of Control, and any PSUs in excess of the COC Amount shall be forfeited. The COC Amount for each Performance Period shall vest and be paid on the Payment Date, provided that the Participant continues to be employed by, or provide services to, the Employer, until the Payment Date.
(b)    Involuntary Termination Without Cause; Good Reason. In the event the Participant’s employment or service is involuntarily terminated by the Company without Cause or the Participant terminates for Good Reason (each as defined in the Participant’s employment agreement with the Company)] within two months prior to the Change of Control or upon or after the Change of Control, but prior to the Payment Date, a prorated portion of the COC Amount for each Performance Period shall become vested. The prorated portion shall be determined by multiplying the COC Amount for the applicable Performance Period by a fraction, the numerator of which is the number of days the Participant was employed by or in the service of the Company during the Performance Period and the denominator of which is 365. Such vested PSUs shall be paid within thirty (30) days after the Participant’s termination of employment or service, or, if later, the date of the Change of Control, subject to the requirements of Section 409A of the
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Code. If the Participant ceases to be employed by, or provide service to, the Employer for any reason other than as described above in this subsection (b), no payment shall be made with respect to any COC Amount, and the PSUs shall be forfeited. Notwithstanding the foregoing, if the Participant’s employment agreement with the Company has a pre-Change of Control protection period of three months, instead of two months, the reference above to “two months prior to a Change of Control” shall be changed to “three months prior to a Change of Control.”
(c) Employment Agreement. Notwithstanding anything in the terms of any employment agreement to the contrary, the terms of this Agreement with respect to vesting of PSUs in connection with a Change of Control shall supersede and replace the terms of any employment agreement with the Participant relating to vesting in connection with a Change of Control, and the Participant agrees to such replacement. For the avoidance of doubt, this Agreement does not supersede more favorable terms of an employment agreement relating to vesting in a situation where no Change of Control occurs, subject to the requirements of Section 409A.
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Benjamin Wolin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Covetrus, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2021 By: /s/ Benjamin Wolin
Name: Benjamin Wolin
Title: Chief Executive Officer, President and Director
(Principal Executive Officer)



Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,  Matthew Foulston, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Covetrus, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 6, 2021 By: /s/  Matthew Foulston
Name: Matthew Foulston
Title: Executive Vice President and Chief Financial
(Principal Financial Officer)



Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Benjamin Wolin, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Covetrus, Inc. for the period ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Covetrus, Inc.
Date: May 6, 2021 By: /s/ Benjamin Wolin
Name: Benjamin Wolin
Title: Chief Executive Officer, President and Director
(Principal Executive Officer)




Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Foulston, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Covetrus, Inc. for the period ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Covetrus, Inc.
Date: May 6, 2021 By: /s/ Matthew Foulston
Name: Matthew Foulston
Title: Executive Vice President and Chief Financial
(Principal Financial Officer)