CHANGE IN CONTROL AGREEMENT

 

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                           CHANGE IN CONTROL AGREEMENT

 

 

        THIS CHANGE IN CONTROL AGREEMENT, dated as of October 31, 2005, is made

by and between TRACTOR SUPPLY COMPANY, a Delaware corporation (the "Company"),

and Anthony F. Crudele (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, 2007; 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 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

 

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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 (other than following a termination by the

Executive for Good Reason), (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), (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, or (iv) 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.

 

 

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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 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 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.

 

        (b)      If the Executive's employment shall be terminated 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 benefits under, any other severance plan or program that may be

adopted by the Company. Such 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 (or the stock 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.

 

        6.       SEVERANCE PAYMENTS.

 

        (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 or Disability, 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, the Company shall

        pay to the Executive a lump sum severance payment, in cash, equal to 1.5

        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

 

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        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. 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.

 

                (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 our acquiring company

        then held by the Executive) and all then outstanding restricted shares

        of stock of the Company (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 cause (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 normal expiration date of such option.

 

                (iv)     To the extent that the full vesting of any stock option

        or share of restricted stock, or the full exercisability of any stock

        option, 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 is 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 determined by the Board) over the aggregate exercise

        price provided for in such stock options, and (y) repurchase any shares

        of restricted stock at their fair

 

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         market value (as determined by the Board without regard to the

        restrictions on such shares of stock).

 

                (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.

 

                (vi)     The Company shall provide the Executive with

        outplacement services suitable to the Executive's position for a period

        of one year or, if earlier, until the first acceptance by the Executive

        of an offer of employment.

 

        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) 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.

 

 

        (b)      GROSS-UP PAYMENT

 

                (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.

 

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                (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's residence and employment on the Date of

        Termination, net of the maximum reduction in federal income taxes that

        could be obtained from deduction of such state and local taxes, (y) the

        Executive shall be deemed to pay employment taxes at the highest rates

        in effect in the state and locality of the Executive's employment, and

        (z) amounts actually withheld from any payment to the Executive pursuant

        to Section 11 hereof with respect to income or employment taxes shall be

        ignored.

 

                (iv)     In the event that the Excise Tax is Finally Determined

        to be less than the amount taken into account hereunder in calculating

        the Gross-Up Payment and, after giving effect to such Finally Determined

        amount, the Severance Payments are to be reduced pursuant to Section

        6(b)(ii) hereof, then the Executive shall repay to the Company, within

        five (5) business days following the date that the amount of such

        reduction in the Severance Payments is Finally Determined, the Gross-Up

        Payment previously paid to the Executive and the amount of such

        reduction in the Severance Payments, plus interest on the amount of such

        repayments at 120% of the rate provided in Section 1274(b)(2)(B) of the

        Code.

 

                (v)      In the event that the E