CHANGE IN CONTROL AGREEMENT
Exhibit 10.42
THIS CHANGE IN CONTROL AGREEMENT, dated as of , 20_____, is made by and between Tractor
Supply Company, a Delaware corporation (the “Company”), and (the “Executive”).
WHEREAS, the Company considers it essential to the best interests of its stockholders to
xxxxxx 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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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, 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 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 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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(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.
(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.
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(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 Excise Tax is Finally Determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, but, after giving effect
to such Finally Determined amount, no reduction of the Severance Payments is required
pursuant to Section 6(b)(ii) hereof, then the Executive shall repay to the Company, within
five (5) business days following the time that the amount of such reduction in the Excise
Tax is Finally Determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the Gross-Up Payment being
repaid by the Executive), to the extent that such repayment results in a reduction in the
Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages
for purposes of federal, state and local income and employment taxes, plus interest on the
amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code.
(vi) Except as otherwise provided in Section 6(b)(vii) below, in the event that the
Excise Tax is Finally Determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the Company
shall, within five (5) business days following the time that the amount of such excess is
Finally Determined, (A) make an additional Gross-Up Payment in respect of such excess and a
Gross-Up Payment in respect of any amounts paid pursuant to clause (B) or (C) of this
Section 6(b)(vi) (plus any interest, penalties or additions payable by the Executive with
respect to such amounts), (B) if the Severance Payments were reduced pursuant to Section
6(b)(ii) hereof, but after giving effect to such final determination, the Severance
Payments should not have been so reduced, the amount by which the Severance Payments were
reduced pursuant to Section 6(b)(ii) hereof, and (C) interest on such amounts at 120% of
the rate provided in Section 1274(b)(2) of the Code.
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(vii) In the event that the Severance Payments were reduced pursuant to Section
6(b)(ii) hereof and the value of the Total Payments that are considered “parachute
payments” within the meaning of Section 280G(b)(2) of the Code is Finally Determined to
differ from the amount taken into account hereunder in calculating the Gross-Up Payment,
but such Finally Determined value still does not exceed 330% of the Executive’s Base
Amount, then, within five (5) business days following the date on which such value is
Finally Determined, (x) the Company shall pay to the Executive the amount (if any) by which
the reduced Severance Payments (after taking the Finally Determined value into account)
exceeds the amount of the reduced Severance Payments actually paid to the Executive, plus
interest on the amount of such payment at 120% of the rate provided in Section 1274(b) of
the Code, or (y) the Executive shall pay to the Company the amount (if any) by which the
reduced Severance Payments actually paid to the Executive exceeds the amount of the reduced
Severance Payments (after taking the Finally Determined value into account), plus interest
on the amount of such payment at 120% of the rate provided in Section 1274(b) of the Code.
(c) The payments provided for in Section 6(a)(i) and (b)(i) hereof shall be made not later
than the tenth business day following the Date of Termination, with the payment date determined by
the Company in its sole discretion; provided, however, that if the amounts of the payments under
Section 6(b)(i) cannot be Finally Determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company or, in the case of
payments under Section 6(b)(i) hereof, in accordance with Section 6(b) hereof, of the minimum
amount of such payments to which the Executive is clearly entitled and shall pay the remainder of
such payments (together with interest on the unpaid remainder (or on all such payments to the
extent the Company fails to make such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the sixtieth (60th) day after the Date of Termination,
with the payment date determined by the Company in its sole discretion. At the time that payments
are made under this Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
(d) The Executive and the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments. The Company shall pay to the Executive all legal
fees and expenses incurred by the Executive (i) in obtaining or enforcing any benefit or right
provided by this Agreement or (ii) in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to any payment or benefit provided
hereunder, provided that, in either case, Executive prevails on the merits of such action. In the
event of a claim as to which Executive only obtains partial recovery or relief, Executive shall be
considered to have prevailed if Executive should receive more than 50% of the amount or relief
claimed. Such payments shall be made within five (5) business days after the later of (y) delivery
of the Executive’s written requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require and (z) a final, non-appealable judgment from a
court of competent jurisdiction or the binding conclusion of an audit, investigation or proceeding
by the IRS or applicable agency.
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(e) All reimbursements and in-kind benefits described in this Section 6 shall be made within
the time periods set forth in Treasury Reg. § 1.409A-3(i)(1)(iv) to the extent applicable. The
amount of expenses eligible for reimbursement, and the in-kind benefits provided, during any year
pursuant to this Section 6 shall not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided in any other year.
7. Termination Procedures and Compensation During Dispute.
(a) Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Executive’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include an invitation to attend a meeting of the Board, to be
held no sooner than fifteen (15) days and no later than thirty (30) days
following the date of such Notice of Termination for the purpose of considering whether Cause
existed for the Executive’s termination. If the Executive elects to attend the meeting, the
Executive and his or her counsel shall be given the opportunity to address the Board. At the
conclusion of the meeting, the Board shall vote whether the Executive was guilty of conduct giving
rise to Cause hereunder, which vote shall require not less than three-quarters (3/4) of the entire
membership of the Board in order to confirm the Executive’s termination for Cause. If the Board
fails to confirm the Executive’s termination for Cause, the Board may elect to reinstate the
Executive or treat the termination as a termination without Cause for purposes of this Agreement.
The Company shall have no liability to the Executive with respect to any benefit other than cash
compensation that is denied the Executive during the period between the delivery of a Notice of
Termination for Cause and the Board’s subsequent failure to confirm that Cause existed. Notice of
Termination due to a Good Reason must be provided by the Executive to the Company within ninety
(90) days of the occurrence of the event which is the basis for such Good Reason exists.
(b) Date of Termination. The “Date of Termination,” with respect to any termination
of the Executive’s employment after a Change in Control and during the Term, shall mean the date
specified in the Notice of Termination which, except in the case of a termination for Cause, shall
not be less than fifteen (15) days from the date such Notice of Termination is given and in the
case of a “Good Reason,” shall mean the notice and cure period requirements contained in Sections
7(a) and 16(q) herein. Notwithstanding the foregoing, the Company shall have the right to restrict
the Executive’s access to company facilities and properties, and to terminate the Executive’s
authority to act on behalf of the Company, in such manner as the Company, in its sole discretion,
shall deem appropriate during the period between the delivery of such a Notice of Termination and
the Date of Termination. The Date of Termination with respect to a termination for Cause shall be
the date the Notice of Termination is delivered to the Executive or such later date as the Company
shall expressly provide; provided, however, that if a Notice of Termination for Cause is delivered
to the Executive and the Board subsequently determines pursuant to Section 7(a) hereof that Cause
did not exist but does not reinstate the Executive, the Date of Termination shall be deemed to be
the date of such Board determination.
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8. No Mitigation. The Company agrees that, if the Executive’s employment with the
Company terminates during the Term, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to
Section 6 hereof. Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise except as expressly provided herein.
9. Successors; Binding Agreement.
(a) In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to or upon the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. For purposes of the
payment provided for in the previous sentence, such payment shall only occur if the succession is a
“change in control” of the Company as defined in Treasury Regulation 1.409A-3(i)(5). If the
Company successfully obtains such assumption and agreement prior to or upon the effectiveness of
any such succession and the successor extends an offer of employment to the Executive, any
termination of the Executive’s employment with the Company incident to such succession shall be
ignored for purposes of this Agreement; provided that nothing contained in this Section 9(a) shall
limit the Executive’s right to terminate employment with the successor for Good Reason if the
succession constitutes a Change in Control and the successor takes any action subsequent to such
succession that would constitute Good Reason hereunder.
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(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.
10. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address inserted below the Executive’s signature on the
final page hereof and, if to the Company, to the address set forth below, or to such other address
as either party may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Attention: Corporate Secretary
11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time. The validity, interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Tennessee. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by their nature may require
either partial or total performance after the expiration of the Term (including, without
limitation, those under Sections 4, 6 and 7 hereof) shall survive such expiration.
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12. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.
14. Settlement of Disputes. Except as otherwise provided by law, this Agreement or
the specific terms of any employee benefit plan of the Company, all claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board and shall be in
writing. The Executive shall provide the Board with all materials and information reasonably
requested by the Board in connection with its review of any such claim. Any denial by the Board of
a claim for benefits under this Agreement shall be delivered to the Executive in writing within 90
days of its receipt of the claim and shall set forth the specific reasons for the denial, the
specific provisions of this Agreement relied upon, a description of any additional material or
information necessary to perfect the claim, and a statement of the Executive’s right to file an
action under ERISA. The Board shall afford a reasonable opportunity to the Executive for a review
of the decision denying a claim and shall further allow the Executive to appeal to the Board a
decision of the Board within sixty (60) days after notification by the Board that the Executive’s
claim has been denied. In pursuing his or her appeal, the Executive shall be permitted to submit
written comments, documents, records or other relevant information relating to his or her claim.
In addition, the Executive will be provided, upon request and free of charge, reasonable access to,
and
copies of, all documents, records and other information relevant to his or her claim. The
Company’s review will take into account all information submitted by the Executive regarding the
claim, regardless of whether or not such information was submitted or considered in the initial
determination. The Company will render its decision on such review within a reasonable period of
time, but not later than 60 days from the Company’s receipt of the Executive’s written appeal. If
the appeal is denied in whole or in part, the Executive will receive a written notification of the
denial which will include (i) the specific reasons for the denial, (ii) reference to the specific
provisions of the Agreement upon which the denial was based and (iii) a statement of the
Executive’s right to bring an action under ERISA.
15. Compliance with Section 409A. The parties acknowledge and agree that, to the
extent applicable, this Agreement shall be interpreted in accordance with, and the parties agree to
use their best efforts to achieve timely compliance with, Section 409A of the Code and the Treasury
Regulations and other interpretive guidance issued thereunder, including without limitation any
such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any
provision of this Agreement to the contrary, in the event that the Company determines that any
compensation or benefits payable or provided under this Agreement may be subject to Section 409A of
the Code, the Company may, with the consent of the Executive, adopt such limited amendments to this
Agreement and appropriate policies and procedures, including amendments and policies with
retroactive effect, that the Company reasonably determines are necessary or appropriate to (i)
exempt the compensation and benefits payable under this Agreement from Section 409A of the Code
and/or preserve the intended tax treatment of the compensation and benefits provided with respect
to this Agreement or (ii) comply with the requirements of Section 409A of the Code.
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16. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(a) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.
(b) “Auditor” shall have the meaning set forth in Section 6(b) hereof.
(c) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.
(d) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
(e) “Board” shall mean the Board of Directors of the Company.
(f) “Cause” for termination by the Company of the Executive’s employment shall mean (i)
Executive’s failure or refusal to carry out the lawful directions of the Company, which are
reasonably consistent with the responsibilities of
the Executive’s position; (ii) a material act of dishonesty or disloyalty by Executive related to
the business of the Company; (iii) Executive’s conviction of a felony, a lesser crime against the
Company, or any crime involving dishonest conduct; (iv) Executive’s habitual or repeated misuse or
habitual or repeated performance of the Executive’s duties under the influence of alcohol or
controlled substances; or (v) any incident materially compromising the Executive’s reputation or
ability to represent the Company with the public or any act or omission by the Executive that
substantially impairs the Company’s business, good will or reputation.
(g) “Change in Control” shall be deemed to have occurred if:
(i) Any Person (including a “group” as defined in Section 14(d) of the Exchange Act) other
than an Exempt Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing more than 35% of the combined voting power of the Company’s then
outstanding securities; provided, however, that no Change of Control shall be deemed to have
occurred as a result of a change in ownership percentage resulting solely from an acquisition of
securities by the Company; or
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(ii) During any two (2) consecutive years during the Term, individuals who at the beginning of
such two (2) year period constitute the Board and any new director whose election to the Board or
nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved (such individuals and any such
new director being referred to as the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office as a result of either an actual
or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(iii) Consummation of a reorganization, merger or consolidation of the Company (a “Business
Combination”), in each case, unless, following such Business Combination, all or substantially all
of the individuals and entities who were the beneficial owners of outstanding voting securities of
the Company immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the company resulting from such Business
Combination (including, without limitation, a company which, as a result of such transaction, owns
the Company or all or substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially
the same proportions as their ownership immediately prior to such Business Combination of the
outstanding voting securities of the Company; or
(iv) A sale or other disposition of all or substantially all of the assets of the Company
(other than in a transaction in which all or substantially all of the individuals and entities who
were the Beneficial Owners of outstanding voting securities of the Company immediately prior to
such sale or other disposition beneficially own, directly or indirectly, substantially all of the
combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors of the acquirer of such assets (either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership immediately prior to such
sale or other disposition), or the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(h) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(i) “Company” shall mean Tractor Supply Company and, except in determining whether or not any
Change in Control of the Company has occurred, shall include any successor to its business or
assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(j) “Date of Termination” shall have the meaning set forth in Section 7(b) hereof.
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(k) “Disability” shall be deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executive’s
duties with the Company for a period of six (6) consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within thirty (30) days after such
Notice of Termination is given, the Executive shall not have returned to the full-time performance
of the Executive’s duties.
(l) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(m) “Excise Tax” shall mean any excise tax imposed under Section 4999 of the Code.
(n) “Executive” shall mean the individual named in the preamble to this Agreement.
(o) “Exempt Person” shall mean Xxxxxx X. Xxxxxxxx, Xx., his spouse, his children and their
spouses, and his grandchildren (or the legal representative of any such person) and each trust for
the benefit of any such person.
(p) “Finally Determined” shall mean, with respect to any amount used in the computation of a
Gross-Up Payment, that such amount has been the subject of an audit adjustment by the Internal
Revenue Service that is either (i) agreed to by both the Executive and the Company, such agreement
not to be unreasonably withheld, or (ii) sustained by a court of competent jurisdiction in a
decision with which the Executive and the Company concur, such concurrence not to be unreasonably
withheld, or with respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed or there is no further right of appeal.
(q) “Good Reason” for termination by the Executive of the Executive’s employment shall mean
the occurrence (without the Executive’s express written consent) after any Change in Control, of
any one of the following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in paragraph (i), (v) or (vi) below, such act or
failure to act is corrected within the later of 30 days of the Company’s receipt of notice of Good
Reason from the Executive or prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties materially inconsistent with the
Executive’s status as a senior executive officer of the Company or a material adverse
alteration in the nature or status of the Executive’s responsibilities from those in effect
immediately prior to the Change in Control;
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(ii) a material reduction by the Company in the Executive’s annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(iii) the relocation of the Executive’s principal place of employment to a location
more than 50 miles from the Executive’s principal place of employment immediately prior to
the Change in Control or the Company’s requiring the Executive to be based anywhere other
than such principal place of employment (or permitted relocation thereof) except for
required travel on the Company’s business to an extent substantially consistent with the
Executive’s present business travel obligations;
(iv) the failure by the Company to pay to the Executive any material portion of the
Executive’s current compensation, or to pay to the Executive any material portion of an
installment of deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect any compensation plan in which
the Executive participates immediately prior to the Change in Control which is material to
the Executive’s total compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the failure by
the Company to continue the Executive’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the Executive’s participation
relative to other participants, as existed immediately prior to the Change in Control; or
(vi) the failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the Company’s pension,
savings, life insurance, medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control (except for across
the board changes similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company), the taking of any other action by the
Company which would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the Executive at the time
of the Change in Control, or the failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled in accordance with the
Company’s normal vacation policy in effect at the time of the Change in Control.
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The Executive’s right to terminate the Executive’s employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(r) “Gross-Up Payment” shall have the meaning set forth in Section 6(b) hereof.
(s) “Notice of Termination” shall have the meaning set forth in Section 7(a) hereof.
(t) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company
(u) “Retirement” shall be deemed the reason for the termination by the Executive of the
Executive’s employment if such employment is terminated in accordance with the Company’s retirement
policy, including early retirement, generally applicable to its salaried employees.
(v) “Severance Payments” shall have the meaning set forth in Section 6(a) hereof.
(w) “Tax Counsel” shall have the meaning set forth in Section 6(b) hereof.
(x) “Term” shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
(y) “Total Payments” shall mean those payments so described in Section 6(b) hereof.
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IT WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| By: | ||||||
| Title: Chief Executive Officer | ||||||
| EXECUTIVE | ||||||
| Name: | ||||||
| Address: | ||||||
| (Please print carefully) | ||||||
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