CHANGE IN CONTROL
AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT
, dated as of
, 20_____, is made by and between Tractor Supply Company, a
Delaware corporation (the “Company”), and James F.
Wright (the “Executive”).
WHEREAS , the Company considers it essential to the best
interests of its stockholders to foster the continued employment of
key management personnel; and
WHEREAS , the Board recognizes that, as is the case with
many publicly held corporations, the possibility of a Change in
Control exists and that such possibility, and the uncertainty and
questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment
of the Company and its stockholders; and
WHEREAS , the Board has determined that appropriate
steps should be taken to reinforce and encourage the continued
attention and dedication of certain members of the Company’s
senior management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in
Control.
NOW, THEREFORE , in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms .
The definitions of capitalized terms
used in this Agreement are provided in the last Section
hereof.
2. Term of Agreement .
The Term of this Agreement shall
commence on the date hereof and shall continue in effect through
June 30, 2012; provided, however, that if a Change in Control
occurs during the Term, the Term shall expire no earlier than the
second anniversary of the date on which such Change in Control
occurs.
3. Company’s Covenants
. In order to induce the
Executive to remain in the employ of the Company and in
consideration of the Executive’s covenants set forth in
Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as
provided in Section 5(c) hereof, no Severance Payments or other
benefits shall be payable or provided under this Agreement unless
there shall have been (or, under the terms of the last sentence of
Section 6(a) hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company on
or following a Change in Control and during the Term. This
Agreement shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have
any right to be retained in the employ of the Company.
4. The
Executive’s Covenants .
(a) Employment . The Executive
agrees that, subject to the terms and conditions of this Agreement,
in the event of a Change in Control during the Term, the Executive
will remain in the employ of the Company until the earliest of
(i) a date which is six (6) months from the date of such
Change in Control, (ii) the Date of Termination by the
Executive of the Executive’s employment for Good Reason or by
reason of death, Disability or Retirement, or (iii) the
termination by the Company of the Executive’s employment for
any reason.
(b) Noncompetition, etc. The
Executive agrees that the Executive will not, for a period of one
year from the Date of Termination of the Executive’s
employment by the Company, (i) directly or indirectly become an
employee, director, consultant or advisor of, or otherwise
affiliated with, any operator of farm and ranch stores in the
United States, (ii) directly or indirectly solicit or hire, or
encourage the solicitation or hiring of, any person who was an
employee of the Company at any time on or after such Date of
Termination (unless more than six months shall have elapsed between
the last day of such person’s employment by the Company and
the first date of such solicitation or hiring), or
(iii) disparage the name, business reputation or business
practices of the Company or any of its officers or directors, or
interfere with the Company’s existing or prospective business
relationships. The Executive also agrees that the Executive will
not, during Executive’s employment and following the Date of
Termination of Executive’s employment, without the written
consent of the Company, disclose to any person, other than as
required by law or court order, any confidential information or
trade secrets obtained by the Executive while in the employ of the
Company; provided, however, that confidential information shall not
include any information known generally to the public (other than
as a result of unauthorized disclosure by the Executive) or any
specific information or type of information generally not
considered confidential by persons engaged in the same business as
the Company. The Executive acknowledges that these restrictions are
reasonable and necessary to protect the Company’s legitimate
interests, that the Company would not have entered into this
Agreement in the absence of such restrictions, and that any
violation of these restrictions will result in irreparable harm to
the Company. The Executive agrees that the Company shall be
entitled to preliminary and permanent injunctive relief, without
the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising from
any violation hereof, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company may
be entitled.
(c) Return of Confidential
Information . Upon termination of Executive’s employment
with the Company or at any other time upon the Company’s
request, Executive shall promptly return to the Company all
originals and all copies (including photocopies and facsimiles and
copies on computers or other means of electronic storage) of all
materials relating in any way to confidential information or the
business of the Company or any affiliates of the Company, whether
made or compiled by Executive or furnished to Executive by virtue
of his or her employment with the Company and will so represent to
the Company. Upon Executive’s termination of employment with
the Company, Executive shall also return to the Company all Company
property in his or her possession.
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5.
Compensation Other Than Severance Payments .
(a) If the Executive’s employment
shall be terminated for any reason following a Change in Control
and during the Term, the Company shall pay the Executive’s
full salary to the Executive through the Date of Termination (the
“Accrued Salary”) at the rate in effect immediately
prior to the Date of Termination or, if higher, the rate in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date
of Termination under and in accordance with the terms of the
Company’s compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason. The Accrued Salary shall be
paid to the Executive within thirty (30) days of the Date of
Termination, with the payment date determined by the Company in its
sole discretion.
(b) If the Executive’s employment
shall terminate for any reason following a Change in Control and
during the Term, the Company shall pay to the Executive the
Executive’s normal post-termination compensation and
benefits, if any; provided, however, that, the severance benefits
provided in Section 6 hereof shall be exclusive and the
Executive shall not be entitled to participate in, or receive
severance benefits under, any other severance plan or program that
may be adopted by the Company or any other employment agreement.
Any post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company’s retirement,
insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
(c) Notwithstanding any provision of any
stock option plan, stock incentive plan, restricted stock plan,
stock option or similar plan or agreement to the contrary,
immediately upon the occurrence of a Change in Control during the
Term, and without regard to whether the Executive’s
employment is terminated, the Executive shall be fully vested in
all then outstanding options to acquire stock of the Company (or if
such options have been assumed by, or replaced with options for
shares of, a parent, surviving or acquiring company, such assumed
or replacement options), and all then outstanding restricted shares
of stock of the Company and other equity-based awards (including
restricted stock units) (or the stock or equity of any parent,
surviving or acquiring company into which such restricted shares
have been converted or for which they have been exchanged) held by
the Executive.
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(a) Severance Payments . If the
Executive’s employment is terminated following a Change in
Control and during the Term, other than (A) by the Company for
Cause, (B) by reason of death, Disability or Retirement, or
(C) by the Executive without Good Reason, then the Company
shall pay the Executive the following amounts, and provide the
Executive the following benefits (collectively, the
“Severance Payments”), together with any Gross-Up
Payment payable under Section 6(b) hereof, in addition to any
payments and benefits to which the Executive is entitled under
Section 5 hereof:
(i) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination
and in lieu of any severance benefit otherwise payable to the
Executive (including pursuant to any employment agreement), the
Company shall pay to the Executive a lump sum severance payment, in
cash, equal to 2.0 times the sum of (x) the Executive’s
base salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason,
and (y) the Executive’s target annual bonus pursuant to
any annual bonus or incentive plan maintained by the Company in
respect of the fiscal year in which occurs the Date of Termination
or, if higher, in respect of the fiscal year in which occurs the
Change in Control.
(ii) For the two year period immediately
following the Date of Termination, the Company shall arrange to
provide the Executive and his dependents life, disability, accident
and health insurance benefits substantially similar to those
provided to the Executive and his dependents immediately prior to
the Date of Termination or, if more favorable to the Executive,
those provided to the Executive and his dependents immediately
prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive than
the cost to the Executive immediately prior to such date or
occurrence; provided, however, that, unless the Executive consents
to a different method (after taking into account the effect of such
method on the calculation of “parachute payments”
pursuant to Section 6(b) hereof), such insurance benefits shall be
provided through a third-party insurer. The Company’s payment
of such premiums shall be paid directly to the relevant third party
insurers on a monthly basis. Benefits otherwise receivable by the
Executive pursuant to this Section 6(a)(ii) shall be reduced
to the extent benefits of the same type are received by or made
available to the Executive by a subsequent employer of the
Executive during the two year period following the
Executive’s termination of employment (and any such benefits
received by or made available to the Executive shall be reported to
the Company by the Executive); provided, however, that the Company
shall reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over such cost immediately prior
to the Date of Termination or, if more favorable to the Executive,
the first occurrence of an event or circumstance constituting Good
Reason.
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(iii) Notwithstanding any provision of any
stock option plan, stock incentive plan, restricted stock plan or
similar plan or agreement to the contrary, as of the Date of
Termination, (x) the Executive shall be fully vested in all
outstanding options to acquire stock of the Company (or the options
of any parent, surviving, or acquiring company then held by the
Executive) and all then outstanding restricted shares of stock of
the Company and other equity-based awards (including restricted
stock units) (or such parent, surviving or acquiring company) held
by the Executive, and (y) subject to any limitation on
exercise in any such plan or agreement that may not be amended
without stockholder approval, all options referred to in clause
(x) above shall be immediately exercisable and shall remain
exercisable until the earlier of (1) the second anniversary of
the Date of Termination, or (2) the otherwise applicable
expiration date of the term of such option.
(iv) To the extent that the full vesting of
any stock option, share of restricted stock or other equity-based
award, or the full exercisability of any stock option or other
equity-based award, provided for in Section 5(c) or
Section 6(a)(iii) should violate any law, rule or regulation
of any governmental authority or self-regulatory organization
applicable to the Company, or to the extent otherwise determined by
the Company in its sole discretion, the Company may, in lieu of
providing any vesting or exercisability rights pursuant to Section
5(c) or 6(a)(iii), (x) cancel any or all of the
Executive’s outstanding options in exchange for a lump sum
payment, in cash, equal to the excess of the fair market value of
the shares of stock underlying such options (whether or not vested
or exercisable) on the Date of Termination (as reasonably
determined by the Board in good faith) over the aggregate exercise
price provided for in such stock options, and (y) repurchase
any shares of restricted stock or other equity-based awards
(including restricted stock units) at their fair market value (as
determined by the Board without regard to the restrictions on such
shares of stock). The lump sum payment provided for in this
Section 6(a)(iv) shall be made, if at all, within thirty
(30) days of the Date of Termination, with the payment date
determined by the Company in its sole discretion.
(v) The Company shall pay to the Executive
a lump sum amount, in cash, equal to the Executive’s target
annual bonus under any bonus plan maintained by the Company in
respect of the fiscal year in which occurs the Date of Termination
multiplied by a fraction, the numerator of which is the number of
days in such fiscal year through and including the Date of
Termination, and the denominator of which is 365. The lump sum
payment provided for in this Section 6(a)(v) shall be made, if
at all, within thirty (30) days of the Date of Termination,
with the payment date determined by the Company in its sole
discretion.
(vi) The Company shall provide the
Executive with outplacement services suitable to the
Executive’s position for a period of one year following his
or her Date of Termination or, if earlier, until the first
acceptance by the Executive of an offer of employment.
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For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (x) the
Executive’s employment is terminated by the Company without
Cause (whether or not a Change in Control ever occurs) and, at the
time of such termination, the Company is a party to a written
agreement the consummation of which would constitute a Change in
Control, or (y) the Executive terminates his employment for
Good Reason (whether or not a Change in Control ever occurs) within
six (6) months of the occurrence of the event which
constitutes Good Reason, or if shorter, the end of the term, and,
both at the time the event occurs that constitutes Good Reason and
at the time of such termination, the Company is a party to such an
agreement.
Notwithstanding anything herein to the contrary,
to the maximum extent permitted by applicable law, the Severance
Payments to be made to the Executive pursuant to this Section 6(a)
shall be made in reliance upon Treasury Regulations promulgated
under Section 409A of the Code, including Section
1.409A-1(b)(9) of the Treasury Regulations (including any
exceptions from the application of Section 409A thereunder) or
Section 1.409A-1(b)(4) of the Treasury Regulations. For this
purpose, each Severance Payment shall be considered a separate and
distinct payment for purposes of Section 409A of the Code. However,
to the extent any such payments are treated as non-qualified
deferred compensation subject to Section 409A of the Code,
then (a) no amount shall be payable pursuant to this Section
6(a) unless Executive’s termination of employment constitutes
a “separation from service” within the meaning of
Section 1.409A-1(h) of the Treasury Regulations and
(b) if Executive is deemed at the time of his separation from
service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, then to the extent
delayed commencement of any portion of the Severance Payments to
which Executive is entitled under this Agreement is required in
order to avoid a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code, such portion of
Executive’s Severance Payments shall not be provided to
Executive prior to the earlier of (x) the expiration of the
six-month period measured from the date of the Executive’s
“separation from service” with the Company (as such
term is defined in Section 1.409A-1(h) of the Treasury
Regulations) or (y) the date of Executive’s death. Upon
the earlier of such dates, all payments deferred pursuant to this
paragraph shall be paid in a lump sum to the Executive, and any
remaining payments due under the Agreement shall be paid as
otherwise provided herein. The determination of whether the
Executive is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of his
separation from service shall be made by the Company in accordance
with the terms of Section 409A of the Code and applicable
guidance thereunder (including without limitation
Section 1.409A-1(i) of the Treasury Regulations and any
successor provision thereto).
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(i) Whether or not the Executive becomes
entitled to the Severance Payments, except as otherwise provided in
Section 6(b)(ii) hereof, if any of the payments or benefits
received or to be received by the Executive in connection with a
Change in Control or the Executive’s termination of
employment ( whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, with
any Person whose actions result in a Change in Control or with any
Person affiliated with the Company or such Person ) (such
payments or benefits, excluding the Gross-Up Payment, being
hereinafter referred to as the “Total Payments”) will
be subject to the Excise Tax, the Company shall pay to the
Executive an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up
Payment, and after taking into account the phase out of the
itemized deductions attributable to the Gross-Up Payment, shall be
equal to the Total Payments.
(ii) If the Total Payments would (but for
this Section 6(b)) be subject (in whole or part) to the Excise
Tax, but the aggregate value of the portion of the Total Payments
that are considered “parachute payments” within the
meaning of section 280G(b)(2) of the Code is less than 330% of the
Executive’s Base Amount, then subsection (i) of this
Section 6(b) shall not apply, and the cash Severance Payments shall
be reduced (if necessary, to zero), and all other Severance
Payments shall thereafter be reduced (if necessary, to zero), to
the extent necessary to cause the Total Payments not to be subject
to the Excise Tax.
(iii) For purposes of determining whether
any of the Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (A) all of the Total Payments shall
be treated as “parachute payments” (within the meaning
of Section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel (“Tax Counsel”) reasonably acceptable to
the Executive and selected by the accounting firm that was,
immediately prior to the Change in Control, the Company’s
independent auditor (the “Auditor”), such payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the Code,
(B) all “excess parachute payments” within the
meaning of Section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel,
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base
Amount allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (C) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, (x) the
Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the states and
localities of the Executive
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