<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e) (2))
</TABLE>
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Tractor Supply Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[TRACTOR SUPPLY CO. (R) LOGO]
TRACTOR SUPPLY COMPANY
320 PLUS PARK BOULEVARD
NASHVILLE, TENNESSEE 37217
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you
to attend the 1997 Annual Meeting of Stockholders of Tractor Supply Company.
As shown in the formal notice enclosed, the meeting will be held on
Thursday, April 24, 1997, at 10:00 a.m. (central standard time) at our
corporate headquarters in Nashville, Tennessee. The purpose of this year's
meeting is to elect three Class III Directors for a term of three years, to
approve the Company's 1996 Associate Stock Purchase Plan, to approve an
amendment to the Company's 1994 Stock Option Plan to increase the number of
shares of common stock reserved for issuance thereunder, to approve an
amendment to the Company's Restated Certificate of Incorporation, as amended,
to increase the authorized number of shares of common stock, to ratify the
reappointment of Price Waterhouse LLP as the Company's independent certified
public accountants for fiscal 1997, and to transact such other business as may
properly come before the meeting. The meeting will include a report on Tractor
Supply Company's activities for the fiscal year ended December 28, 1996 and
there will be an opportunity for comments and questions from stockholders.
Whether or not you plan to attend the meeting, it is important that
you be represented and that your shares be voted. Accordingly, after reviewing
the Proxy Statement, we ask you to complete, sign and date the proxy card and
return it as soon as possible in the postage-paid envelope provided. Early
return of your proxy will permit us to avoid the expense of soliciting the
votes of stockholders who are late sending in their proxy cards.
Sincerely,
Joseph H. Scarlett, Jr. Gerald E. Newkirk
Chairman of the Board President and
and Chief Executive Officer Chief Operating Officer
March 21, 1997
<PAGE> 3
TRACTOR SUPPLY COMPANY
320 PLUS PARK BOULEVARD
NASHVILLE, TENNESSEE 37217
(615) 366-4600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
Tractor Supply Company, a Delaware corporation (the "Company"), will be held at
the Company's management headquarters, 320 Plus Park Boulevard, Nashville,
Tennessee, on Thursday, April 24, 1997, at 10:00 a.m. (central standard time)
(the "Annual Meeting") for the following purposes:
1. To elect three Class III Directors for three-year terms ending
at the 2000 Annual Meeting of Stockholders;
2. To approve the Company's 1996 Associate Stock Purchase Plan;
3. To approve an amendment to the Company's 1994 Stock Option
Plan to increase the number of shares of common stock, par
value $.008 per share (the "Common Stock"), reserved for
issuance thereunder from 250,000 to 1,000,000;
4. To approve an amendment to the Company's Restated Certificate
of Incorporation, as amended, to increase the number of
authorized shares of Common Stock from 9,500,000 to
100,000,000;
5. To ratify the reappointment of Price Waterhouse LLP as
independent certified public accountants for the fiscal year
ending December 27, 1997; and
6. To transact such other business as may properly come before
the meeting and any continuations and adjournments thereof.
The Board of Directors has fixed the close of business on March 12,
1997 as the record date for determining the holders of the Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
The Common Stock of the Company should be represented as fully as
possible at the Annual Meeting. Therefore, please sign and return the enclosed
proxy at your earliest convenience. You may, of course, revoke your proxy at
any time before it is voted at the meeting. However, signing and returning the
proxy will assure your representation at the Annual Meeting if you do not
attend.
By Order of the Board of Directors
Michael J. Kincaid
Vice President-Controller and Secretary
Nashville, Tennessee
March 21, 1997
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY.
- --------------------------------------------------------------------------------
<PAGE> 4
TRACTOR SUPPLY COMPANY
320 PLUS PARK BOULEVARD
NASHVILLE, TENNESSEE 37217
(615) 366-4600
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997
INTRODUCTION AND VOTING PROCEDURES
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board") of Tractor
Supply Company, a Delaware corporation (the "Company"), for use at the 1997
Annual Meeting of Stockholders of the Company to be held at the Company's
management headquarters, 320 Plus Park Boulevard, Nashville, Tennessee, on
Thursday, April 24, 1997, at 10:00 a.m. (central standard time) and at any
continuations and adjournments thereof (the "Annual Meeting"). This Proxy
Statement is first being mailed on or about March 21, 1997 to holders of record
of the common stock, par value $.008 per share, of the Company (the "Common
Stock") at the close of business on March 12, 1997.
The shares of Common Stock held by each stockholder who signs and
returns the enclosed proxy will be counted for purposes of determining the
presence of a quorum at the meeting unless such proxy shall be timely revoked.
If the enclosed form of proxy is executed and returned, it may, nevertheless,
be revoked at any time before it is voted by delivery of a written revocation
or a duly executed proxy bearing a later date to the Secretary of the Company
at its management headquarters or by the stockholder personally attending and
voting his or her shares at the meeting.
The Board has fixed the close of business on March 12, 1997 as the
record date (the "record date") for the meeting. Only stockholders of record
at the close of business on March 12, 1997 are entitled to notice of and to
vote at the Annual Meeting. At the close of business on March 12, 1997, there
were [ ] shares of Common Stock outstanding and entitled to vote
at the Annual Meeting. Each share of Common Stock entitles the holder thereof
to one vote on each matter to be considered at the Annual Meeting. A quorum
(i.e., holders of record of a majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting) is required for any
vote taken at the Annual Meeting. Assuming a quorum is present with respect to
such matters, the affirmative vote of the holders of a plurality of the shares
of Common Stock present in person or represented by proxy is required for the
election of directors, the affirmative vote of the holders of a majority of the
outstanding shares of the Common Stock as of the record date is required for
the approval of the amendment to the Company's Restated Certificate of
Incorporation, as amended, to increase the number of shares of authorized
Common Stock, and the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy is required
for the approval of any other matter submitted to a vote of the stockholders at
the Annual Meeting. Under Delaware law, abstentions are treated as present and
entitled to vote and, therefore, will be counted in determining whether a
quorum is present and will have the effect of a vote withheld on the election
of directors or a vote against any other matter. A broker non-voted share
(i.e., a share held by a broker or nominee as to which instructions have not
been received from the beneficial owner or person entitled to vote and as to
which the broker or nominee does not have discretionary power to vote on a
particular matter) is considered not entitled to vote on that matter and,
therefore, will not be counted in determining whether a quorum is present or
whether a matter has been approved.
The Annual Report to Stockholders of the Company for the fiscal year
ended December 28, 1996, including audited financial statements (the "Annual
Report"), is being mailed concurrently with this Proxy Statement to all holders
of record of Common Stock at the close of business on March 12, 1997. In
addition, the Company has
1
<PAGE> 5
provided brokers, dealers, banks, voting trustees and their nominees, at
Company expense, with additional copies of the Annual Report so that such
record holders could supply such material to beneficial owners as of March 12,
1997. Additional copies of the Annual Report and the Company's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996 to be filed with the
Securities and Exchange Commission (the "Form 10-K") (but without exhibits to
the Form 10-K) may be obtained without charge upon request to the Company's
investor relations firm, Corporate Communications, Inc., 523 Third Avenue
South, Nashville, Tennessee 37210. See "Availability of Form 10-K and Annual
Report to Stockholders."
EACH PROPERLY EXECUTED PROXY RECEIVED IN TIME FOR THE MEETING WILL BE
VOTED AS SPECIFIED THEREIN. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED THEREBY WILL BE VOTED FOR THE ELECTION OF JOSEPH H. SCARLETT, JR.,
GERALD E. NEWKIRK AND S.P. BRAUD AS CLASS III DIRECTORS, FOR THE APPROVAL OF
THE COMPANY'S 1996 ASSOCIATE STOCK PURCHASE PLAN, FOR THE APPROVAL OF AN
AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER, FOR THE APPROVAL OF AN
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED,
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK AND FOR
RATIFICATION OF THE REAPPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
27, 1997.
ELECTION OF CLASS III DIRECTORS
AND INFORMATION REGARDING DIRECTORS
ELECTION OF CLASS III DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, as
amended, the Board is divided into three classes designated as Class I, Class
II and Class III, respectively. At the Annual Meeting the current terms of the
Class III directors will expire. The Board has nominated the three incumbent
Class III directors, Joseph H. Scarlett, Jr., Gerald E. Newkirk, and S.P.
Braud, for election as Class III directors for a three-year term expiring at
the 2000 Annual Meeting of Stockholders. The following table sets forth
certain information concerning the three nominees for election as Class III
directors.
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND
NAME AND AGE SINCE BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- --------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Joseph H. Scarlett, Jr., 53 ................ 1982 Chairman and Chief Executive Officer of the
Company since February 1993 after having
served as President and Chief Operating
Officer of the Company since 1987. Between
1979 and 1987, served as Vice President -
Personnel, Senior Vice President -
Administration and Executive Vice President -
Operations of the Company. Prior to 1979,
held operational positions, including
District Supervisor and Personnel Director,
with Two Guys Discount Stores in New Jersey
over a 15 year period. Member of the
International Mass Retail Association Board.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND
NAME AND AGE SINCE BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- --------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Gerald E. Newkirk, 50 ...................... 1985 President and Chief Operating Officer of the
Company since February 1993 after having
served as Executive Vice President of the
Company in charge of Operations and
Merchandising since 1987 and as Vice
President of the Company in charge of
Merchandising from 1981 to 1987. From 1979
to 1981, was involved with store operations,
first as a District Manager and subsequently
as a Regional Vice President of the Company.
Prior to 1979, was a District Manager for
Grossman's Lumber. Member of the National
FFA Foundation Sponsor Board.
S.P. Braud, 66 ............................. 1993 President and director of Braud Design/Build
Inc., a residential construction company
located in Ponte Vedra Beach, Florida, since
October 1992. Previously served as a Vice
President and the Treasurer and Chief
Financial Officer of Service Merchandise
Company, Inc. from 1986 to 1993, a Vice
President and the Controller of the Retail
Group of General Mills from 1982 to 1986, the
Chief Financial Officer of the Specialty
Retailing Group of W.R. Grace & Company and
the Senior Vice President of Operations of
Shepler's Western Wear (a subsidiary of W.R.
Grace & Company) from 1977 to 1982, the
Senior Vice President of Finance and
Administration for White Stores from 1975 to
1977 and the Controller of the North Central
Region of Montgomery Ward from 1972 to 1975.
</TABLE>
If any nominee becomes unwilling or unable to serve, which is not
expected, the proxies will be voted for a substitute person designated by the
Board.
- ---------------
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO ELECT JOSEPH H. SCARLETT, JR., GERALD E. NEWKIRK AND
S.P. BRAUD AS CLASS III DIRECTORS OF THE COMPANY TO HOLD OFFICE UNTIL THE 2000
ANNUAL MEETING OF STOCKHOLDERS.
3
<PAGE> 7
INFORMATION CONCERNING CLASS I DIRECTOR
The following table sets forth certain information concerning the
Class I director of the Company, whose term expires at the 1998 Annual Meeting
of Stockholders.
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND
NAME AND AGE SINCE BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- --------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Thomas O. Flood, 50 ........................ 1985 Senior Vice President of Administration and
Finance, Treasurer and Chief Financial
Officer of the Company since January 1996,
after having served as Vice President of
Administration and Finance of the Company
since 1984 and Chief Financial Officer and
Treasurer since June 1993. Previously served
as Vice President of Finance of the Company
from 1982 to 1984, as Controller from 1981 to
1982 and in various financial and management
information systems capacities between 1969
and 1981.
</TABLE>
INFORMATION CONCERNING CLASS II DIRECTORS
The following table sets forth certain information concerning the
Class II directors of the Company, whose terms expire at the 1999 Annual
Meeting of Stockholders.
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND
NAME AND AGE SINCE BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- --------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Thomas J. Hennesy, III, 67 ................. 1982 Retired as Vice Chairman of the Company in
June 1995, after having served as Vice
Chairman of the Company since February 1993,
Chairman and Chief Executive Officer of the
Company from 1982 to February 1993 and
President of the Company from 1982 to 1987.
Previously served as President of several
subsidiaries of, and as Vice President -
Operations of, Fuqua Industries, Inc. from
1974 to 1982.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND
NAME AND AGE SINCE BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- --------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Joseph D. Maxwell, 58 ..................... 1985 Retired as Vice President of Marketing of the
Company in June 1996, after having served as
Vice President of Marketing of the Company
since 1984. Previously served in various
capacities with the Company from 1980 to
1984. From 1967 to 1980, was employed by
Hallmark Auto Centres, Ltd., a retail
subsidiary of Goodyear Canada, last serving
as Chief Operating Officer for five years.
Joseph M. Rodgers, 63 ...................... 1995 Chairman of The JMR Group, an investment
company located in Nashville, Tennessee,
since 1984. Previously served as the United
States Ambassador to France from 1985 until
1989. Other directorships: AMR Corporation /
American Airlines, Inc., Fort Worth, Texas,
since 1989; Gaylord Entertainment Company,
Nashville, Tennessee, since 1991; Gryphon
Holdings Inc., New York, New York, since
1993; Lafarge Corporation, Reston, Virginia,
since 1989; SunTrust Bank, Nashville, N.A.,
Nashville, Tennessee, since 1989; Thomas
Nelson, Inc., Nashville, Tennessee, since
1992; and Willis Corroon Group plc., London,
England and Nashville, Tennessee, since 1990.
</TABLE>
BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
COMPENSATION OF DIRECTORS - The Company pays each director who is not
also an employee of the Company an annual retainer of $8,000. In addition, the
Company pays all such non-employee directors $500 for each Board meeting
attended, or committee meeting attended if not held in conjunction with a Board
meeting, and reimburses all directors for out-of-pocket expenses incurred in
connection with their attendance at Board and committee meetings. Moreover,
each of the directors is eligible to participate in the Company's 1994 Stock
Option Plan under which non-qualified stock options for 500 shares of Common
Stock are automatically granted annually to each of the non-employee directors
with an exercise price equal to the fair market value of such shares at the
time of grant. No director who is an employee of the Company receives
compensation for services rendered as a director.
BOARD OF DIRECTORS - During the Company's fiscal year ended December
28, 1996 ("fiscal 1996"), the Board held four meetings. The Board has three
standing committees, the Audit Committee, the Compensation Committee and the
Executive Committee. The Board does not have a standing nominating committee.
During fiscal 1996, the Audit Committee held three meetings, the Compensation
Committee held three meetings and the Executive Committee held none. During
fiscal 1996, all of the current directors of the Company attended 100% of the
aggregate number of meetings of the Board and the respective Committees of the
Board on which they served that were held during the period of time that such
person served on the Board or such Committee.
5
<PAGE> 9
AUDIT COMMITTEE - The Audit Committee, which is comprised of Messrs.
Braud (Chairman) and Rodgers, is responsible for overseeing the auditing
procedures and financial reporting of the Company, reviewing the general scope
of the Company's annual audit and the fee charged by the Company's independent
certified public accountants, determining the duties and responsibilities of
the internal auditors, receiving, reviewing and accepting the reports of the
Company's independent certified public accountants, reviewing and approving
related-party transactions and overseeing the Company's systems of internal
accounting and management controls.
COMPENSATION COMMITTEE - The Compensation Committee, which is
comprised of Messrs. Braud (Chairman) and Rodgers, is responsible for reviewing
and recommending the appropriate compensation and benefits of directors and
officers of the Company, considering and making grants and awards under and
administering the Company's 1994 Stock Option Plan and overseeing the Company's
various other compensation and benefit plans.
EXECUTIVE COMMITTEE - The Executive Committee, which is comprised of
Messrs. Scarlett (Chairman), Newkirk and Braud, is responsible for exercising
all of the powers of the Board between Board meetings, except as otherwise
limited by the Company's Amended and Restated By-laws and applicable law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Braud and Rodgers serve on the Compensation Committee of the
Board. During fiscal 1996, Messrs. Braud and Rodgers, and Douglas J. Tigert, a
director who resigned effective November 11, 1996 for personal reasons, served
as members of the Compensation Committee. There are no, and during fiscal 1996
there were no, interlocking relationships between any officers of the Company
and any entity whose directors or officers serve on the Board's Compensation
Committee, nor did any current or past officers of the Company serve on the
Compensation Committee during fiscal 1996.
APPROVAL OF 1996 ASSOCIATE STOCK PURCHASE PLAN
On July 29, 1996, the Board of Directors adopted the Tractor Supply
Company 1996 Associate Stock Purchase Plan (the "ASPP"), subject to approval by
the Company's stockholders. The Board of Directors believes that the purchase
of shares of Common Stock by employees ("associates") of the Company through
the ASPP will provide associates with an incentive to advance the Company's
interests by aligning the interests of associates with those of the
stockholders of the Company. The Board of Directors believes that the benefits
to associates with respect to the ASPP will assist the Company in attracting
and retaining qualified associates.
The maximum number of shares of the Company's Common Stock that may be
issued under the ASPP is 1,000,000 (if the increase in the number of authorized
shares of the Company's Common Stock is approved by the Company's stockholders)
or 500,000 (if the increase in the number of authorized shares of the Company's
Common Stock is not approved by the Company's stockholders). A copy of the
ASPP is attached hereto as Annex A and the following summary is qualified in
its entirety by reference thereto.
DESCRIPTION OF ASPP
Purpose
The purpose of the ASPP is to provide associates of the Company an
incentive to advance the Company's interests by providing a method whereby they
may acquire a proprietary interest in the Company on favorable terms. The ASPP
is intended to qualify as an "Employee Stock Purchase Plan" under Section 423
of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions
of the ASPP shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
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<PAGE> 10
Administration
The ASPP shall be administered by the Board or a committee appointed
by the Board and currently is administered by the Compensation Committee (the
"Committee") of the Board. The administration, interpretation and application
of the ASPP by the Board and the Committee shall be final, conclusive and
binding upon all participants.
Eligibility
Any associate who, on the first day of the applicable offering period
(the "Enrollment Date"), is customarily employed for a least twenty (20) hours
per week and more than five (5) months in a calendar year by the Company is
eligible to participate in the ASPP. No (i) associate who, in the aggregate,
owns or holds outstanding options or rights to purchase, or as a result of
participation in the ASPP would, in the aggregate, own or hold outstanding
options or rights to purchase, five percent (5%) or more of the total combined
voting power of all classes of stock of the Company, or (ii) member of the
Committee may participate in the ASPP.
Participation in an Offering
The ASPP is administered over a period of successive offering periods
(each, an "Offering Period"). Each Offering Period consists of a three
calendar month period, commencing on January 1, April 1, July 1 and October 1
of each year, except that the first Offering Period will be a one (1) month
period commencing on December 1, 1996 and terminating on December 31, 1996.
The Board may change the duration of Offering Periods with respect to future
offerings. An eligible associate may become a participant in the ASPP for any
Offering Period by completing a subscription agreement authorizing payroll
deductions and filing it with the Company prior to the applicable Enrollment
Date. Once enrolled, a participant will continue to participate in the ASPP
for each succeeding Offering Period until such time as the participant
withdraws from the ASPP or the participant's employment terminates.
Grant and Exercise of Option
On the Enrollment Date of each Offering Period, each eligible
associate participating in such Offering Period shall be deemed to have been
granted an option to purchase, on the last day for such Offering Period (the
"Exercise Date"), up to the number of full shares of the Company's Common Stock
determined by dividing such associate's payroll deductions accumulated during
such Offering Period by the applicable option price per share for such Offering
Period; provided, however, that no eligible associate participating in the ASPP
shall be granted an option under the ASPP which permits such associate's rights
to purchase stock under the ASPP to accrue at a rate which exceeds $25,000 of
the fair market value of such stock for each calendar year in which such option
is outstanding. Unless a participant withdraws from the ASPP or the
participant's employment terminates, his or her option for the purchase of
shares will be exercised automatically on the Exercise Date of each Offering
Period, and the maximum number of full shares subject to such option will be
purchased for the participant at the applicable option price with the
accumulated payroll deductions in his or her account. Any amount remaining in
the participant's account after an Exercise Date as a result of being
insufficient to purchase a full share of Common Stock shall be held in the
participant's account until the Exercise Date in the next Offering Period or
the earlier withdrawal of the participant from the Plan or the participant's
employment terminates. If on a given Exercise Date the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available, the Company shall make a pro rata allocation of the remaining shares
in as uniform a manner as shall be practicable and as it shall determine to be
equitable.
Purchase Price
The option price per share of Common Stock in a given Offering Period
shall be the lower of: (i) 85% of the fair market value of a share of Common
Stock on the Enrollment Date for such Offering Period; and (ii) 85% of the fair
market value of a share of Common Stock of the Company on the Exercise Date for
such Offering Period.
Payroll Deductions
At the time a participant files his or her subscription agreement, the
participant shall elect to have payroll deductions made on each payroll date
during each Offering Period. No interest will accrue on the payroll deductions
7
<PAGE> 11
of a participant in the ASPP. A participant must authorize payroll deductions
in a fixed dollar amount not less than $5.00 of eligible compensation per
payroll date but not more than $21,250 in any calendar year. Eligible
compensation means all regular straight time earnings and all payments for
overtime, shift premium, incentive compensation, bonuses, payments in lieu of
vacation or sick leave, and commissions, in each case before any deductions
required by law or authorized by the associate, including, without limitation,
pursuant to any deferred compensation arrangement. Eligible compensation does
not include any other cash payment or employee benefit, including, without
limitation, severance payments, payments by the Company of social security,
workers compensation, unemployment compensation, any disability payments or
other payments required by statute, and any payments or contributions by the
Company for insurance or other employee benefit plans. A participant may not
make any additional payments into the ASPP other than through payroll
deductions. A participant may discontinue his or her participation in the
Plan, may reduce the rate of his or her payroll deductions during an Offering
Period, and may increase the rate of his or her payroll deductions effective as
of the Enrollment Date of the next Offering Period. Notwithstanding the
foregoing, to the extent necessary to comply with the Code, a participant's
payroll deductions may be decreased to 0% during any Offering Period at such
time as the aggregate of all payroll deductions accumulated with respect to
such Offering Period and any other Offering Periods ending within the same
calendar year under the ASPP equal $21,250.
Transferability
A participant may not assign, transfer or pledge (other than by will,
the laws of descent and distribution or as otherwise specifically provided for
in the ASPP) any rights to payroll deductions credited, or with regard to the
exercise of an option or to receive shares, under the ASPP.
Withdrawal; Termination of Employment
A participant may withdraw from the ASPP at any time prior to the
Exercise Date of any Offering Period by giving written notice to the Company.
Upon withdrawal, all but not less than all payroll deductions credited under
the ASPP that have not been applied toward the purchase of shares of Common
Stock will be refunded to the participant, the participant's participation in
the ASPP will be automatically terminated, and no further payroll deductions
for the purchase of shares will be made. Payroll deductions will not resume on
behalf of a participant who has withdrawn from the ASPP unless a new
subscription agreement is delivered to the Company prior to the Enrollment Date
for any succeeding Offering Period directing the Company to resume payroll
deductions. Upon termination of a participant's employment prior to the
Exercise Date of an Offering Period for any reason, including retirement,
resignation or death, or upon the failure of the participant to remain
customarily employed for at least twenty (20) hours per week and more than five
(5) months per calendar year (provided, however, that a participant's service
as an associate will not be considered terminated or interrupted in the case of
a leave of absence agreed to in writing by the Company if such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute) the participant's payroll
deductions credited under the ASPP will be returned to the participant or, in
the case of death, the participant's payroll deductions, cash and shares
credited under the ASPP will be delivered to the participant's designated
beneficiary or, in the absence of a beneficiary validly designated under the
ASPP who is living at the time of such participant's death, to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), at the
Company's discretion, to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
Capital Changes
In the event any change is made in the Company's capitalization during
an Offering Period, such as a stock split or stock dividend, which results in
an increase or decrease in the number of shares of Common Stock outstanding
without receipt of consideration by the Company (provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration"), appropriate adjustment
shall be made in the purchase price and in the number of shares subject to
options under the ASPP. Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. In the
event
8
<PAGE> 12
of the proposed dissolution or liquidation of the Company, any then current
Offering Period will terminate immediately prior to the consummation of such
proposed action unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
ASPP shall be assumed or an equivalent option shall be substituted by such
successor corporation, or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion, that each
participant shall have the right to exercise any unexercised option in lieu of
such assumption or substitution. The Board, if it so determines in the
exercise of its sole discretion, may also make provision for adjusting the
number of shares of Common Stock under the ASPP (i) covered by each outstanding
option and (ii) authorized for issuance but not yet placed under option, as
well as the price per share of Common Stock covered by each outstanding option,
in the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares
of its outstanding Common Stock, and in the event of the Company being
consolidated with or merged into any other corporation.
Amendment or Termination of the ASPP
The Board may at any time terminate or amend the ASPP. No such
termination shall affect options previously granted, nor may an amendment make
any change in any option theretofore granted which adversely affects the rights
of any participant, nor may an amendment be made without the approval of the
stockholders of the Company if such amendment would increase the number of
shares that may be issued under the ASPP (except any increase determined as
provided above) or modify the requirements concerning which associates (or
class of associates) are eligible for participation in the ASPP.
FEDERAL INCOME TAX INFORMATION
The ASPP is designed to qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. Under Section 423 of the Code, a participant
will not realize taxable income at the time the participant purchases stock
under the ASPP. However, a participant may be deemed to receive compensation
taxable as ordinary income in the year in which the participant disposes of the
stock or dies while holding the stock.
The rules applicable to the disposition of stock vary depending upon
whether or not the disposition constitutes a "disqualifying disposition" (i.e.,
a disposition within two years after the Enrollment Date of the Offering Period
during which the disposed of stock was purchased).
If a participant makes a disqualifying disposition, the participant
will be deemed to receive compensation taxable as ordinary income in an amount
equal to the excess of the value of the stock on the Exercise Date on which it
was purchased over the amount paid for the stock, regardless of whether the
proceeds of the disposition exceed the participant's purchase price. In such
case, the participant's cost basis for the stock would be correspondingly
increased by the amount recognized as compensation by the participant. The
Company, at the time a disqualifying disposition is made, will collect from the
participant the federal income tax withholding due on the additional
compensation. The participant's capital gain or loss on the disqualifying
disposition itself will be the difference between the participant's basis so
adjusted and the proceeds of the disqualifying disposition.
If a participant should sell stock at a profit and the sale is not a
disqualifying disposition, the participant would recognize as compensation
taxable as ordinary income an amount equal to the lesser of (i) the excess of
the fair market value of the stock on the date of disposition over the
participant's purchase price, or (ii) the "applicable discount" (for purposes
of the ASPP, 15%) applied to the fair market value of the stock on the
Enrollment Date of the Offering Period during which the stock was purchased.
Any profit in excess of the amount recognized as compensation would be treated
as capital again. If the sale is at a loss and is not a disqualifying
disposition, the difference between the participant's purchase price and the
proceeds of the sale would be a capital loss.
9
<PAGE> 13
If a participant dies at any time while holding the stock, the
participant would be deemed to have received compensation taxable as ordinary
income in the year of his or her death in an amount equal to the smaller of (i)
the applicable discount applied to the fair market value of the stock on the
Enrollment Date of the Offering Period during which the stock was purchased, or
(ii) the excess, if any, of the fair market value of the stock on the date of
death over the participant's purchase price.
INDIVIDUAL TAX IMPLICATIONS ATTENDANT TO PARTICIPATION IN THE ASPP ARE
THE SOLE RESPONSIBILITY OF THE INDIVIDUAL PARTICIPANT. THE BRIEF DISCUSSION OF
FEDERAL TAX CONSEQUENCES PROVIDED ABOVE IS NOT EXHAUSTIVE. PLEASE NOTE THAT
THE LAW MAY CHANGE AND SPECIAL RULES ARE PROVIDED WITH RESPECT TO SITUATIONS
NOT SPECIFICALLY DISCUSSED HEREIN. THE COMPANY STRONGLY RECOMMENDS THAT EACH
PARTICIPANT CONSULT WITH A TAX ADVISOR PRIOR TO COMMENCING ANY TRANSACTION
UNDER THE ASPP.
PLAN BENEFITS
The Company cannot now determine the exact number of shares to be
issued in the future under the ASPP to the officers named under "EXECUTIVE
COMPENSATION - SUMMARY COMPENSATION TABLE", to all current officers as a group,
or to all associates (including officers) as a group.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO APPROVE THE COMPANY'S 1996 ASSOCIATE STOCK PURCHASE
PLAN.
APPROVAL OF AMENDMENT TO 1994 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER
The Tractor Supply Company 1994 Stock Option Plan (the "Stock Option
Plan") currently permits the grant of incentive stock options ("ISOs"),
nonqualified stock options ("NQSOs"), stock appreciation rights ("SARs")
related to an option, SARs not related to any option ("unrelated SARs") and
restricted stock. ISOs and NQSOs granted under the Stock Option plan generally
vest 33 1/3% each year, beginning on the third anniversary of the date of
grant, thus becoming 100% vested on the fifth anniversary of the grant date and
have a maximum term of ten (10) years after the date of grant. To date, no
SARs, unrelated SARs or shares of restricted stock have been granted under the
Stock Option Plan.
In October 1996, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder from 250,000
shares to 1,000,000 shares.
As of January 31, 1997, options to purchase 276,000 shares of Common
Stock at a weighted average exercise price of $21.19 per shares were
outstanding, including 26,000 shares subject to approval of this amendment by
the Company's stockholders, none of which were exercisable, and 724,000 shares
remained available for future grants under the Stock Option Plan, including the
750,000 shares subject to stockholder approval at the Annual Meeting.
DESCRIPTION OF 1994 STOCK OPTION PLAN
In December 1993, the Company adopted the Stock Option Plan, which
became effective upon the consummation of the Company's initial public offering
in February 1994. The purpose of the Stock Option Plan is to provide certain
officers, directors (including directors who are not associates) and key
associates of the Company and its affiliates with an incentive to maintain and
enhance the long-term performance and profitability of the Company and to
enhance the Company's ability to attract and retain the services of qualified
persons. The maximum number of shares of Common Stock that may be issued by
the Company pursuant to options, SAR's and restricted stock granted under the
Stock Option Plan (subject to adjustment as described below) is 1,000,000 (if
the increase in the
10
<PAGE> 14
number of shares of Common Stock reserved for issuance under the Stock Option
Plan and the increase in the total number of authorized shares of Common Stock
are approved by the Company's stockholders) or 250,000 (if the increases are
not approved by the Company's stockholders). Any shares covered by options,
SARs or restricted stock awards granted under the Stock Option Plan which
expire, terminate, or are cancelled shall again become available for awards
under the Stock Option Plan.
The Stock Option Plan is administered by the Compensation Committee of
the Board of Directors, the composition of which is intended to satisfy the
provisions of Rule 16b-3 under the Exchange Act. During the 10-year period
ending in 2003, the Compensation Committee will have the authority, subject to
the terms of the Stock Option Plan, to determine when and to whom to make
grants under the Stock Option Plan, the number of shares to be covered by the
grants, the types and terms of the options, SARs and restricted stock granted
and the exercise price of the options and SARs and to prescribe, amend and
rescind rules and regulations relating to the Stock Option Plan.
The Company's Board of Directors may, without stockholder approval,
amend, suspend or discontinue the Stock Option Plan at any time except that,
without stockholder approval, no such amendment may (i) materially increase the
benefits accruing to grantees under the Stock Option Plan, (ii) increase the
maximum number of shares as to which awards may be granted under the Stock
Option Plan, except for adjustments to reflect stock dividends or other
recapitalizations affecting the number or kind of outstanding shares, (iii)
change the eligibility requirements for participation in the Stock Option Plan,
(iv) provide for the grant of options or SARs having an exercise price or
appreciation base (as defined in the Stock Option Plan) of less than 100% of
the fair market value of the Common Stock on the date of grant, (v) permit an
option or unrelated SAR to be exercisable, or a restricted stock award to vest,
more than 10 years after the date of grant, or (vi) extend the term of the
Stock Option Plan beyond the initial 10-year period.
Under the terms of the Stock Option Plan, ISOs within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
NQSOs subject to the provisions of Section 83 of the Code, SARs related to an
option, unrelated SARs and restricted stock may be granted to officers,
directors and key associates of the Company and its affiliates, except that
ISOs may be granted only to associates of the Company (as defined in Section
424 of the Code). The Stock Option Plan contains no limitations upon the
number of shares with respect to which options, SARs or restricted stock awards
may be granted to an individual over the term of the Stock Option Plan.
The Stock Option Plan provides for an automatic annual grant of NQSOs
to purchase 500 shares of Common Stock to each director who is not also an
associate of the Company or an affiliate and such grant will vest 33 1/3% a
year commencing on the third anniversary of the date of the grant (thus
becoming 100% vested on the fifth anniversary of the date of grant).
To the extent that the aggregate fair market value, determined as of
the date of grant of an ISO, of Common Stock with respect to which ISOs granted
under this Stock Option Plan and all other option plans of the Company, are
exercisable for the first time by any individual during any calendar year
exceeds $100,000, such options shall be treated as options which are not ISOs.
Each ISO is exercisable over a period, determined by the Compensation
Committee in its discretion, but not to exceed 10 years from the date of grant,
as required by the Code. In addition, in the case of an ISO granted to an
individual who, at the time such ISO is granted, owns shares possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (a "10% Stockholder"), the exercise period for the ISO may not exceed
five years from the date of grant. In the case of NQSOs, the exercise period,
not to exceed 10 years from the date of grant, shall in all cases be determined
by the Compensation Committee. Options may be exercisable during the option
period at such times, in such amounts, in accordance with such terms and
conditions and subject to such restrictions, as are set forth in the option
agreement evidencing the grant of such options, except that no option may be
exercised prior to the first anniversary of the date of grant. The
Compensation Committee may, in its discretion, with the
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<PAGE> 15
grantee's consent, cancel any award of options, SARs or restricted stock and
issue a new award in substitution therefor or accelerate the exercisability of
any award granted under the Stock Option Plan or extend the scheduled
expiration date of an award.
The exercise price of an ISO or an NQSO (the "Option Price") may not
be less than the fair market value of the shares of the Common Stock on the
date of grant, except that, in the case of an ISO granted to a 10% Stockholder,
the Option Price may not be less than 110% of such fair market value. The
Option Price of and the number of shares covered by, each option will not
change during the life of the option, except for adjustments to reflect stock
dividends, splits, other recapitalizations or reclassifications or changes
affecting the number or kind of outstanding shares. If the Company is proposed
to be merged or consolidated with another corporation or reorganized or
liquidated, then the Compensation Committee may, in its discretion, provide
that options and SARs granted to an optionee or grantee will terminate unless
exercised within the period determined by the Compensation Committee (not less
than 30 days), in which case the Compensation Committee must accelerate the
exercisability and vesting of all outstanding options, SARs and restricted
stock of such optionee or grantee.
The shares purchased upon the exercise of an option are to be paid for
by check or, if and to the extent provided in the applicable option agreement,
by broker's advance or by delivery of previously-acquired shares of Common
Stock with a value equal to the total Option Price, or in a combination of such
methods. The Compensation Committee shall, under certain circumstances, have
the right, in its discretion, to cancel an option (or part thereof) as to which
an optionee has given notice of intent to exercise and to pay to the optionee
an amount equal to the excess of the fair market value of the shares of Common
Stock subject to the option (or part thereof) cancelled over the appropriate
option price of the option (or part thereof) cancelled.
Options and SARs may be transferred by an optionee only by will or by
the laws of descent and distribution and may be exercised only by the optionee
or grantee during his lifetime. Except as otherwise provided in the applicable
option agreement, the following will apply upon an optionee's or grantee's
termination of employment or service. If the employment or service of an
optionee or grantee terminates for any reason other than by reason of death,
termination for cause or resignation (whether or not he is a party to a written
contract), the optionee or grantee may, within the three-month period (or other
period specified by the Compensation Committee in certain events) following
such termination, exercise such options or SARs to the extent he was entitled
to exercise at the date of termination. If an optionee or grantee dies while
employed or rendering services (or within three months or such other period
after termination of employment or service for any reason other than
termination for cause or resignation), all outstanding options and SARs, to the
extent then vested, may be exercised by the person or persons to whom the
optionee's or grantee's rights pass within one year after the optionee's or
grantee's death. If the employment or service of an optionee or grantee is
terminated for cause or by reason of resignation, all options and SARs granted
to such optionee or grantee shall terminate on the day his employment or
service terminates. In no case may options or SARs be exercised later than the
expiration date specified in the applicable Stock Option Plan agreement.
Upon the exercise of a SAR, a holder generally is entitled, without
payment to the Company, to receive cash, shares of Common Stock or any
combination thereof, as determined by the Compensation Committee, in an amount
equal to the excess of the fair market value of one share of Common Stock on
the exercise date over the fair market value of one share of Common Stock on
the grant date of (i) the related option (in the case of an SAR granted in
conjunction with an option) or (ii) the SAR (in the case of an unrelated SAR),
multiplied by the number of shares in respect of which the SAR is exercised.
The Compensation Committee may grant restricted stock awards alone or
in tandem with other awards under the Stock Option Plan. Vesting of restricted
stock awards may be conditioned upon the completion of a specified period of
service, the attainment of specific performance goals or such other factors as
the Compensation Committee may determine. The Compensation Committee may, in
its discretion, require a grantee to pay an amount to acquire any restricted
stock, which amount may be refunded to such grantee upon such events as the
Compensation Committee
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<PAGE> 16
may determine. During the restricted period, the grantee may not transfer,
assign or otherwise encumber or dispose of the restricted stock, except as may
be permitted by the Compensation Committee. During the restricted period, the
grantee will have the right to vote the restricted stock and to receive any
cash dividends if and to the extent so provided by the Compensation Committee.
FEDERAL INCOME TAX INFORMATION
ISOs under the Stock Option Plan are afforded favorable federal income
tax treatment under the Code. If an option is treated as an incentive stock
option, the optionee will recognize no income upon grant or exercise of the
option unless the alternative minimum tax rules apply. Upon an optionee's sale
of the shares (assuming that the sale occurs no sooner than two years after
grant of the option and one year after exercise of the option), any gain will
be taxed to the optionee as long-term capital gain. If the optionee disposes
of the shares prior to the expiration of the above holding periods, the
optionee will recognize ordinary income in an amount measured as the difference
between the exercise price and the lower of the fair market value of the shares
at the exercise date or the sale price of the shares. Any gain or loss
recognized on such a premature sale or exchange of the shares in excess of the
amount treated as ordinary income will be characterized as capital gain or
loss. Under the Code, the fair market value of the total number of shares of
Common Stock (determined on the date of grant of such option) covered by
incentive stock options held by an optionee first becoming exercisable in any
one calendar year may not exceed $100,000. To the extent this limit is
exceeded, such options will not qualify as incentive stock options and will be
taxed as NQSOs as described below.
All other options granted under the Stock Option Plan are NQSOs and
will not qualify for any special tax benefits to the optionee under the Code.
Accordingly, although an optionee will not recognize any taxable income at the
time he or she is granted a NQSO, the optionee will recognize ordinary income
for federal income tax purposes upon exercise of the NQSO in an amount measured
by the excess of the fair market value of the shares on the date of exercise
over the exercise price. Upon an optionee's resale of his or her shares, any
difference between the sale price and the fair market value of such shares on
the date of exercise will be treated as capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than one year.
A recipient of an SAR under the Stock Option Plan will not recognize
any taxable income under the Code at the time the SAR is granted, but will
realize ordinary income at the time he or she receives any cash payment upon
exercise of the SAR.
A recipient of a restricted stock award under the Stock Option Plan
will not recognize any taxable income under the Code at the time the restricted
shares are received provided the shares are subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code. Upon lapse or
release of the restrictions, the recipient will be taxed at ordinary income tax
rates in an amount equal to the current fair market value of the shares. Any
awards that are not subject to a substantial risk of forfeiture will be subject
to taxation at the time of grant at ordinary income tax rates. Upon a
recipient's resale of his or her shares following the lapse or release of the
restrictions, any difference between the sale price and the fair market value
of such shares on the date the restrictions lapsed or were released will be
treated as capital gain or loss, and will qualify for long-term capital gain or
loss treatment if more than one year has passed.
A recipient of a restricted stock award may elect to be taxed at
ordinary income tax rates on the fair market value of his or her shares at the
time the award is made, notwithstanding any substantial risk of forfeiture. If
the election is made, no tax will be payable upon the subsequent lapse or
release of the restrictions, and any subsequent gain or loss upon resale will
be treated as long-term capital gain or loss.
The ordinary income recognized by (i) an optionee upon the exercise of
a NQSO, (ii) a recipient of an SAR upon its exercise, or (iii) a recipient of a
restricted stock award upon the lapse or release of restrictions posing a
substantial risk of forfeiture (or upon an election to be taxed currently made
at the time of the award), will be treated
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<PAGE> 17
as wages for tax purposes and will be subject to tax withholding by the Company
out of the current compensation paid to such person, if any. If such current
compensation is insufficient to pay the withholding tax, such person will be
required to make direct payment to the Company for the tax liability. A person
may satisfy any required withholding, with the consent of the Board of
Directors, in whole or in part, by surrendering to the Company shares of Common
Stock held by such person. For such purpose, the surrendered shares are valued
at their fair market value at the time of surrender.
The Company will generally be entitled to a tax deduction in the
amount and at the time that the recipient of an ISO, NQSO, SAR or restricted
stock award recognizes any related ordinary income.
INDIVIDUAL TAX IMPLICATIONS ATTENDANT TO OPTIONEES IN THE STOCK OPTION
PLAN ARE THE SOLE RESPONSIBILITY OF THE INDIVIDUAL OPTIONEE. THE BRIEF
DISCUSSION OF FEDERAL TAX CONSEQUENCES PROVIDED ABOVE IS NOT EXHAUSTIVE.
PLEASE NOTE THAT THE LAW MAY CHANGE AND SPECIAL RULES ARE PROVIDED WITH RESPECT
TO SITUATIONS NOT SPECIFICALLY DISCUSSED HEREIN. THE COMPANY STRONGLY
RECOMMENDS THAT EACH PARTICIPANT CONSULT WITH A TAX ADVISOR PRIOR TO COMMENCING
ANY TRANSACTION UNDER THE STOCK OPTION PLAN.
PLAN BENEFITS
The Company cannot now determine the exact number of options to be
granted in the future to the officers named under "EXECUTIVE
COMPENSATION--SUMMARY COMPENSATION TABLE" below, to all current officers as a
group, or to all associates (including officers). See "EXECUTIVE
COMPENSATION--OPTION GRANTS IN LAST FISCAL YEAR" below for the number of stock
options granted to the officers named in the SUMMARY COMPENSATION TABLE in the
fiscal year ended December 28, 1996. During the fiscal year ended December 28,
1996, options to purchase 90,500 shares of Common Stock of the Company were
granted to all current officers as a group and options to purchase 133,500
shares of Common Stock of the Company were granted to all associates (including
officers).
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1994 STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE THEREUNDER FROM 250,000 TO 1,000,000.
APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION, AS
AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
In October 1996, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Restated Certificate of Incorporation
of the Company, as amended, to increase the number of authorized shares of
Common Stock from 9,500,000 shares to 100,000,000 shares. If the amendment is
approved, the first sentence of Article FOURTH of the Restated Certificate of
Incorporation, as amended, which sets forth the Company's presently authorized
capital stock, will be deleted in its entirety and the following will be
substituted therefor:
"The total number of shares of stock which the Corporation shall have
authority to issue is 100,040,000 shares of capital stock, of which (a)
100,000,000 shares shall be of a class designated "Common Stock", par value
$.008 per share, and (b) 40,000 shares shall be of a class designated
"Preferred Stock", par value $1.00 per share (of which 20,000 shares shall be
of a series designated "Series B Preferred Stock")."
The Board of Directors believes that the authorized number of shares
of Common Stock should be increased to provide sufficient shares for such
corporate purposes as may be determined by the Board of Directors including,
without limitation: raising additional capital; issuing additional options
and/or awards under the Company's ASPP and Stock Option Plan in order to
attract and retain valuable associates and/or directors; effecting a stock
split or
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<PAGE> 18
issuing a stock dividend in order to facilitate broader ownership of the
Company's Common Stock and acquiring other businesses in exchange for shares of
the Company's Common Stock. The Company at present has no commitments,
agreements or undertakings to issue any such additional shares, other than
pursuant to the ASPP and the Stock Option Plan. The Board of Directors
considers the authorization of additional shares of Common Stock advisable to
ensure prompt availability of shares for issuance should the occasion arise.
If required by law or regulation, the Company will seek stockholder approval
prior to any issuance of shares.
The shares of Common Stock, including the additional shares proposed
for authorization, do not have preemptive or similar rights. The issuance of
additional shares of Common Stock could have the effect of diluting existing
stockholder earnings per share, book value per share and voting power.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM 9,500,000 TO 100,000,000.
EXECUTIVE COMPENSATION
The following table summarizes information concerning cash and
non-cash compensation paid to or accrued for the benefit of the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company for all services rendered in all capacities to the
Company for the fiscal years ended December 28, 1996, December 30, 1995 and
December 31, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------- ------------
Awards
------------
Fiscal Other Annual Stock Options All Other
Name and Principal Position Year Salary (1) Bonus Compensation (in shares) Compensation (2)
--------------------------- ------ ---------- ----- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Joseph H. Scarlett, Jr. . . . . . . . 1996 $ 325,000 $ 65,000 -- -- $ 22,768
Chairman of the Board and 1995 $ 291,512 $ 87,450 -- -- $ 27,559
Chief Executive Officer 1994 $ 265,588 $ 185,000 -- -- $ 44,898
Gerald E. Newkirk . . . . . . . . . . 1996 $ 285,012 $ 57,000 -- -- $ 18,227
President and Chief 1995 $ 269,516 $ 80,850 -- -- $ 26,227
Operating Officer 1994 $ 245,610 $ 171,500 -- -- $ 41,985
Thomas O. Flood . . . . . . . . . . . 1996 $ 182,000 $ 36,400 -- -- $ 12,798
Senior Vice President- 1995 $ 176,306 $ 52,890 -- -- $ 19,746
Administration and Finance, 1994 $ 168,062 $ 117,530 -- -- $ 33,093
Treasurer and Chief Financial
Officer (3)
John R. Pearson . . . . . . . . . . . 1996 $ 165,022 $ 33,000 -- 20,000 $ 9,816
Senior Vice President- 1995 $ 160,004 $ 49,500 -- 5,000 $ 13,861
Merchandising 1994 $ 132,842 $ 92,820 -- 2,000 $ 25,993
James R. McMurray . . . . . . . . . . 1996 $ 125,008 $ 18,750 -- 10,000 $ 12,292
Vice President-Information 1995 $ 120,250 $ 24,000 -- 2,000 $ 4,812
Technology and Chief 1994 $ 6,938 $ -- -- -- $ --
Information Officer (4)
</TABLE>
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<PAGE> 19
- --------------------------
(1) Includes portion of salary deferred at named executive's election under the
Tractor Supply Company Employee 401(k) Retirement Plan (the "401(k) Plan").
(2) Compensation reflected in this column is comprised of Company contributions
to the 401(k) Plan, amounts credited as Company contributions under the
Deferred Compensation Plan, amounts paid by the Company pursuant to the
Medical Expense Reimbursement Plan and premiums paid by the Company
pursuant to the Executive Life Insurance Plan. Amounts for fiscal 1996 are
as follows:
(a) Company contributions to the 401(k) Plan in the amount of $4,261 for
Mr. Scarlett; $3,939 for Mr. Newkirk; $2,824 for Mr. Flood; $2,339 for
Mr. Pearson; and $0 for Mr. McMurray.
(b) Amounts credited as Company contributions under the Deferred
Compensation Plan in the amount of $9,750 for Mr. Scarlett; $8,550
for Mr. Newkirk; $5,460 for Mr. Flood; $4,950 for Mr. Pearson; and
$3,750 for Mr. McMurray.
(c) Amounts paid by the Company pursuant to the Medical Expense
Reimbursement Plan in the amount of $5,771 for Mr. Scarlett; $2,978
for Mr. Newkirk; $2,716 for Mr. Flood; $856 for Mr. Pearson; and
$7,172 for Mr. McMurray.
(d) Premiums paid by the Company pursuant to the Executive Life Insurance
Plan in the amount of $2,986 for Mr. Scarlett; $2,760 for Mr. Newkirk;
$1,798 for Mr. Flood; $1,671 for Mr. Pearson; and $1,370 for
Mr. McMurray.
(3) Mr. Flood was elected Senior Vice President of Administration and Finance,
Treasurer and Chief Financial Officer in January 1996, having previously
served as Vice President of Administration and Finance since 1984 and as
Chief Financial Officer and Treasurer since June 1993.
(4) Mr. McMurray was elected Vice President-Information Technology and Chief
Information Officer in January 1996, having previously served as Vice
President-Management Information Systems since December 1994.
OPTION GRANTS IN LAST FISCAL YEAR
The following table reflects certain information with respect to
options to acquire shares of the Company's Common Stock granted under the
Company's 1994 Stock Option Plan to the executive officers named in the Summary
Compensation Table above (excluding Messrs. Scarlett, Newkirk and Flood, who do
not participate in the Stock Option Plan) during the fiscal year ended December
28, 1996.
<TABLE>
<CAPTION>
Individual Grants (1) Potential Realizable Value at
- ------------------------------------------------------------------------ Assumed Annual Rates of Stock Price
Appreciation for Option Term (2)
-----------------------------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (#) Year (%) ($/Sh) Date 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John R.
Pearson 20,000 14.8 21.375 1/26/06 268,852 681,324
James R.
McMurray 10,000 7.4 21.375 1/26/06 134,426 340,662
</TABLE>
(1) The exercise price of the options granted is equal to the fair market
value of the Company's Common Stock on the date of grant. Options generally
have a 10-year term. Options generally vest 33 1/3% each year, beginning on
the third anniversary of the grant date, thus becoming 100% vested on the fifth
anniversary of the grant date.
(2) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration date using
5% and 10% appreciation rates set by the Securities and Exchange Commission,
compounded annually, and, therefore, are not intended to forecast possible
future appreciation, if any, of the Company's Common Stock price.
Additionally, these values do not take into consideration the terms of the
options providing for nontransferability, vesting, or termination of the
options following termination of employment.
16
<PAGE> 20
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table reflects certain information with respect to options to
acquire shares of the Company's Common Stock under the Company's 1994 Stock
Option Plan exercised during the fiscal year ended December 28, 1996 and
options held at fiscal year end by the officers named in the Summary
Compensation Table above (excluding Messrs. Scarlett, Newkirk and Flood, who do
not participate in the Stock Option Plan).
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options Options at
at FY-End (#) FY-End ($) (1)
--------------------- ----------------
Shares Value
Name Acquired on Realized Exercisable/ Exercisable/
Exercise (#) ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R.
Pearson -0- -0- -0- / 27,000 -0- / -0-
James R.
McMurray -0- -0- -0- / 12,000 -0- / -0-
</TABLE>
(1) The value of unexercised in-the-money options is calculated based on the
difference between the option exercise price and the closing price of the
Company's Common Stock at fiscal year end, multiplied by the number of shares
underlying the options. The closing price of the Company's Common Stock as
reported on The Nasdaq National Market on December 27, 1996 was $20.50.
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee is provided in accordance with
rules adopted by the Securities and Exchange Commission to inform stockholders
of the Compensation Committee's policies for executive officers and the
rationale for compensation paid to the Company's Chief Executive Officer. It
is not to be incorporated by reference by any general statement which
incorporates by reference this proxy statement into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, and is not to be otherwise deemed filed under either such Act.
The Compensation Committee of the Board has furnished the following report
on executive compensation:
Under the supervision of the Compensation Committee of the Board, the
Company has developed and implemented compensation policies, plans and programs
("Compensation Policies") which seek to structure executive compensation
consistent with the Company's overall business strategy, philosophy and
objectives. The Compensation Policies are intended to embody a
"pay-for-performance" philosophy which rewards executives for long-term
strategic management and enhancement of stockholder value by providing
performance-based incentives that measure rewards against personal and Company
goals. The Company believes this philosophy attracts, retains and motivates
key executives critical to the long-term success of the Company.
This compensation philosophy is implemented through compensation packages
which include various cash and non-cash components. Although no formal
analysis of compensation was conducted by the Compensation Committee, the
Company believes, based in part on independent compensation surveys of the
retail industry in general and the Company's survey of select retailers, that
its base salaries are generally set somewhat below competitive levels; it
therefore relies to a larger degree on annual and longer term "incentive"
compensation.
17
<PAGE> 21
In setting annual salaries, the Compensation Committee reviews an annual
salary plan recommended by the Company for each of the Company's officers. The
annual salary plan is based on numerous subjective factors which include the
officer's individual performance and responsibility level, and the Company's
performance for the preceding fiscal year as well as objective factors such as
inflation and matching the officer's position to comparable positions in the
competitive marketplace by reference to the surveys referred to above.
Generally, the salary goal for officers is targeted at or below the salary
range mid-point of the 50th percentile of salaries for comparable positions
(based on the surveys referred to above) so that a larger portion of the
officer's compensation is tied to Company performance, thereby more closely
linking executive and stockholder interests. The annual salary plans are
established by the Compensation Committee based on its assessment of the
foregoing factors, as well as its assessment of the officer's past performance
and the Compensation Committee's expectation of the officer's future
contributions in leading the Company.
For the fiscal year ended December 28, 1996, Joseph H. Scarlett, Jr., the
Company's Chairman of the Board and Chief Executive Officer, received a base
salary of $325,000, an increase of 11.5% over the prior fiscal year. Mr.
Scarlett's salary is determined by the Compensation Committee substantially in
accordance with the policies described above relating to all officers of the
Company. In particular, the salary increase was based on the comparison of
base salaries of chief executive officers of retailers participating in the
compensation surveys referred to above, the Company's overall performance and
the Compensation Committee's assessment of Mr. Scarlett's personal performance
and accomplishments and expectations of Mr. Scarlett's future contributions in
leading the Company. Under Mr. Scarlett's leadership, the Company achieved
record sales and earnings in fiscal 1995, following a record sales and earnings
performance in fiscal 1994 which benefitted, in part, from the Company's
initial public offering (the "IPO"). In fiscal 1995, the Company also realized
its goal of increasing the total store count by approximately 12%, successfully
opening 20 new stores in the first year following the IPO, and was positioned
to accommodate its growth and expansion plans. The Company believes that after
considering Mr. Scarlett's salary increase in fiscal 1996, Mr. Scarlett's base
salary is still below the salary mid-point of the 50th percentile of salaries
for chief executive officers for retail companies of comparable size based on
the compensation surveys referred to above.
All executive officers participate in the Company's Senior Executive
Incentive Plan ("SEIP") under which they are eligible to receive a bonus
ranging from 20% of their annual base salary if the Company realizes a FIFO
pretax profit increase ("profit increase") ranging from 0% to 6%, to 70% of
their annual base salary if the Company realizes a profit increase of 41% or
more. Certain other officers participate in the Company's Other Executive
Incentive Plan ("OEIP") under which they are eligible to receive a bonus
ranging from 15% of their annual base salary if the Company realized a profit
increase ranging from 0% to 6%, to 50% of their annual base salary if the
Company realizes a profit increase of 41% or more. The Compensation Committee
may recommend, and the Board may award, at its discretion, bonuses based on
other subjective factors such as the executive's individual performance,
unusual factors, strategic long-term decisions affecting the Company's
performance during the fiscal year, and the perceived expectation of the
executive officer's future contributions in leading the Company. The
Compensation Committee or the Board may amend or terminate the SEIP at any
time. For fiscal 1996, all of the officers were awarded bonuses as reflected
in the Summary Compensation Table contained elsewhere in the proxy statement.
A large portion of the officers' total compensation is tied to stock
performance, thus more closely aligning their interests with the long-term
interests of stockholders. This is accomplished primarily through the
Company's 1994 Stock Option Plan, which is administered by the Compensation
Committee of the Board of Directors. Stock options generally are granted
annually to all officers and other key employees (excluding Messrs. Scarlett,
Newkirk and Flood), have a 10 year term, are exercisable at the market price
on the date of grant, and vest 33 1/3% each year, beginning on the third
anniversary of the grant date, thus becoming 100% vested on the fifth
anniversary of the grant date. The stock option grant size is determined by
the Compensation Committee and generally is based on the number of shares whose
present value equals a percentage of the salary mid-point for a comparable
position in the retailing industry, with the largest number of option shares
being granted to senior executive officers (100% of such salary mid-point)
decreasing incrementally, based on position, to 50% of such salary mid-point.
The stock option grant size may also be impacted
18
<PAGE> 22
by the officer's individual performance. Messrs. Scarlett, Newkirk and Flood
have chosen not to participate in the Company's 1994 Stock Option Plan due to
their already large stock ownership as shown elsewhere in the proxy statement.
The Company's officers are also compensated, to a lesser extent, pursuant
to several other plans. The Deferred Compensation Plan ("DCP"), which is
administered by the Compensation Committee, provides additional incentives for
officers of the Company and enhances the Company's ability to attract and
retain the services of qualified persons. According to the terms of the DCP,
the Board, in its discretion, determines each year a percentage of the
officer's annual base salary to be allocated to his or her deferred
compensation account under the DCP, which account earns simple interest at the
prime rate as in effect on January 1 each year and vests upon the officer's
retirement after attaining age 55, contingent (in most cases) on such officer's
continued employment with the Company until age 55. Officers also participate
in (i) the Medical Expense Reimbursement Plan, which provides for reimbursement
in amounts up to $20,000 annually for certain medical expenses for themselves
and their families not otherwise covered by the Company's group medical
insurance plan and (ii) the Executive Life Insurance Plan, which provides for
basic term life insurance coverage (equal to four times salary rounded to the
next highest $1,000 to a maximum of $1,000,000) in excess of that which is
provided by the Company's group life insurance plan.
The Company's officers also participate in the various qualified and
non-qualified employee benefit plans sponsored by the Company. The Company
makes only nominal use of perquisites in compensating its executive officers.
The Compensation Committee believes that the Company's Compensation
Policies are strongly linked to the Company's performance and the enhancement
of stockholder value. The Compensation Committee intends to continually
evaluate the Company's Compensation Policies and plans to ensure that they are
appropriately configured to align the interests of officers and stockholders
and that the Company can attract, motivate and retain talented management
personnel.
The table included in the proxy statement and the accompanying narrative
and footnotes reflect the decisions covered by the above discussion. The
foregoing report has been furnished by the members of the Compensation
Committee:
S.P. Braud (Chairman)
Joseph M. Rodgers
19
<PAGE> 23
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total stockholder return on the Company's Common Stock from February 17, 1994
(the commencement date of the Company's initial public offering of Common
Stock) to December 28, 1996 (the Company's fiscal year-end) with the cumulative
total returns of the S&P 500 Index and the S&P Specialty Retail Group Index
over the same period. The comparison assumes that $100 was invested on
February 17, 1994 in the Company's Common Stock and in each of the foregoing
indices. The historical stock price performance shown on this graph is not
necessarily indicative of future performance.
[GRAPH]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
2/17/94 12/31/94 12/30/95 12/28/96
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tractor Supply Company
Common Stock $100.00 $105.00 $ 98.75 $102.50
-----------------------------------------------------------------------------------------
S&P Retail (Building $100.00 $102.31 $ 99.56 $119.90
Supplies) - 500 Index*
-----------------------------------------------------------------------------------------
S&P 500 Index $100.00 $100.52 $138.29 $173.53
-----------------------------------------------------------------------------------------
</TABLE>
* Formerly known as S&P Specialty Retail Group Index
20
<PAGE> 24
INTERESTS OF MANAGEMENT IN CERTAIN TRANSACTIONS
The Company leases its management headquarters and eight of its stores
from certain members of its Board, senior management and their wives, or
certain entities controlled by them. Such persons entered into these
transactions principally to realize certain passive loss tax benefits that were
available at the time of entering into the leases, but were significantly
reduced by the Tax Reform Act of 1986. The Company believes these transactions
were consummated on general business terms comparable to those which would have
been available if they had been entered into with unrelated parties. The
Company does not intend to enter into any such transactions in the future
without the approval of its independent directors.
Pursuant to a lease agreement dated September 15, 1986, the Company
leases its management headquarters from GOF Partners, a general partnership of
which Messrs. Scarlett, Hennesy, Newkirk, Maxwell and Flood (each of whom are
either executive officers and/or directors of the Company) are the general
partners. The initial term of the lease is ten years, commencing on February
10, 1987 and ending on February 9, 1997, subject to renewal at the option of
the Company for two successive five-year terms. In September 1996, the Company
exercised its option to renew the lease for two successive five-year terms
ending on February 9, 2007. Monthly rent is $30,000 for the first five years,
$32,000 for the second five years, $35,000 for the first renewal term and
$39,000 for the second renewal term. The Company has the option to terminate
the lease at any time after the end of the initial lease term by offering to
purchase the premises at a price of $4,775,000. If GOF Partners were to reject
the Company's offer to purchase, the lease would terminate 90 days after the
date of the offer.
Under a lease agreement dated September 1, 1991, the Company leases
its Plainfield, Indiana store from GOF Indiana Corp., a corporation of which
Messrs. Scarlett, Hennesy, Newkirk, Maxwell and Flood are the sole
shareholders, directors and executive officers. The initial term of the lease
is 20 years, commencing on September 1, 1991 and ending on August 31, 2011,
subject to renewal at the option of the Company for two successive five-year
terms. Monthly rent is $8,437.50 for the first five years, $8,750 for the
second five years, $9,062.50 for the third five years and $9,375 for the final
five years of the initial term. The Company has the option to terminate the
lease at any time after August 31, 2001 by offering to purchase the premises at
a price that increases from $873,300 to $1,012,500, depending on the date of
the offer. If GOF Indiana Corp. were to reject the Company's offer to
purchase, the lease would terminate 90 days after the date of the offer. The
related land is leased by GOF Indiana Corp. from the Company pursuant to a
ground lease agreement dated July 1, 1991 providing for a 50-year lease term,
commencing on July 1, 1991 and ending on June 30, 2041 and annual rental
payments that increase from $15,000 per annum to $24,300 per annum. In October
1996, the Board approved a proposed transaction to relocate the Plainfield,
Indiana store to a larger facility. To effect the proposed transaction, the
Company expects it will (i) acquire the Plainfield, Indiana store's building
from GOF Indiana Corp. for $650,000, the purchase price provided for under the
lease agreement between the Company and GOF Indiana Corp. effective through
August 31, 1996 (GOF Indiana Corp. waived the increase in the purchase price
effective September 1, 1996 since the transaction on the property is not
expected to close until approximately June 1997), (ii) cancel the ground lease
agreement with GOF Indiana Corp. respecting said property, (iii) sell the
Plainfield, Indiana store (building and land) to Premier Ventures, LLC, a real
estate developer, for $750,000 (which is approximately $650,000 below the
appraised value of said property), and (iv) lease a new larger store from
Premier Ventures, LLC (said new store to be built by Premier Ventures, LLC on a
nearby site owned by them of approximately four acres and in accordance with
the Company's specifications), pursuant to which the Company will receive a
discounted rent (approximately 6.30 per square foot initially compared to the
market rate of approximately 8.60 per square foot or approximately $750,000
over the fifteen year initial lease) in consideration for the reduced purchase
price on the Plainfield, Indiana store building and land.
On January 1, 1986, the Company entered into capitalized
sale-leaseback transactions with Mr. Scarlett and his wife for its Omaha,
Nebraska store, Mr. Hennesy and his wife for its Corpus Christi, Texas and
Toledo, Ohio stores, Mr. Newkirk and his wife for its Waterloo, Iowa and
Sioux Falls, South Dakota stores, Mr. Maxwell and his wife for its Nashville,
Tennessee store and Mr. Flood and his wife for its Mandan, North Dakota store.
The Company
21
<PAGE> 25
sold and leased back and provided the financing for such properties at
estimated fair values totaling $2,575,000. Management determined such sale
prices based on the appraised value of comparable stores acquired by the
Company around that time. The related gains arising from the sale-leaseback of
these properties are deferred and amortized on a straight-line basis over the
lives of the related leases. Properties under capital leases acquired through
such sale-leaseback transactions have been reduced by the related deferred
gains on the properties and are classified with property and equipment on the
Company's financial statements. Pursuant to substantially similar lease
agreements dated January 1, 1986, the Company leases such stores for initial
terms of 20 years, commencing on January 1, 1986 and ending on December 31,
2005, subject to renewal at the option of the Company for two successive
five-year terms. The Company has the option to terminate such leases after
December 31, 1995 by offering to purchase the premises at purchase prices
ranging from $389,500 to $523,500 for the Corpus Christi, Texas store to
$934,800 to $1,256,300 for the Omaha, Nebraska store, depending on the date of
the offer. If the landlord were to reject an offer to purchase a particular
store, the lease would terminate 90 days after the date of the offer. Monthly
rent payments under such leases range from $2,580 to $6,081 for the Corpus
Christi, Texas store to $6,193 to $14,595 for the Omaha, Nebraska store. Rent
payments under all such leases totaled approximately $425,000 for the fiscal
year ended December 28, 1996. In December 1993, all of the 20 year nonrecourse
installment deed notes between the Company and such executive officers and/or
directors and their wives, except the two issued by Mr. Hennesy and his wife,
were repaid. During the fiscal year ended December 31, 1994, (i) the Company
exchanged the mortgage on the note issued by Mr. Hennesy and his wife
respecting the Toledo, Ohio store with a mortgage on the Paris, Texas store,
which was owned by the Company and had a comparable fair market value, and (ii)
the two notes issued by Mr. Hennesy and his wife were repaid. The balance of
these capitalized lease obligations, which are included in total capital lease
obligations on the Company's financial statements, was $1,817,000 as of
December 28, 1996.
The leases do not contain any restrictions on assignment by the
landlords. Moreover, if a landlord were to sell or otherwise transfer the
leased premises, it would not remain secondarily liable under the lease;
rather, the purchaser or transferee would be deemed, without any agreement with
the Company, to have assumed all of the obligations of the landlord arising
after the date of such sale or transfer.
Pursuant to the Plan of Reorganization and Exchange Agreement dated as
of May 1, 1991 between the Company and Thomas J. Hennesy, III, a director of
the Company, the Company acquired 2,408,334 (constituting all) of the shares of
Common Stock held by Mr. Hennesy in exchange for 5,875 shares of Series B
Preferred Stock, par value $1.00 per share, of the Company (the "Preferred
Stock"). Dividends on outstanding shares of the Preferred Stock are cumulative
and payable semi-annually on May 1 and November 1 at a rate of 8% of the stated
value ($1,000 per share) of such shares, increasing to 10% on May 1, 1999, 11%
on May 1, 2000, 12% on May 1, 2001 and 13% thereafter. Such shares may be
redeemed by the Company at any time and from time to time, in whole or in part,
after May 1, 1995 at a redemption price of $1,000 per share plus unpaid accrued
dividends. In connection with such Plan of Reorganization and Exchange, the
Company also purchased, at a cash redemption price of $2.44 per share, 481,817
shares of Common Stock from persons to whom Mr. Hennesy had transferred shares
of Common Stock. On May 26, 1995, the Company repurchased 2,350 shares of the
Preferred Stock at a total repurchase price of approximately $2,363,000
(including accrued dividends totalling approximately $13,000). On May 24,
1996, the Company repurchased 1,762 shares of the Preferred Stock at a total
repurchase price of approximately $1,771,000 (including accrued dividends
totalling approximately $9,000). The Company expects to repurchase the
remaining 1,763 outstanding shares of the Preferred Stock in fiscal 1997 (at a
total repurchase price of approximately $1,763,000 plus unpaid accrued
dividends).
Pursuant to a Consulting and Noncompetition Agreement between the
Company and Thomas J. Hennesy, III, dated as of May 1, 1991, Mr. Hennesy, who
is currently a director of the Company, has agreed to provide consulting and
advisory services to the Company from July 1, 1995 to June 30, 2000 and not to
compete with the Company during such period and for two years thereafter.
During such seven-year period, the Company will pay Mr. Hennesy a fee of
$150,000 per annum and will provide him and his wife with certain health
benefits.
22
<PAGE> 26
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") requires the Company's executive officers and directors and persons
who beneficially own more than ten percent (10%) of the Company's Common Stock
to file initial reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission ("SEC") and The Nasdaq Stock Market and
to furnish the Company with a copy of each such report. Additionally, SEC
regulations require the Company to identify in its proxy statement those
individuals for whom any of such reports was not filed on a timely basis during
the most recent fiscal year or prior fiscal years. The Company believes that
all Section 16(a) filing requirements applicable to its executive officers and
directors were complied with.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's equity securities as of
January 31, 1997 (except for The Northwestern Mutual Life Insurance Company and
T. Rowe Price Associates, Inc. which are as of December 31, 1996) by (i) each
person who is known by the Company to be the beneficial owner of more than 5%
of the Company's outstanding Common Stock, (ii) each director or person
nominated to be a director, (iii) each named executive officer and (iv) all
directors and executive officers of the Company as a group. The determinations
of "beneficial ownership" of the Common Stock are based upon responses to
Company inquiries which cited Rule 13d-3 under the 1934 Act. Such Rule
provides that shares shall be deemed to be "beneficially owned" where a person
has, either solely or in conjunction with others, the power to vote or to
direct the voting of shares and/or the power to dispose, or to direct the
disposition, of shares; or where a person has the right to acquire any such
beneficial ownership within 60 days after the date of determination. Except as
disclosed in the notes to the table, each named person has sole voting and
investment power with respect to the number of shares shown as beneficially
owned by him. There were [ ] shares of Common Stock issued
and outstanding on January 31, 1997.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percent
Class of Beneficial Owner (a) Owned of Class
- -----------------------------------------------------------------------------------------------------------
Common
Stock
<S> <C> <C>
Joseph H. Scarlett, Jr. (c) (d) . . . . . . . . . . 1,479,692 17.0%
Gerald E. Newkirk (c) (e) . . . . . . . . . . . . . 455,852 5.2%
Thomas O. Flood (c) (f) . . . . . . . . . . . . . . 599,842 6.9%
John R. Pearson (b) (c) . . . . . . . . . . . . . . 667 *
James R. McMurray . . . . . . . . . . . . . . . . . -- --
Tractor Supply Company Employee
401(k) Retirement Plan (h) . . . . . . . . . . . 978,912 11.2%
The Northwestern Mutual Life
Insurance Company . . . . . . . . . . . . . . . 598,400 6.9%
T. Rowe Price Associates, Inc. . . . . . . . . . . . 909,900 10.4%
S.P. Braud . . . . . . . . . . . . . . . . . . . . . 500 *
Thomas J. Hennesy, III (i) . . . . . . . . . . . . . 2,000 *
Joseph D. Maxwell (c) (g) . . . . . . . . . . . . . 450,059 5.2%
Joseph M. Rodgers . . . . . . . . . . . . . . . . . 550 *
All directors and executive officers as a group
(16 persons) (b) (c) (d) (e) (f) (g) (i) . . . . 2,993,445 34.3%
* Less than 1%
</TABLE>
23
<PAGE> 27
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percent
Class of Beneficial Owner (a) Owned (b) of Class
- -----------------------------------------------------------------------------------------------------------
Series B
Preferred
Stock
<S> <C> <C>
Joseph H. Scarlett, Jr. . . . . . . . . . . . . . . -- --
Gerald E. Newkirk . . . . . . . . . . . . . . . . . -- --
Thomas O. Flood . . . . . . . . . . . . . . . . . . -- --
John R. Pearson . . . . . . . . . . . . . . . . . . -- --
James R. McMurray . . . . . . . . . . . . . . . . . -- --
Tractor Supply Company Employee
401(k) Retirement Plan . . . . . . . . . . . . . -- --
The Northwestern Mutual Life
Insurance Company . . . . . . . . . . . . . . . -- --
S.P. Braud . . . . . . . . . . . . . . . . . . . . . -- --
Thomas J. Hennesy, III (j) . . . . . . . . . . . . . 1,500 85.1%
Joseph D. Maxwell . . . . . . . . . . . . . . . . . -- --
Joseph M. Rodgers . . . . . . . . . . . . . . . . . -- --
All directors and executive officers as a group
(16 persons) . . . . . . . . . . . . . . . . . 1,500 85.1%
</TABLE>
(a) The addresses of Messrs. Scarlett, Newkirk, Flood, Pearson, McMurray,
Maxwell, Braud, Hennesy and Rodgers and the Tractor Supply Company Employee
401(k) Retirement Plan (the "401(k) Plan") are c/o the Company, 320 Plus
Park Blvd., Nashville, Tennessee 37127, the address of The Northwestern
Mutual Life Insurance Company is 720 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, and the address of T. Rowe Price Associates, Inc. is 100
East Pratt Street, Baltimore, Maryland 21202.
(b) Shares of Common Stock owned by Mr. Pearson and the directors and executive
officers as a group include approximately 667 and 2,500 shares of Common
Stock, respectively, which are beneficially owned pursuant to options
granted under the Company's 1994 Stock Option Plan, because they will have
the right to acquire beneficial ownership of the shares of Common Stock
relating thereto within 60 days after January 31, 1997.
(c) Shares of Common Stock owned by Messrs. Scarlett, Newkirk, Flood, Pearson,
Maxwell, and the directors and executive officers as a group exclude
approximately 24,494, 23,048, 19,782, 10,784, 20,888 and 116,275 shares of
Common Stock, respectively, allocated to their respective 401(k) Plan
accounts, with respect to which such directors and executive officers do
not have investment or voting power and disclaim beneficial ownership.
(d) Includes 100,000 shares owned by Mr. Scarlett's wife with respect to which
Mrs. Scarlett has investment and voting power and Mr. Scarlett disclaims
beneficial ownership.
(e) Includes 451,123 shares owned jointly by Mr. Newkirk's wife with respect to
which Mrs. Newkirk has shared investment and voting power, 2,749 shares
owned by one of Mr. Newkirk's daughters with respect to which such daughter
has investment and voting power, and 1,980 shares owned by Mr. Newkirk's
other daughter pursuant to a uniform gift to minors' account and with
respect to which Mr. Newkirk is the custodian. Mr. Newkirk disclaims
beneficial ownership of the shares held by or for the benefit of his
daughters.
(f) Includes 100,000 shares owned by Mr. Flood's wife with respect to which
Mrs. Flood has investment and voting power and Mr. Flood disclaims
beneficial ownership.
(g) Includes 218,992 shares owned by Mr. Maxwell's wife with respect to which
Mrs. Maxwell has investment and voting power and Mr. Maxwell disclaims
beneficial ownership, 3,200 shares owned by Mr. Maxwell's son with respect
to which such son has investment and voting power and Mr. Maxwell disclaims
beneficial ownership and 8,875 shares owned by Mr. Maxwell's daughter with
respect to which such daughter has investment and voting power and Mr.
Maxwell disclaims beneficial ownership.
(h) Includes the shares described in footnote (c) above.
(i) Includes 1,000 shares owned by Mr. Hennesy's wife with respect to which
Mrs. Hennesy has investment and voting power and Mr. Hennesy disclaims
beneficial ownership and 1,000 shares owned by one of Mr. Hennesy's sons
with respect to which such son has investment and voting power and Mr.
Hennesy disclaims beneficial ownership.
(j) Does not include 120 shares owned by Mr. Hennesy's wife (with respect to
which Mr. Hennesy disclaims beneficial ownership) or 143 shares owned by
certain relatives or other persons to whom he has transferred shares.
24
<PAGE> 28
RATIFICATION OF REAPPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board has reappointed Price Waterhouse LLP as the firm of
independent certified public accountants to audit the financial statements of
the Company for the fiscal year ending December 27, 1997. Price Waterhouse LLP
has served as independent auditors for the Company since 1983. At the Annual
Meeting, the stockholders are being asked to ratify the reappointment of Price
Waterhouse LLP as the Company's independent auditors for fiscal 1997. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
Representatives of Price Waterhouse LLP have been invited to and are
expected to attend the Annual Meeting, will have the opportunity to make a
statement if they so desire and are expected to be available to respond to
appropriate questions from stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO RATIFY OF THE REAPPOINTMENT OF PRICE WATERHOUSE LLP
AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 27, 1997.
STOCKHOLDER PROPOSALS
Stockholders who desire to submit to the Company proposals for
inclusion in the Company's proxy materials for the 1998 Annual Meeting of
Stockholders must submit such proposals to the Secretary of the Company by
November 15, 1997.
OTHER MATTERS
The Board does not intend to present any business at the Annual
Meeting other than the items stated in the "Notice of Annual Meeting of
Stockholders" and knows of no other business to be presented for action at the
meeting. If, however, any other business should properly come before the
meeting or any continuations or adjournments thereof, it is intended that the
enclosed proxy will be voted with respect thereto in accordance with the best
judgment and discretion of the persons named in the proxy.
In addition to solicitation by mail, proxies may also be solicited by
certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telecopy or telegram. The
costs of such solicitation will be borne by the Company. The Company will also
make arrangements with brokerage houses, custodians and other nominees to send
proxy materials to the beneficial owners of shares of the Company's Common
Stock held in their names, and the Company will reimburse them for their
related postage and clerical expenses.
AVAILABILITY OF FORM 10-K
AND ANNUAL REPORT TO STOCKHOLDERS
Copies of the Company's Annual Report to Stockholders for the fiscal
year ended December 28, 1996, which includes certain audited financial
information about the Company, are currently being mailed to stockholders
together with this Proxy Statement. Additional copies of such Annual Report,
along with copies of the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996, as filed with the Securities and Exchange
Commission (exclusive of documents incorporated therein by reference), are
available without charge to stockholders upon written request to the Company's
investor relations firm, Corporate Communications, Inc., 523 Third Avenue
South, Nashville, Tennessee 37210.
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<PAGE> 29
ANNEX A
TRACTOR SUPPLY COMPANY
1996 ASSOCIATE STOCK PURCHASE PLAN
Tractor Supply Company (the "Company") does hereby establish
its 1996 Associate Stock Purchase Plan (the "Plan") as follows:
1. PURPOSE
The purpose of the Plan is to provide associates of the
Company and its subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions
of the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS
(a) "Associate" shall mean any person who is customarily
employed for at least twenty (20) hours per week and more than five (5) months
in a calendar year by the Company or any Subsidiary of the Company.
(b) "Board" shall mean the Board of Directors of the
Company and any committee of the Board appointed pursuant to Section 13 hereof.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Common Stock" shall mean the Common Stock, $.008 par
value per share, of the Company.
(e) "Company" shall mean Tractor Supply Company, a
Delaware corporation.
(f) "Compensation" shall mean all regular straight time
earnings and all payments for overtime, shift premium, incentive compensation,
bonuses, payments in lieu of vacation or sick leave, and commissions, in each
case before any deductions required by law or authorized by the Employee,
including, without limitation, pursuant to any deferred compensation
arrangement. Compensation does not include any other cash payment or employee
benefit, including, without limitation, severance payments, payments by the
Company of social security, worker's compensation, unemployment compensation,
any disability payments or other payments required by statute, and any payments
or contributions by the Company for insurance or other employee benefit plans.
(g) "Continuous Status as an Associate" shall mean the
absence of any interruption or termination of service as an Associate.
Continuous Status as an Associate shall not be considered interrupted in the
case of a leave of absence agreed to in writing by the Company or any
Subsidiary of the Company, provided either that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
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<PAGE> 30
ANNEX A
(i) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
(j) "Exercise Date" shall mean the last day of an
Offering Period.
(k) "Fair Market Value" of a share of Common Stock on any
date shall mean an amount determined by the Board on such basis as it, acting
in good faith, shall deem appropriate; provided, however, that (i) in the event
the Common Stock is then quoted on the Nasdaq National Market, the Fair Market
Value of a share of Common Stock on any date shall mean the closing price of a
share of Common Stock on the Nasdaq National Market on such date, (ii) in the
event the Common Stock is then traded over the counter but is not quoted on the
Nasdaq National Market, the Fair Market Value of a share of Common Stock on any
date shall mean the average of the closing bid and asked prices on such date,
and (iii) in the event the Common Stock is then listed on any stock exchange,
the Fair Market Value of a share of Common Stock on any date shall mean the
closing price on the principal such exchange on such date. Whenever possible,
the determination of Fair Market Value shall be based on the prices reported in
The Wall Street Journal. In the event that a closing price, or bid or asked
price, is not available for a particular date, the Fair Market Value of a share
of Common Stock of the Company on such date shall be the Fair Market Value of a
share of Common Stock of the Company on the last business day prior to such
date for which a closing price, or bid and asked price, is available.
(l) "Offering Period" shall mean each period during which
an Associate may acquire shares of Common Stock under the Plan as provided in
Section 4 hereof.
(m) "Parent" of the Company shall mean, at the time of
the granting of any option under the Plan, any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if each
of the corporations in such unbroken chain (other than the Company) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such unbroken chain.
(n) "Plan" shall mean this 1996 Associate Stock Purchase
Plan.
(o) "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(p) "Subsidiary" of the Company shall mean, at the time
of the granting of any option under the Plan, any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations in such unbroken chain (other than the last such
corporation) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such unbroken
chain.
3. ELIGIBILITY
(a) Any Associate who is employed by the Company or any
Subsidiary of the Company on a given Enrollment Date shall be eligible to
participate in the Plan, subject to any limitations imposed by Section 423(b)
of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Associate shall be granted an option under the Plan (i) if,
immediately after the grant, such Associate (or any other person whose stock
would be attributed to such Associate pursuant to Section 424(d) of the Code)
would own stock or hold outstanding options to purchase stock possessing in the
aggregate five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company (or of any Parent or Subsidiary of the
Company), or (ii) which permits such Associate's rights to purchase stock under
all employee stock purchase plans of the Company (and under all employee stock
purchase plans maintained by any Parent or Subsidiary of the Company) to accrue
at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of Fair Market
Value of such stock
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<PAGE> 31
(determined at the time such option is granted) for each calendar year in which
such option is outstanding. For this purpose, a right to purchase stock
accrues when it first becomes exercisable during the calendar year.
4. OFFERING PERIODS
The Plan shall be implemented by consecutive three (3) month
Offering Periods with a new Offering Period commencing on January 1, April 1,
July 1 and October 1 of each year, commencing October 1, 1996, or as otherwise
determined by the Board, and continuing thereafter until the Plan is terminated
in accordance with Section 19 hereof. The Board shall have the power to change
the duration of Offering Periods with respect to future offerings.
5. PARTICIPATION
(a) An eligible Associate may become a participant in the
Plan for any Offering Period by completing a subscription agreement authorizing
payroll deductions on the form provided by the Company and filing it with the
Company's Payroll Department during normal business hours at least fifteen days
prior to the applicable Enrollment Date. Once enrolled, a participant will
continue to participate in the Plan for each succeeding Offering Period until
the withdrawal of the participant from the Plan in accordance with Section 10
hereof.
(b) Payroll deductions for a participant shall commence
on the first payroll date coinciding with or following the Enrollment Date for
each Offering Period and shall end on the last payroll date in each Offering
Period until the withdrawal of the participant in accordance with Section 10
hereof.
6. PAYROLL DEDUCTIONS
(a) At the time a participant files his or her
subscription agreement, the participant shall elect to have payroll deductions
made on each payroll date during each Offering Period. A participant may
authorize payroll deductions in a fixed dollar amount or fixed percentage of
Compensation per payroll date, subject to Section 3(b) hereof and any minimum
or other limitation specified by the Board.
(b) All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, may reduce the rate
of his or her payroll deductions by delivery of written notice to the Payroll
Department at least fifteen days prior to the payroll date for which such
reduction is to be effective and may increase (subject to any limitations
adopted by the Board pursuant to Section 6(a) hereof) the rate of his or her
payroll deductions effective as of the Enrollment Date of the next Offering
Period by completing a new subscription agreement and filing it with the
Company at least fifteen days prior to such Enrollment Date.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and paragraph 3(b)
hereof, a participant's payroll deductions may be decreased to 0% during any
Offering Period at such time as the aggregate of all payroll deductions
accumulated with respect to such Offering Period and any other Offering Periods
ending within the same calendar year under the Plan (and under any other
employee stock purchase plan maintained by the Company, or any Parent or
Subsidiary of the Company) equal $21,250. Payroll deductions shall recommence
at the rate provided in such participant's subscription agreement at the
beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless the participant's participation in the Plan is
sooner terminated pursuant to Section 10 hereof.
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7. GRANT OF OPTION
(a) On the Enrollment Date of each Offering Period, each
eligible Associate participating in such Offering Period shall be deemed to
have been granted an option to purchase on the Exercise Date for such Offering
Period up to the number of full shares of the Company's Common Stock determined
by dividing such Associate's payroll deductions accumulated during such
Offering Period by the applicable option price per share for such Offering
Period.
(b) The option price per share of Common Stock in a given
Offering Period shall be the lower of: (i) 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date for such Offering Period; and (ii)
85% of the Fair Market Value of a share of Common Stock of the Company on the
Exercise Date for such Offering Period.
8. EXERCISE OF OPTION
Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date of each Offering Period, and the
maximum number of full shares subject to such option will be purchased for the
participant at the applicable option price with the accumulated payroll
deductions in his or her account. A participant's option to purchase shares
hereunder is exercisable only by the participant during his or her lifetime.
Any amount remaining in the participant's account after an Exercise Date as a
result of being insufficient to purchase a full share of Common Stock shall be
held in the participant's account until the Exercise Date in the next Offering
Period or the earlier withdrawal of the participant from the Plan pursuant to
Section 10 hereof.
9. DELIVERY
Shares of Common Stock purchased on any Exercise Date shall be
delivered to a broker designated by the Board to hold shares for the benefit of
participants in the Plan. Such shares shall be delivered as physical
certificates or by means of a book entry system as determined by the Board from
time to time. Although a participant may direct the broker to sell such shares
at any time (subject to the restrictions of Section 15 hereof and applicable
securities laws), the shares otherwise must be held in an account with the
broker designated by the Board until 24 months after the Enrollment Date of the
Offering Period during which the shares were purchased. Following such
24-month period, a participant may transfer his or her shares to another broker
or to any other person but all costs incident to such transfer shall be paid by
the participant.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT
(a) A participant may withdraw all but not less than all
of the payroll deductions credited to his or her account under the Plan at any
time prior to the Exercise Date of any Offering Period by giving written notice
to the Company. All of the participant's payroll deductions credited to his or
her account will be paid to the participant promptly after receipt of the
participant's notice of withdrawal and the participant's participation in the
Plan will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made. Payroll deductions will not resume on
behalf of a participant who has withdrawn from the Plan unless a new
subscription agreement is delivered to the Company at least fifteen days prior
to the Enrollment Date for any succeeding Offering Period directing the Company
to resume payroll deductions.
(b) Upon termination of a participant's Continuous Status
as an Associate prior to the Exercise Date of an Offering Period for any
reason, including retirement, death or the failure to be customarily employed
for at least twenty (20) hours per week and more than five (5) months per
calendar year, the payroll deductions credited to the participant's account
will be returned to the participant or, in the case of death, to the person or
persons entitled thereto under Section 14 hereof, and such participant's option
will be automatically terminated.
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<PAGE> 33
11. INTEREST
No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK
(a) Subject to the approval of an increase in the number
of authorized shares of the Company's Common Stock by the stockholders of the
Company, the maximum number of shares of the Company's Common Stock that shall
be made available for sale under the Plan shall be 1,000,000 shares. Until
such time as the stockholders of the Company have approved an increase in the
number of authorized shares of the Company's Common Stock, the maximum number
of shares of the Company's Common Stock that shall be made available for sale
under the Plan shall be 500,000 shares. The number of shares of the Company's
Common Stock that shall be made available for sale under the Plan shall be
subject to certain adjustments upon changes in capitalization of the Company as
provided in Section 18 hereof. The shares of Common Stock sold under the Plan
may be authorized but unissued shares, reacquired shares held in treasury or
shares purchased on the open market. If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available, the Company shall make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) A participant will have no interest or voting right
in shares of Common Stock covered by the participant's option until such option
has been exercised.
(c) Shares sold to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
the participant's spouse.
13. ADMINISTRATION
The Plan shall be administered by the Board or a committee
appointed by the Board. The administration, interpretation and application of
the Plan by the Board and its committee shall be final, conclusive and binding
upon all participants. Members of the Board who are eligible Associates are
permitted to participate in the Plan, provided that:
(a) Members of the Board who are eligible to participate
in the Plan may not vote on any matter affecting the administration of the Plan
or the grant of any option pursuant to the Plan; and
(b) If a committee is established to administer the Plan,
no member of the Board who is eligible to participate in the Plan may be a
member of the committee.
14. DESIGNATION OF BENEFICIARY
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash from the participant's
account under the Plan in the event of such participant's death with the
Company's Payroll Department.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice to the Company's Payroll Department.
In the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver any shares and cash in the
participant's account to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
shares and cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
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<PAGE> 34
15. TRANSFERABILITY
Neither payroll deductions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive shares
under the Plan may be assigned, transferred, pledged or otherwise disposed of
in any way (other than by will, the laws of descent and distribution or as
provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10 hereof.
16. USE OF FUNDS
All payroll deductions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such payroll deductions.
17. REPORTS
Individual accounts will be maintained for each participant in
the Plan. A statement of account will be given to each participant quarterly
promptly following each Exercise Date, which statement will set forth the
amount of payroll deductions for the preceding Offering Period, the per share
option price in effect and the number of shares purchased on such Exercise
Date, and the remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock
resulting from a stock split or the payment of a stock dividend (but only on
the Common Stock) or any other increase or decrease in the number of shares of
outstanding Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option under the Plan.
(b) In the event of the proposed dissolution or
liquidation of the Company, any then current Offering Period will terminate
immediately prior to the consummation of such proposed action unless otherwise
provided by the Board. In the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation, or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion, that each participant shall
have the right to exercise any unexercised option in lieu of such assumption or
substitution. If the Board makes any unexercised options fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant that such participant's unexercised
option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and such option will terminate upon the expiration of such
period.
(c) The Board, if it so determines in the exercise of its
sole discretion, may also make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or
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<PAGE> 35
other increases or reductions of shares of its outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
19. AMENDMENT OR TERMINATION
The Board may at any time terminate or amend the Plan. No
such termination shall affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant, nor may an amendment be made without the approval of
the stockholders of the Company if such amendment would:
(a) Increase the number of shares that may be issued
under the Plan (except any increase adopted pursuant to Section 18(a) hereof);
or
(b) Modify the requirements concerning which associates
(or class of associates) are eligible for participation in the Plan.
20. NOTICES
All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. STOCKHOLDER APPROVAL
(a) Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve months after the date the Plan
was adopted. If such stockholder approval is obtained at a duly held
stockholders' meeting, it may be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock of the Company
present or represented and entitled to vote thereon, which approval shall be:
(i) Solicited substantially in accordance with Section
14(a) of the Exchange Act; or
(ii) Solicited after the Company has furnished in writing
to the holders entitled to vote substantially the same information concerning
the Plan as that which would be required by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished.
(b) In the case of approval by written consent, it must
be obtained by the unanimous written consent of all stockholders of the
Company.
22. INCOME TAX CONSEQUENCES
The Plan is designed to qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code. Under Section 423 of the Code, a
participant will not realize taxable income at the time the participant
purchases stock under the Plan. However, a participant may be deemed to
receive compensation taxable as ordinary income in the year in which the
participant disposes of the stock or dies while holding the stock.
The rules applicable to the disposition of stock vary
depending upon whether or not the disposition constitutes a "disqualifying
disposition" (i.e., a disposition within two years after the Enrollment Date of
the Offering Period during which the disposed of stock was purchased).
If a participant makes a disqualifying disposition, the
participant will be deemed to receive compensation taxable as ordinary income
in an amount equal to the excess of the value of the stock on the Exercise
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<PAGE> 36
Date on which it was purchased over the amount paid for the stock, regardless
of whether the proceeds of the disposition exceed the participant's purchase
price. In such case, the participant's cost basis for the stock would be
correspondingly increased by the amount recognized as compensation by the
participant. The Company, at the time a disqualifying disposition is made,
will collect from the participant the federal income tax withholding due on the
additional compensation. The participant's capital gain or loss on the
disqualifying disposition itself will be the difference between the
participant's basis so adjusted and the proceeds of the disqualifying
disposition.
If a participant should sell stock at a profit and the sale is
not a disqualifying disposition, the participant would recognize as
compensation taxable as ordinary income an amount equal to the lesser of (i)
the excess of the Fair Market Value of the stock on the date of disposition
over the participant's purchase price, or (ii) the "applicable discount" (for
purposes of the Plan, 15%) applied to the Fair Market Value of the stock on the
Enrollment Date of the Offering Period during which the stock was purchased.
Any profit in excess of the amount recognized as compensation would be treated
as capital gain. If the sale is at a loss and is not a disqualifying
disposition, the difference between the participant's purchase price and the
proceeds of the sale would be a capital loss.
If a participant dies at any time while holding the stock, the
participant would be deemed to have received compensation taxable as ordinary
income in the year of his or her death in an amount equal to the smaller of (i)
the applicable discount applied to the Fair Market Value of the stock on the
Enrollment Date of the Offering Period during which the stock was purchased, or
(ii) the excess, if any, of the Fair Market Value of the stock on the date of
death over the participant's purchase price.
INDIVIDUAL TAX IMPLICATIONS ATTENDANT TO PARTICIPATION IN THE
PLAN ARE THE SOLE RESPONSIBILITY OF THE INDIVIDUAL PARTICIPANT. THE BRIEF
DISCUSSION OF FEDERAL TAX CONSEQUENCES PROVIDED ABOVE IS NOT EXHAUSTIVE.
PLEASE NOTE THAT THE LAW MAY CHANGE AND SPECIAL RULES ARE PROVIDED WITH RESPECT
TO SITUATIONS NOT SPECIFICALLY DISCUSSED HEREIN.
THE COMPANY STRONGLY RECOMMENDS THAT EACH PARTICIPANT CONSULT
WITH A TAX ADVISOR PRIOR TO COMMENCING ANY TRANSACTION HEREUNDER.
23. NO EMPLOYMENT RIGHTS
Participation in the Plan will not impose any obligations upon
the Company to continue the employment of any participant for any specific
period and will not affect the right of the Company to terminate any
participant's employment at any time, with or without cause.
24. CONDITIONS UPON ISSUANCE OF SHARES
(a) Shares shall not be issued with respect to an option
unless the exercise of such option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic
and foreign, including, without limitation, the Securities Act, the Exchange
Act and the requirements of the Nasdaq National Market or any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of an option, the
Company may require the person exercising such option to represent and warrant
at the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law.
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<PAGE> 37
Appendix A
PRELIMINARY COPY
TRACTOR SUPPLY COMPANY
P
R
O
X
Y
ANNUAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS THOMAS O. FLOOD AND MICHAEL J. KINCAID
AND EACH OF THEM (WITH POWER OF SUBSTITUTION) PROXIES OF THE UNDERSIGNED TO
REPRESENT AND VOTE, AS DESIGNATED ON THE REVERSE SIDE, ALL SHARES OF COMMON
STOCK, PAR VALUE $.008 PER SHARE ("COMMON STOCK"), OF TRACTOR SUPPLY COMPANY
(THE "COMPANY") WHICH THE UNDERSIGNED WOULD BE ENTITLED TO VOTE IF PERSONALLY
PRESENT AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1997 AND
AT ANY ADJOURNMENT THEREOF.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 38
- --------------------------------------------------------------------------------
PLEASE MARK
[ X ] VOTES AS IN
THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1, 2, 3, 4 AND 5. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ITEMS 1, 2, 3, 4 AND 5.
1. ELECTION OF THREE CLASS III DIRECTORS FOR THREE YEAR TERMS
ENDING AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS.
NOMINEES FOR CLASS III DIRECTORS: JOSEPH H. SCARLETT, JR.
GERALD E. NEWKIRK
S.P. BRAUD
FOR ALL WITHHOLD ALL
[ ] [ ]
[ ]
- --------------------------------------
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
FOR AGAINST ABSTAIN
2. APPROVAL OF THE COMPANY'S 1996 [ ] [ ] [ ]
ASSOCIATE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
3. APPROVAL OF AN AMENDMENT TO THE [ ] [ ] [ ]
COMPANY'S 1994 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE
THEREUNDER FROM 250,000 TO 1,000,000.
FOR AGAINST ABSTAIN
4. Approval of an amendment to the [ ] [ ] [ ]
Company's Restated CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 9,500,000 TO
100,000,000.
FOR AGAINST ABSTAIN
5. RATIFICATION OF THE REAPPOINTMENT OF [ ] [ ] [ ]
PRICE WATERHOUSE LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 27, 1997.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
IMPORTANT: PLEASE DATE AND SIGN AS YOUR NAME APPEARS AT LEFT AND RETURN IN THE
ENCLOSED ENVELOPE. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN,
ETC., PLEASE GIVE FULL TITLE AS SUCH. IF THE STOCKHOLDER IS A CORPORATION,
THIS PROXY SHOULD BE SIGNED IN THE FULL CORPORATION NAME BY A DULY AUTHORIZED
OFFICER WHOSE TITLE IS STATED.
SIGNATURE: DATE
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SIGNATURE: DATE
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