<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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e) (2))
[X] 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:
- --------------------------------------------------------------------------------
<PAGE> 2
(TSC TRACTOR SUPPLY CO 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 2000 Annual Meeting of Stockholders of Tractor Supply Company.
As shown in the formal notice enclosed, the meeting will be held on
Thursday, April 27, 2000, at 10:00 a.m. (central time) at our management
headquarters in Nashville, Tennessee. The purpose of this year's meeting is to
elect two Class III Directors for a term of three years, To approve the
Company's 2000 Stock Incentive Plan, to ratify the reappointment of
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants for fiscal 2000, 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 January 1, 2000 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.
Chairman of the Board, President
and Chief Executive Officer
March 24, 2000
<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 27, 2000
NOTICE IS HEREBY GIVEN that the 2000 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 27, 2000, at 10:00 a.m. (central time) (the
"Annual Meeting") for the following purposes:
1. To elect two Class III Directors for a three-year term ending
at the 2003 Annual Meeting of Stockholders;
2. To approve the Company's 2000 Stock Incentive Plan;
3. To ratify the reappointment of PricewaterhouseCoopers LLP as
independent certified public accountants for the fiscal year
ending December 30, 2000; and
4. 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 15,
2000 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
David C. Lewis
Assistant Secretary
Nashville, Tennessee
March 24, 2000
- --------------------------------------------------------------------------------
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 27, 2000
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 2000
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 27, 2000, at 10:00 a.m. (central time) and at any continuations
and adjournments thereof (the "Annual Meeting"). This Proxy Statement is first
being mailed on or about March 22, 2000 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 15, 2000.
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 Assistant 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 15, 2000 as the
record date (the "record date") for the meeting. Only stockholders of record at
the close of business on March 15, 2000 are entitled to notice of and to vote at
the Annual Meeting. At the close of business on March 15, 2000, there were
8,774,198 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, 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 January 1, 2000, 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 15, 2000. In
addition, the Company has 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 15, 2000. Additional copies of the Annual Report and the Company's
Annual Report on Form 10-K for the fiscal year ended January 1, 2000 to be filed
with the Securities and Exchange
1
<PAGE> 5
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. AND S. P.
BRAUD AS CLASS III DIRECTORS, FOR APPROVAL OF THE COMPANY'S 2000 STOCK INCENTIVE
PLAN AND FOR RATIFICATION OF THE REAPPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 30, 2000.
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 term of the Class
III directors will expire. The Board, upon the recommendation of its Nominating
Committee, has nominated two of the incumbent Class III directors, Joseph H.
Scarlett, Jr. and S. P. Braud, for election as Class III directors for a
three-year term expiring at the 2003 Annual Meeting of Stockholders. The
following table sets forth certain information concerning the nominees for
election as Class III directors.
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND BUSINESS
NAME AND AGE SINCE EXPERIENCE FOR LAST FIVE YEARS
- ----------------------------- ------------- ------------------------------------------------------
<S> <C> <C>
Joseph H. Scarlett, Jr., 57.... 1982 Chairman, President and Chief Executive Officer of
the Company since July 1998 after having served as
Chairman and Chief Executive Officer of the Company
since February 1993 and as President and Chief
Operating Officer of the Company from 1987 to February
1993. Between 1979 and 1987, served as Vice President
of Personnel, Senior Vice President of Administration and
Executive Vice President of 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.
S.P. Braud, 69................. 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>
2
<PAGE> 6
If a nominee becomes unwilling or unable to serve, which is not
expected, the proxies will be voted for a substitute person designated by the
Board upon the recommendation of its Nominating Committee.
- ------------------
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE PROPOSAL TO ELECT JOSEPH H. SCARLETT, JR. AND S. P. BRAUD AS
CLASS III DIRECTORS OF THE COMPANY TO HOLD OFFICE UNTIL THE 2003 ANNUAL MEETING
OF STOCKHOLDERS.
INFORMATION CONCERNING CLASS I DIRECTORS
The following table sets forth certain information concerning the Class
I directors of the Company, whose terms expires at the 2001 Annual Meeting of
Stockholders.
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND BUSINESS
NAME AND AGE SINCE EXPERIENCE FOR LAST FIVE YEARS
- ------------------------------ ----------------- ------------------------------------------------------
<S> <C> <C>
Thomas O. Flood, 53 .......... 1985 Retired as Senior Vice President of Administration
and Finance, and Chief Financial Officer in
September 1999, positions he had held since
January 1996 and June 1993, respectively. Mr. Flood
previously served as Treasurer of the Company from
June 1993 until July 1998, Chief Financial Officer of
the Company from January 1996 until July 1998, Vice
President of Administration and Finance of the
Company from 1984 until January 1996, Vice President
of Finance of the Company from 1982 to 1984, Controller
of the Company from 1981 to 1982 and in various
financial and management information systems
capacities between 1969 and 1981. Mr. Flood
continues to serve as a consultant to the Company.
Gerard E. Jones, 63 .......... 1999 Partner in the law firm of Richards & O'Neil LLP
since February 1972. Richards & O'Neil LLP
serves as corporate counsel to the Company. Mr. Jones
is a director of five mutual funds sponsored by
Morgan Stanley Dean Witter Investment Management,
including the Morgan Stanley Dean Witter Institutional
Fund, Inc.
</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 2002 Annual Meeting of
Stockholders.
3
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH COMPANY, DIRECTORSHIPS AND BUSINESS
NAME AND AGE SINCE EXPERIENCE FOR LAST FIVE YEARS
- ----------------------------- ----------- ------------------------------------------------------
<S> <C> <C>
Joseph D. Maxwell, 61 ....... 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, 66 ....... 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; Lafarge Corporation, Reston, Virginia,
since 1989; SunTrust Bank, Nashville, N.A., Nashville,
Tennessee, since 1989; Thomas Nelson, Inc., Nashville,
Tennessee, since 1992; and Towne Services, Inc.,
Atlanta, Georgia, since 1998.
Sam K. Reed, 52 ............. 2000 Chief Executive Officer and director of the Keebler
Foods Company, Inc. since January 1996. Previously
served as President and Chief Executive Officer of
the Western Bakery Group, a division of Specialty
Foods Corporation from 1994 to 1995 and as President
and Chief Executive Officer of Mother's Cake and
Cookie Company from 1991 to 1994. Prior to that, held
Executive Vice President positions at President Baking
Company, Wyndham Bakery Products and Murray Bakery
Products from 1985 to 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 $20,000. In addition, the
Company pays all such non-employee directors $1,500 for each Board meeting
attended and $500 for each 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 (i) for 3,500 shares
of Common Stock are automatically granted to each non-employee director of the
Company upon election to the Board, and (ii) for 1,500 shares of Common Stock
are automatically granted to each non-employee director annually thereafter,
with exercise prices equal to the fair market value of such shares at the
4
<PAGE> 8
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 January 1,
2000 ("fiscal 1999"), the Board held four meetings. The Board has four standing
committees, the Audit Committee, the Compensation Committee, the Nominating
Committee and the Executive Committee. During fiscal 1999, the Audit Committee
held three meetings, the Compensation Committee held two meetings, the
Nominating Committee held four meetings and the Executive Committee held none.
During fiscal 1999, all of the incumbent directors of the Company attended at
least 75% 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.
AUDIT COMMITTEE - The Audit Committee, which is comprised of Messrs.
Braud (Chairman), Rodgers, Jones and Reed, 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), Rodgers, Jones and Reed, 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.
NOMINATING COMMITTEE - The Nominating Committee, which is comprised of
Messrs. Braud (Chairman), Scarlett, Maxwell and Jones, is responsible for
nominating persons to serve on the Board for consideration at the Company's
annual meeting of stockholders and recommending persons to fill any interim
vacancy on the Board.
EXECUTIVE COMMITTEE - The Executive Committee, which is comprised of
Messrs. Scarlett (Chairman), Braud, Maxwell and Jones 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, Rodgers, Jones and Reed serve on the Compensation
Committee of the Board. There are no, and during fiscal 1999 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 1999.
APPROVAL OF 2000 STOCK INCENTIVE PLAN
DESCRIPTION OF 2000 STOCK INCENTIVE PLAN
Subject to approval by the Company's stockholders, the Board of
Directors of the Company has adopted the 2000 Stock Incentive Plan, the full
text of which is set forth as Exhibit A to this Proxy Statement.
5
<PAGE> 9
In December 1993, the Company adopted its 1994 Stock Option Plan, which
became effective upon the consummation of the Company's initial public offering
in February 1994 and has served as the Company's principal equity-based
incentive compensation program since that time. Although the 1994 Stock Option
Plan will not expire until 2003, the maximum number of shares of Common Stock
that may be issued by the Company pursuant to options, stock appreciation rights
("SARs") and restricted stock awards granted under the 1994 Stock Option Plan
(subject to certain adjustments) is 1,000,000 shares. To date, the Company has
issued 7,249 shares of Common Stock under the 1994 Stock Option Plan (upon the
exercise of options granted thereunder) and has outstanding options for an
additional 891,500 shares of Common Stock (the Company has never granted SARs or
restricted stock awards under the 1994 Stock Option Plan). The Company
accordingly believes that the shares available under the 1994 Stock Option Plan
will be exhausted in the near future.
The 2000 Stock Incentive Plan is intended to provide the Company with a
successor to the 1994 Stock Option Plan that will permit the Company to continue
to provide certain of its officers, directors and executive, managerial and
professional employees ("key personnel") with an incentive to maintain and
enhance the long-term performance and profitability of the Company and to
closely align their interests with the long-term interests of the Company's
stockholders. In most respects, the terms of the two plans are identical.
The 2000 Stock Incentive Plan will be administered by the Compensation
Committee of the Board of Directors. During the 10-year period ending in 2010,
the Compensation Committee will have the authority, subject to the terms of the
2000 Stock Incentive Plan, to determine which key personnel will receive grants
under the 2000 Stock Incentive Plan and when, the number of shares to be covered
by the grants, the types and terms of the options, SARs and restricted stock
awards granted and to adopt rules for implementing the 2000 Stock Incentive
Plan.
Under the terms of the 2000 Stock Incentive Plan, incentive stock
options ("ISOs") (within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code")), nonqualified stock options ("NQSOs") subject
to the provisions of Section 83 of the Code, SARs related to an option,
unrelated SARs and restricted stock awards may be granted to key personnel of
the Company, except that ISOs may be granted only to employees of the Company
(as defined in Section 424 of the Code). Subject to certain adjustments
described below, no more than 1,000,000 shares of Common Stock may be issued
with respect to options, unrelated SARs and restricted stock awards granted
under the Plan. Shares of Common Stock covered by options, unrelated SARs or
restricted stock awards granted under the Plan that expire, terminate or are
forfeited or cancelled for any reason without payment will again become
available for awards under the 2000 Stock Incentive Plan. Subject to certain
adjustments described below, no individual may be granted an option or unrelated
SAR under the Plan in any one calendar year if the shares of Common Stock
underlying such option or unrelated SAR, when added to the shares of Common
Stock underlying all of the other grants of options and unrelated SARs to the
grantee in the same calendar year, exceed 50,000 shares of Common Stock. The
Stock Option Plan contains no specific limitation on the number of restricted
stock awards that may be granted to an individual.
The 2000 Stock Incentive Plan provides for an automatic grant to each
director who is not also an associate of the Company of (i) a NQSO for 3,500
shares of Common Stock upon initial election to the Board of Directors, and (ii)
a NQSO for 1,500 shares of Common Stock on an annual basis (typically, the
fourth Wednesday following the end of each fiscal year). All such options will
have an option exercise price equal to 100% of the fair market value of the
Common Stock on the date the option is granted. These options will become
exercisable with respect to 33 1/3% of the shares on the first anniversary of
the date of grant, an additional 33 1/3% of the shares on the second anniversary
of the date of grant, and 100% exercisable on the third anniversary of the date
of grant. These options will terminate and cease to be exercisable on the tenth
6
<PAGE> 10
anniversary of the date of grant. These automatic grants are comparable to those
currently enjoyed by the directors under the Company's 1994 Stock Option Plan
and will not begin until no further grants are available under such Plan. The
Board of Directors reserves the right to amend the terms of these automatic
grants.
Each option and SAR will be exercisable over a period, to be determined
by the Compensation Committee, but not to exceed 10 years from the date of
grant. 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. The Compensation Committee may, in its discretion, with the
grantee's consent, cancel any options, SARs or restricted stock awards and issue
a new award as a replacement, accelerate the exercisability of any award, or
extend the scheduled expiration date of any award.
The exercise price of an option 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.
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 exercise price of, and the number of shares covered by, each option
and SAR generally will not change during the life of the option. However, all of
the terms of the 2000 Stock Incentive Plan, well as the terms of all agreements
setting forth the terms of awards made under the 2000 Stock Incentive Plan, are
subject to appropriate adjustment by the Compensation Committee to reflect stock
dividends, stock splits, recapitalizations or reclassifications or other changes
affecting the number or kind of outstanding shares. In addition, if the Company
is proposed to be merged or consolidated with another corporation or reorganized
or liquidated, then the Compensation Committee may provide that all options and
SARs granted to an individual will terminate unless exercised.
The Compensation Committee will, under certain circumstances, have the
right to cancel an option 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 cancelled over
the exercise price of the option cancelled.
Options and SARs may be transferred by a grantee only by will or by the
laws of descent and distribution and may be exercised only by the grantee during
his or her lifetime. If the employment or service of a grantee terminates for
any reason other than by reason of death, termination for cause or resignation,
the 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 or she was entitled to exercise them at
the date of termination. If a grantee dies while employed or rendering services
(or within a specified post-employment exercise period), all outstanding options
and SARs, to the extent then vested and still exercisable, may be exercised by
the person or persons to whom the grantee's rights pass within one year after
the grantee's death. If the employment or service of a grantee is terminated for
cause or by reason of resignation, all options and SARs granted to such grantee
shall terminate on the day his or her employment or service terminates. In no
case may options or SARs be exercised later than the expiration date specified
in the applicable agreement.
7
<PAGE> 11
The Compensation Committee may grant restricted stock awards alone or
in tandem with other awards under the 2000 Stock Incentive 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 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.
The Company's Board of Directors may, without stockholder approval,
amend, suspend or discontinue the 2000 Stock Incentive Plan at any time, except
that, without stockholder approval, no such amendment may (i) materially
increase the benefits accruing to grantees under the 2000 Stock Incentive Plan,
(ii) increase the maximum number of shares as to which awards may be granted
under the 2000 Stock Incentive 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 2000
Stock Incentive Plan, (iv) provide for the grant of options or SARs having an
exercise price 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 2000 Stock Incentive Plan beyond its initial 10-year
period.
FEDERAL INCOME TAX INFORMATION
ISOs granted under the 2000 Stock Incentive Plan may be afforded
favorable federal income tax treatment under the Code. If an option is treated
as an ISO, 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.
All other options granted under the 2000 Stock Incentive Plan are
NQSOs. 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.
8
<PAGE> 12
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 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 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 Compensation Committee, 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 participants in the 2000 Stock
Incentive 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 above. The Company strongly recommends
that each participant consult with a tax advisor prior to commencing any
transaction under the 2000 Stock Incentive 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 January 1, 2000. During the fiscal year ended January 1, 2000,
options to purchase 69,500 shares of Common Stock of the Company were granted to
all current officers as a group and options to purchase 218,000 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 COMPANY'S 2000 STOCK INCENTIVE PLAN.
9
<PAGE> 13
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 (as well as Mr. Flood, who retired in September 1999) for all
services rendered in all capacities to the Company for the fiscal years ended
January 1, 2000, December 26, 1998 and December 27, 1997:
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> <C>
Joseph H. Scarlett, Jr........... 1999 $ 433,846 $ 176,000 -- -- $ 123,142
Chairman of the Board, President 1998 $ 374,039 $ 300,000 -- -- $ 113,767
and Chief Executive Officer 1997 $ 325,000 $ -- -- -- $ 14,766
Gerald W. Brase ................. 1999 $ 218,038 $ 87,800 -- 10,000 $ 18,499
Senior Vice President- 1998 $ 210,000 $ 105,000 -- -- $ 89,474
Merchandising and Marketing (3) 1997 $ 50,767 $ 42,000 -- 25,000 $ 6,205
Thomas O. Flood.................. 1999 $ 196,431 $ -- -- -- $ 61,521
Senior Vice President- 1998 $ 188,461 $ 95,000 -- -- $ 58,790
Administration and Finance, 1997 $ 182,000 $ -- -- -- $ 10,538
and Chief Financial Officer (4)
Michael E. Brown................. 1999 $ 194,308 $ 78,400 -- 10,000 $ 17,725
Senior Vice President- 1998 $ 182,967 $ 92,500 -- 25,000 $ 106,833
Operations (5) 1997 $ -- $ -- -- -- $ --
Gary M. Magoni................... 1999 $ 109,962 $ 70,415 -- 5,000 $ 16,663
Vice President - Operations 1998 $ 100,308 $ 77,464 -- -- $ 16,238
1997 $ 97,885 $ 27,447 -- 13,000 $ 8,180
Daisy L. Vanderlinde............. 1999 $ 136,769 $ 42,300 -- 5,000 $ 17,318
Vice President-Human Resources 1998 $ 127,442 $ 51,400 -- -- $ 13,536
1997 $ 129,699 $ 15,000 -- 13,000 $ 5,898
</TABLE>
- ------------------
(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, premiums paid by the Company pursuant
to the Executive Life Insurance Plan and amounts paid or reimbursed for
certain moving and relocation expenses. Amounts for fiscal 1999 are as
follows:
(a) Company contributions to the 401(k) Plan in the amount of $7,067 for
Mr. Scarlett; $0 for Mr. Brase; $4,908 for Mr. Flood; $0 for Mr. Brown;
$3,867 for Mr. Magoni; and $4,898 for Ms. Vanderlinde.
(b) Amounts credited as Company contributions under the Deferred
Compensation Plan in the amount of $0 for Mr. Scarlett; $13,170 for
Mr. Brase; $0 for Mr. Flood; $11,760 for Mr. Brown; $6,420 for Mr.
Magoni; and $8,460 for Ms. Vanderlinde.
(c) Amounts paid by the Company pursuant to the Medical Expense
Reimbursement Plan in the amount of $2,797 for Mr. Scarlett; $3,033 for
Mr. Brase; $4,815 for Mr. Flood; $4,708 for Mr. Brown; $4,571 for Mr.
Magoni; and $2,539 for Ms. Vanderlinde.
(d) Premiums paid by the Company pursuant to the Executive Life Insurance
Plan in the amount of $7,080 for Mr. Scarlett; $2,296 for Mr. Brase;
$1,798 for Mr. Flood; $1,257 for Mr. Brown; $1,805 for Mr. Magoni; and
$1,421 for Ms. Vanderlinde.
(e) Premiums paid by the Company pursuant to Split-Dollar Agreements in the
amount of $106,198 for Mr. Scarlett and $50,000 for Mr. Flood (the
Company pays all premiums and retains a collateral interest in the
executive's insurance policy equal to the amount of the premiums, which
it will recover after 15 policy years).
10
<PAGE> 14
(3) Mr. Brase was elected Senior Vice President-Merchandising and Marketing
effective in September 1997.
(4) Mr. Flood retired effective in September 1999.
(5) Mr. Brown was elected Senior Vice President-Operations effective in January
1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table reflects certain information with respect to
options to acquire shares of the Company's Common Stock granted under the
Company's 1994 Stock Option Plan to the executive officers named in the Summary
Compensation Table above (excluding Messrs. Scarlett and Flood, who do not
participate in the Stock Option Plan) during the fiscal year ended January 1,
2000.
<TABLE>
<CAPTION>
Individual Grants (1) Potential Realizable Value at
- -------------------------------------------------------------------------------- Assumed Annual Rates of
Stock Price Appreciation
for Option Term (2)
------------------------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Year Base Price Expiration
Name Granted (#) (%) ($/Sh) Date 5%($) 10%($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald W. Brase 10,000 4.6 25.8125 1/20/09 162,333 411,385
Michael E. Brown 10,000 4.6 25.8125 1/20/09 162,333 411,385
Gary M. Magoni 5,000 2.3 25.8125 1/20/09 81,167 205,692
Daisy L. Vanderlinde 5,000 2.3 25.8125 1/20/09 81,167 205,692
</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 one-third each year, beginning on the third
anniversary of the grant date, thus becoming 100% vested on the fifth
anniversary of the grant date, provided, however, that options granted to
non-employee directors of the Company generally vest one-third each year,
beginning on the first 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.
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 January 1, 2000 and options
held at fiscal year end by the officers named in the Summary Compensation Table
above (excluding Messrs. Scarlett and Flood, who do not participate in the Stock
Option Plan).
11
<PAGE> 15
<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>
Gerald W. Brase -0- -0- -0- / 35,000 -0- / -0-
Michael E. Brown -0- -0- -0- / 35,000 -0- / 35,938
Gary M. Magoni -0- -0- 5,000 / 24,000 -0- / -0-
Daisy L. Vanderlinde -0- -0- 2,666 / 23,334 -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 31, 1999 was $16.00.
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.
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
12
<PAGE> 16
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 January 1, 2000, Joseph H. Scarlett, Jr., the
Company's Chairman of the Board, President and Chief Executive Officer, received
a base salary of $433,846, an increase of 16.0% 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 1998 with sales increasing 18.0% (comparable
store sales increased 10.9%) and net income per share (on a fully diluted basis)
increasing 25.4%, and positioned itself to continue its approximate 12% new
store unit growth rate plans in fiscal 1999. Further, under Mr. Scarlett's
continued leadership, the Company achieved record sales and earnings in fiscal
1999 with sales increasing 14.6% (comparable store sales increased 4.4%) and net
income per share (on a fully diluted basis) increasing 20.2%, and achieved its
approximate 12% new store unit growth rate plan during fiscal 1999, while
positioning itself for continued new store unit growth as well as expansion into
new geographic markets. The Company believes that after considering Mr.
Scarlett's salary increase in fiscal 1999, 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 3% 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 3% 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 or the OEIP at any time. For fiscal 1999 all of
the named executive officers (except for Mr. Flood) 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 and Flood), have a
10 year term, are exercisable at the market price on the date of grant, and vest
one-third each year, beginning on the third anniversary of the grant date, thus
becoming 100% vested on the fifth anniversary of the grant date, provided,
however, that stock options granted to non-employee directors of the Company
generally vest one-third each year, beginning on the first 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
13
<PAGE> 17
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 by the officer's individual past
performance, expectation of the officer's future contributions in leading the
Company, and the Company's overall performance. Messrs. Scarlett 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 (excluding Mr. Scarlett and, prior to his
retirement, Mr. Flood) and enhances the Company's ability to attract and retain
the services of qualified persons. According to the terms of the DCP, each year
a percentage of the officer's annual base salary (ranging from 2% of his or her
annual base salary if the Company's net income increase over the prior year (the
"net income increase") is less than or equal to 0%, to 6% of his or her annual
base salary if the Company's net income increase is greater than 20%) will be
allocated to his or her deferred compensation account under the DCP (provided,
however, that no allocation will be made if the Company's net income is less
than 2.5% of net sales), 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.
In July 1997, after considering that Messrs. Scarlett and Flood have
chosen not to participate in the Company's 1994 Stock Option Plan due to their
already large stock ownership, the Compensation Committee recommended, and the
Board approved, the SERPSwap collateral assignment split dollar insurance plans
intended to provide additional incentives to Messrs. Scarlett and Flood and
replace their existing DCP's. In connection therewith, in 1998, the Company
entered into Split-Dollar Agreements (the "SDA's") with Messrs. Scarlett and
Flood. Pursuant to the terms of the SDA's, the Company (i) pays the premiums
under the SDA's ($106,198 annually and $50,000 annually regarding Messrs.
Scarlett and Flood, respectively) for a period of 10 years, (ii) the Company
obtained a collateral assignment in each of their respective insurance policies
covering the full amount of the premiums paid by the Company (the Company will
be reimbursed from the cash surrender value or death proceeds from each of their
respective insurance policies), and (iii) the insurance policies will be
released to each of their respective trusts in the 16th year, at which time the
death benefit value of the insurance policies is estimated to be approximately
$2.8 million and $1.9 million regarding Messrs. Scarlett and Flood,
respectively.
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
14
<PAGE> 18
appropriately configured to align the interests of officers and stockholders and
that the Company can attract, motivate and retain talented management personnel.
The tables 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
Gerard E. Jones
15
<PAGE> 19
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 January 1, 2000 (the Company's fiscal year-end) with the cumulative total
returns of the S&P 500 Index and the S&P Retail (Building Supplies)-500 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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
12/31/94 12/30/95 12/28/96 12/27/97 12/26/98 1/1/00
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tractor Supply Company
Common Stock $100.00 $ 94.05 $ 97.62 $ 69.05 $102.24 $ 76.19
- -------------------------------------------------------------------------------------
S&P Retail (Building
Supplies)-500 Index* $100.00 $ 97.31 $117.19 $162.29 $336.15 $533.76
- -------------------------------------------------------------------------------------
S&P 500 Index $100.00 $137.57 $172.63 $213.67 $275.89 $332.52
- -------------------------------------------------------------------------------------
</TABLE>
* Formerly known as S&P Specialty Retail Group Index
16
<PAGE> 20
INTERESTS OF MANAGEMENT IN CERTAIN TRANSACTIONS
The Company leases its management headquarters and seven of its stores
from certain current and former members of its Board and senior management,
their wives, and 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 Audit Committee.
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, Maxwell and Flood (each of whom are current executive
officers and/or directors of the Company) and two former members of the Board
and senior management of the Company, are the general partners. 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.
On January 1, 1986, the Company entered into capitalized sale-leaseback
transactions with Mr. Scarlett and his wife for its Omaha, Nebraska store, two
former members of the Board and senior management of the Company and their wives
for its Corpus Christi, Texas; Toledo, Ohio; 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 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 27, 1997. All of the 20 year nonrecourse
installment deed notes between the Company and such executive officers and/or
directors and their wives were subsequently repaid. The balance of these
capitalized lease obligations, which are included in total capital lease
obligations on the Company's financial statements, was $1,396,000 as of January
1, 2000.
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.
17
<PAGE> 21
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
a former director and executive officer 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.
Pursuant to a Consulting Agreement between the Company and Thomas O.
Flood, dated as of August 31, 1999, Mr. Flood, who is currently a director of
the Company, has agreed to provide consulting and advisory services to the
Company from January 1, 2000 to December 31, 2000. During such period, the
Company will pay Mr. Flood a fee of $199,992. Pursuant to a Noncompetition
Agreement between the Company and Thomas O. Flood, dated as of August 31, 1999,
Mr. Flood, who is currently a director of the Company, has agreed not to compete
with the Company for the period from September 1, 1999 through December 31,
2004. During such five-year period, the Company will provide Mr. Flood and his
wife with certain health benefits.
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, provided that Forms 3 were filed late by Reynolds
H. Becker, Vice President Merchandise Manager for Consumer Products of the
Company; Mark D. Gillman, Vice President - Operations (Region III) of the
Company: Stephen E. Hull, Vice President - Real Estate of the Company; and
Gerard E. Jones, a Director of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 31, 2000
(except for T. Rowe Price Associates, Inc., Robert Fleming Inc., Wellington
Management Company, LLP, Luther King Capital Management Corporation, and
Dimension Fund Advisors Inc., and Investors Bank and Trust Company, trustee
under the Tractor Supply Company Restated 401(k) Retirement Plan, which are as
of December 31, 1999) 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 8,774,198 shares of Common Stock issued and outstanding
on January 31, 2000.
18
<PAGE> 22
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percent
Class of Beneficial Owner (a) Owned of Class
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common
Stock
Joseph H. Scarlett, Jr. (c) (d)....................... 1,479,692 16.9%
Gerald W. Brase....................................... -- --
Michael E. Brown...................................... 600 *
Gary M. Magoni (b).................................... 9,534 *
Daisy L. Vanderlinde (b).............................. 3,666 *
Investors Bank and Trust Company (g).................. 470,606 5.4%
Robert Fleming Inc. (h)............................... 639,026 7.3%
Wellington Management Company, LLP (i)................ 570,200 6.5%
Luther King Capital Management Corporation (j)........ 549,700 6.3%
Dimensional Fund Advisors Inc. (k).................... 464,500 5.3%
T. Rowe Price Associates, Inc. (l).................... 1,021,000 11.6%
S.P. Braud (b)........................................ 2,500 *
Thomas O. Flood (c) (e)............................... 529,242 6.0%
Gerard E. Jones ...................................... 750 *
Joseph D. Maxwell (b) (f)............................. 348,651 4.0%
Sam K. Reed........................................... -- *
Joseph M. Rodgers (b)................................. 1,883 *
All directors and executive officers as a group
(20 persons) (b) (c) (d) (e) (f).................. 2,423,056 27.4%
</TABLE>
* Less than 1%
- ------------------
(a) The addresses of Messrs. Scarlett, Brase, Brown, Magoni, Braud, Flood,
Jones, Maxwell, Reed and Rodgers and Ms. Vanderlinde are c/o the Company,
320 Plus Park Blvd., Nashville, Tennessee 37217, the address of Investors
Bank and Trust Company is 89 South Street, Boston, Massachusetts 02111, the
address of Robert Fleming Inc. 320 Park Avenue, New York, New York 10022,
the address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109, the address of Luther King Capital Management
Corporation is 301 Commerce, Suite 1600, Forth Worth, Texas 76102, the
address of Dimensional Fund Advisors Inc. is 1299 Ocean Park Avenue, 11th
Floor, Santa Monica, California 90401 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. Magoni, Ms. Vanderlinde and Messrs.
Braud, Maxwell, Rodgers and the directors and executive officers as a
group include approximately 9,334, 3,666; 2,000; 667; 1,333 and 62,416
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, 2000.
(c) Shares of Common Stock owned by Mr. Scarlett and the directors and
executive officers as a group exclude approximately 26,839 and 55,061
shares of Common Stock, respectively, allocated to their respective 401(k)
Plan accounts, with respect to which such directors and executive officers
have investment and voting power on a pass through basis.
(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 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, 1,800 shares owned by Mr. Flood's son with respect to
which such son has investment and voting power and Mr. Flood disclaims
beneficial ownership and 1,800 shares owned by Mr. Flood's daughter with
respect to which such daughter has investment and voting power and Mr.
Flood disclaims beneficial ownership.
(f) Includes 198,992 shares owned by Mr. Maxwell's wife with respect to which
Mrs. Maxwell has investment and voting power and Mr. Maxwell disclaims
beneficial ownership, 6,200 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 11,170 shares owned by Mr. Maxwell's daughter with
respect to which such daughter has investment and voting power and Mr.
Maxwell disclaims beneficial ownership.
(g) Investors Bank and Trust Company, as trustee for the Tractor Supply Company
Restated 401(k) Retirement Plan, has advised the Company that they hold
these shares of record as trustee (which includes the shares described in
footnote (c) above). Plan participants have voting and investment power on
a pass through basis over the shares held by the trustee.
(h) Based solely on information set forth in a Schedule 13G filed with the
Securities and Exchange Commission on February 7, 2000, these shares are
owned by various client accounts for which Robert Fleming Inc. serves as
investment adviser with shared power to vote and direct the investment of
such shares.
(i) Based solely on information set forth in a Schedule 13G filed with the
Securities and Exchange Commission on February 9, 2000, these shares are
owned by various client accounts for which Wellington Management Company ,
LLP serves as investment adviser with shared power to vote and direct the
investment of such shares.
19
<PAGE> 23
(j) Based solely on information set forth in a Schedule 13G filed with the
Securities and Exchange Commission on February 8, 2000, these shares are
owned by various client accounts for which Luther King Capital Management
Corporation serves as investment adviser with shared power to vote and
direct the investment of such shares.
(k) Based solely on information set forth in a Schedule 13G filed with the
Securities and Exchange Commission on February 4, 2000, these shares are
owned by various client accounts for which Dimensional Fund Advisors Inc.
serves as investment adviser with shared power to vote and direct the
investment of such shares.
(l) Based solely on information set forth in a Schedule 13G filed with the
Securities and Exchange Commission on February 14 2000, these shares are
owned by various individual and institutional investors, including T. Rowe
Price New Horizons Fund, Inc. (which has sole voting power with respect to
800,000 of such shares or 9.1% of the shares outstanding), for which T.
Rowe Price Associates, Inc. serves as investment advisor with sole power to
direct the investment of such shares and, with respect to 221,000 of such
shares, sole power to vote such shares. T. Rowe Price Associates, Inc.
disclaims beneficial ownership of all such shares.
RATIFICATION OF REAPPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board has reappointed PricewaterhouseCoopers LLP as the firm of
independent certified public accountants to audit the financial statements of
the Company for the fiscal year ending December 30, 2000. PricewaterhouseCoopers
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
PricewaterhouseCoopers LLP as the Company's independent auditors for fiscal
2000. In the event of a negative vote on such ratification, the Board of
Directors will reconsider its selection.
Representatives of PricewaterhouseCoopers 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 THE REAPPOINTMENT OF PRICEWATERHOUSECOOPERS
LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 30, 2000.
STOCKHOLDER PROPOSALS
Stockholders who desire to submit to the Company proposals for
inclusion in the Company's proxy materials for the 2001 Annual Meeting of
Stockholders must submit such proposals to the Secretary of the Company by
November 22, 2000.
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.
20
<PAGE> 24
AVAILABILITY OF FORM 10-K
AND ANNUAL REPORT TO STOCKHOLDERS
Copies of the Company's Annual Report to Stockholders for the fiscal
year ended January 1, 2000, 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 January 1,
2000, 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.
21
<PAGE> 25
EXHIBIT A.
TRACTOR SUPPLY COMPANY
2000 STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
SECTION 1.1 PURPOSE. The purpose of this 2000 Stock Incentive Plan (the
"Plan") is to provide certain officers, directors and key employees of Tractor
Supply Company (the "Company") and certain of its Affiliates (if any) with an
incentive to maintain and enhance the long-term performance and profitability of
the Company and to closely align their interests with the long-term interests of
the Company's stockholders.
SECTION 1.2 ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board"), which
committee shall consist of two or more directors, and, to the extent necessary
to comply with (i) Rule 16b-3 of the Securities Exchange Act of 1934 (the "Act")
or any successor rule thereto, each director shall be a "non-employee director"
within the meaning of the Act, and (ii) Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), each director shall be an "outside
director" within the meaning of the Code. The members of the Committee shall be
appointed by, and may be changed at any time and from time to time in the
discretion of, the Board.
(b) The Committee shall have the authority to (i) exercise all of the
powers granted to it under the Plan, (ii) construe, interpret and implement the
Plan and any Plan agreements executed pursuant to Sections 2.3 and 2.9, (iii)
prescribe, amend and rescind rules and regulations relating to the Plan, (iv)
make all determinations necessary or advisable in administering the Plan, and
(v) correct any defect, supply any omission and reconcile any inconsistency in
the Plan.
(c) The determination of the Committee on all matters relating to the
Plan or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder.
SECTION 1.3 PERSONS ELIGIBLE FOR AWARDS. Awards under the Plan may be
made to such officers, directors and executive, managerial or professional
employees ("key personnel") of the Company or its Affiliates (if any) as the
Committee shall, in its sole discretion, select.
SECTION 1.4 TYPES OF AWARDS UNDER THE PLAN.
(a) Awards may be made under the Plan in the form of (i) stock options
("options"), (ii) stock appreciation rights related to an option ("related stock
appreciation rights"), (iii) stock appreciation rights not related to any option
("unrelated stock appreciation rights"), and (iv) restricted stock awards, all
as more fully set forth in Article II.
(b) Options granted under the Plan may be either (i) "nonqualified"
stock options subject to the provisions of Section 83 of the Code, or (ii)
options intended to qualify for incentive stock option treatment described in
Code Section 422.
<PAGE> 26
(c) All options when granted are intended to be nonqualified stock
options, unless the applicable Plan agreement explicitly states that an option
is intended to be an incentive stock option. If an option is granted with the
stated intent that it be an incentive stock option, and if for any reason such
option (or any portion thereof) shall not qualify as an incentive stock option,
then, to the extent of such nonqualification, such option (or portion thereof)
shall be regarded as a nonqualified stock option appropriately granted under the
Plan, provided that such option (or portion thereof) otherwise satisfies the
terms and conditions of the Plan relating to nonqualified stock options
generally.
SECTION 1.5 SHARES AVAILABLE FOR AWARDS.
(a) Subject to Section 3.5 (relating to adjustments upon changes in
capitalization), no more than an aggregate of 1,000,000 shares of Common Stock
may be issued with respect to options, unrelated stock appreciation rights and
restricted stock awards granted under the Plan. Shares of Common Stock covered
by options, unrelated stock appreciation rights or restricted stock awards
granted under the Plan which expire, terminate or are forfeited or cancelled for
any reason whatsoever (other than an option or part thereof which is cancelled
by the Committee and for which cash is paid in respect thereof pursuant to
Section 2.5(f)) shall again become available for awards under the Plan.
(b) Shares of Common Stock that shall be subject to issuance pursuant
to the exercise of options or stock appreciation rights or the grant of
restricted stock awards made under the Plan shall be authorized and unissued or
treasury shares of Common Stock.
(c) Without limiting the generality of the preceding provisions of this
Section 1.5, the Committee may, but solely with the grantee's consent, agree to
cancel any award of options, stock appreciation rights or restricted stock under
the Plan and issue a new award in substitution therefor upon such terms as the
Committee may determine in its sole discretion, provided that the substituted
award satisfies all applicable Plan requirements as of the date such new award
is made.
(d) Subject to Section 3.5 (relating to adjustments upon changes in
capitalization), no grantee may be granted an option or unrelated stock
appreciation right under the Plan in any one calendar year if the shares of
Common Stock underlying such option or unrelated stock appreciation right, when
added to the shares of Common Stock underlying all of the other grants of
options and unrelated stock appreciation rights to the grantee in the same
calendar year, exceed 50,000 shares of Common Stock.
SECTION 1.6 DEFINITIONS OF CERTAIN TERMS.
(a) The term "Affiliate" as used herein means any person or entity
that, at the time of reference, directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, the
Company.
(b) The term "Common Stock" as used herein means the shares of common
stock of the Company as constituted on the effective date of the Plan, and any
other shares into which such common stock shall thereafter be changed by reason
of a recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
(c) The term "fair market value" as used herein as of any date and in
respect of any share of Common Stock shall mean (i) if the Common Stock is
listed on any established stock exchange or a national market system, including,
without limitation, the Nasdaq National Market, the closing sales price (or the
closing bid, if no sales were reported) as quoted on such exchange or system, as
reported in The Wall Street Journal or such other source as the Committee deems
reliable, or (ii) if the Common Stock is not listed on any such established
stock exchange or national market system, the fair market value of the Common
Stock as determined in good faith by the Committee.
-2-
<PAGE> 27
ARTICLE II
STOCK OPTIONS;
STOCK APPRECIATION RIGHTS;
RESTRICTED STOCK AWARDS
SECTION 2.1 GRANT OF STOCK OPTIONS.
(a) The Committee may grant options under the Plan to purchase shares
of Common Stock to such key personnel, and in such amounts and subject to such
terms and conditions, as the Committee shall from time to time determine in its
sole discretion, subject to the terms and provisions of the Plan.
Notwithstanding anything contained herein to the contrary, the Committee may
grant incentive stock options only to employees of the Company or any of the
Company's parent or subsidiary corporations (within the meaning of Code Section
424).
(b) Each director of the Company who is not an employee of the Company
or an Affiliate shall be granted (i) a nonqualified stock option for 3,500
shares of Common Stock upon initial election to the Board of Directors, and (ii)
a nonqualified stock option for 1,500 shares of Common Stock on an annual basis
(typically the fourth Wednesday following the end of each fiscal year). Such
options shall become exercisable with respect to 33 1/3% of the shares of Common
Stock subject thereto (rounded down to the next lower full share) on the first
anniversary date of grant, an additional 33 1/3% of the shares of Common Stock
subject thereto (rounded down to the next lower full share) on the second
anniversary of the date of grant, and 100% exercisable on the third anniversary
of the date of grant. Such options shall terminate and cease to be exercisable
on the tenth anniversary of the date of grant. All options granted pursuant to
this Section 2.1(b) shall have an option exercise price per share of 100% of the
fair market value of a share of Common Stock on the date the option is granted.
Notwithstanding the foregoing, these automatic grants, which are comparable to
those currently enjoyed by such directors under the Company's 1994 Stock Option
Plan, will not begin until no further grants are available under the Company's
1994 Stock Option Plan.
(c) Notwithstanding anything contained herein to the contrary, except
as provided in Section 2.1(b), no member of the Committee shall receive any
award under the Plan.
SECTION 2.2 GRANT OF STOCK APPRECIATION RIGHTS.
(a) The Committee may grant a related stock appreciation right in
connection with all or any part of an option granted under the Plan, either at
the time the related option is granted or any time thereafter prior to the
exercise, termination or cancellation of such option, and subject to such terms
and conditions as the Committee shall from time to time determine in its sole
discretion, subject to the terms and provisions of the Plan. The grantee of a
related stock appreciation right shall, subject to the terms and conditions of
the Plan and the applicable Plan agreement, have the right to surrender to the
Company for cancellation all or a portion of the related option granted under
the Plan, but only to the extent that such option is then exercisable, and to be
paid therefor an amount equal to the excess (if any) of (i) the aggregate fair
market value of the shares of Common Stock subject to the option or portion
thereof surrendered (determined as of the date of exercise of such stock
appreciation right) over (ii) the aggregate appreciation base (determined
pursuant to Section 2.3(d)) of the shares of Common Stock subject to the stock
appreciation right or portion thereof surrendered.
(b) The Committee may grant an unrelated stock appreciation right to
such key personnel, and in such amount and subject to such terms and conditions,
as the Committee shall from time to time determine in its sole discretion,
subject to the terms and provisions of the Plan. The grantee of an unrelated
stock appreciation right shall, subject to the terms and conditions of the Plan
and the applicable Plan agreement, have the right to surrender to the Company
for cancellation all or a portion of such stock appreciation right, but only to
the extent that such stock appreciation right is then exercisable, and to be
paid therefor an amount equal to the excess (if any) of (i) the aggregate fair
market value of the shares of Common Stock subject to the stock appreciation
right or portion thereof surrendered (determined as of the date of exercise of
such stock appreciation right) over (ii) the aggregate appreciation base
(determined pursuant to Section 2.3(d)) of the shares of Common Stock subject to
the stock appreciation right or portion thereof surrendered.
-3-
<PAGE> 28
(c) Payment due to the grantee upon exercise of a stock appreciation
right shall be made (i) by check, (ii) in Common Stock (valued at the fair
market value thereof as of the date of exercise) iii) partly in the manner
provided in clause (i) and partly in the manner provided in clause (ii), all as
determined by the Committee in its sole discretion. If the Committee shall
determine to make all of such payments in Common Stock, no fractional shares
shall be issued and no payments shall be made in lieu of fractional shares.
SECTION 2.3 AGREEMENTS EVIDENCING STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS.
(a) Options and stock appreciation rights granted under the Plan shall
be evidenced by written agreements ("Plan agreements") which shall contain such
provisions not inconsistent with the terms and provisions of the Plan as the
Committee may in its sole discretion deem necessary or desirable.
(b) Each Plan agreement with respect to the granting of an option or an
unrelated stock appreciation right shall set forth the number of shares of
Common Stock subject to the option or unrelated stock appreciation right granted
thereby. Each Plan agreement with respect to the granting of a related stock
appreciation right shall set forth the number of shares of Common Stock subject
to the related option which shall also be subject to the related stock
appreciation right granted thereby.
(c) Each Plan agreement with respect to the granting of an option shall
set forth the amount (the "option exercise price") payable by the grantee to the
Company in connection with the exercise of the option evidenced thereby. The
option exercise price per share shall in no event be less than 100% of the fair
market value of a share of Common Stock on the date the option is granted.
(d) Each Plan agreement with respect to a stock appreciation right
shall set forth the amount (the "appreciation base") over which appreciation
will be measured upon exercise of the stock appreciation right evidenced
thereby. The appreciation base per share of Common Stock subject to a stock
appreciation right shall in no event be less than (i) in the case of an
unrelated stock appreciation right, 100% of the fair market value of a share of
Common Stock on the date the stock appreciation right is granted, or (ii) in the
case of a related stock appreciation right, the option exercise price per share
of Common Stock subject to the related option.
SECTION 2.4 EXERCISE OF RELATED STOCK APPRECIATION RIGHT REDUCES SHARES
SUBJECT TO OPTION. Upon any exercise of a related stock appreciation right or
any portion thereof, the number of shares of Common Stock subject to the related
option shall be reduced by the number of shares of Common Stock in respect of
which such stock appreciation right shall have been exercised.
SECTION 2.5 EXERCISABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS.
Subject to the other provisions of the Plan:
(a) Each Plan agreement with respect to an option or stock appreciation
right shall set forth the period during which and the conditions subject to
which the option or stock appreciation right evidenced thereby shall be
exercisable, such periods and conditions to be determined by the Committee in
its discretion; provided, however, that, except as provided in Section 3.11, no
option or stock appreciation right shall be exercisable prior to the first
anniversary of the date of grant.
(b) Notwithstanding the foregoing or any other provision of the Plan,
no Plan agreement shall permit an option or stock appreciation right to be
exercisable more than 10 years after the date of grant.
(c) Subject to any restrictions imposed by the applicable Plan
agreement, a related stock appreciation right shall be exercisable at any time
during the period that the related option may be exercised.
(d) Unless the applicable Plan agreement otherwise provides, an option
or stock appreciation right granted under the Plan may be exercised from time to
time as to all or part of the full number of shares as to which such option or
stock appreciation right shall then be exercisable.
(e) An option or stock appreciation right shall be exercisable by the
filing of a written notice
-4-
<PAGE> 29
of exercise with the Company, on such form and in such manner as the Committee
shall in its sole discretion prescribe, and by payment in accordance with
Section 2.6. Unless the applicable Plan agreement otherwise provides or the
Committee in its sole discretion otherwise determines, the date of exercise of
an option or stock appreciation right shall be the date the Company receives
such written notice of exercise.
(f) If and to the extent that the applicable Plan agreement so
provides: At any time after the Company's receipt of written notice of exercise
and prior to the "option exercise date" (as defined in Section 2.6(a)), the
Committee, in its sole discretion, shall have the right, by written notice to
the grantee, to cancel the option or any part thereof subject to the notice of
exercise if the Committee, in its sole judgment, determines that legal or
contractual restrictions or blockage or other market considerations would make
the Company's acquisition of Common Stock from, or the grantee's sale of Common
Stock to, the public markets illegal, impracticable or inadvisable. If the
Committee determines to cancel the option or any part thereof subject to the
notice of exercise, the Company shall pay to the grantee an amount equal to the
excess (if any) of (i) the aggregate fair market value of the shares of Common
Stock subject to the option or part thereof cancelled (determined as of the
option exercise date) over (ii) the aggregate option exercise price of the
shares of Common Stock subject to the option or part thereof cancelled. Such
amount shall be delivered to the grantee as soon as practicable after such
option or part thereof is cancelled.
SECTION 2.6 PAYMENT OF OPTION PRICE.
(a) Unless the applicable Plan agreement otherwise provides or the
Committee, in its sole discretion otherwise determines, any written notice of
exercise of an option shall be accompanied by payment of the full purchase price
for the shares being purchased. If the applicable Plan agreement provides, or
the Committee determines, that the full amount of the option exercise price
shall be paid on the option exercise date, the grantee shall have no right to
pay the option exercise price, or to receive shares of Common Stock with respect
to an option exercise, prior to the option exercise date. For purposes of the
Plan, the "option exercise date" shall be deemed to be the sixth business day
immediately following the date written notice of exercise is received by the
Company.
(b) Payment of the option exercise price shall be made in any
combination of the following: (i) by certified or official bank check payable to
the Company (or the equivalent thereof acceptable to the Committee); (ii) with
the consent of the Committee in its sole discretion, by personal check (subject
to collection), which may in the Committee's discretion be deemed conditional;
and (iii) if and to the extent provided in the applicable Plan agreement, by
delivery of previously-acquired shares of Common Stock owned by the grantee for
at least six months (or such longer or shorter period as the Committee may
prescribe) having a fair market value (determined as of the option exercise
date) equal to the portion of the option exercise price being paid thereby,
provided that the Committee may require, as a condition of accepting any such
delivery of shares of Common Stock, that the grantee furnish, if so requested by
the Committee, an opinion of counsel acceptable to the Company to the effect
that such delivery would not result in the grantee incurring any liability under
Section 16(b) of the Act and does not require any Consent (as defined in Section
3.2(b)). Payment in accordance with clause (i) of this Section 2.6(b) may be
deemed to be satisfied, if and to the extent that the applicable Plan agreement
so provides, by delivery to the Company of an assignment of a sufficient amount
of the proceeds from the sale of Common Stock acquired upon exercise to pay for
all of the Common Stock acquired upon exercise and an authorization to the
broker or selling agent to pay that amount to the Company, which sale shall be
made at the grantee's direction at the time of exercise, provided that the
grantee furnish, if so requested by the Committee, an opinion of counsel
acceptable to the Company to the effect that such delivery would not result in
the grantee incurring any liability under Section 16(b) of the Act and does not
require any Consent (as defined in Section 3.2(b)). As soon as practicable after
receipt of full payment, the Company shall, subject to the provisions of Section
3.2, deliver to the grantee a certificate or certificates for the shares of
Common Stock so purchased, which certificate or certificates may bear such
legends as the Company may deem appropriate concerning restrictions on their
disposition in accordance with applicable federal and state securities laws,
rules and regulations or otherwise.
SECTION 2.7 TERMINATION OF EMPLOYMENT OR SERVICE. Subject to the other
provisions of the Plan and except as the applicable Plan agreement may otherwise
provide:
(a) General Rule. All of a grantee's outstanding options and stock
appreciation rights under
-5-
<PAGE> 30
the Plan shall terminate upon his or her termination of employment or service
for any reason (including death) except to the extent post-employment or
post-service exercise of the vested portion of an option or stock appreciation
right is permitted in accordance with this Section 2.7. The "vested portion" of
any option or stock appreciation right shall mean the portion thereof which is
exercisable immediately prior to the grantee's termination of employment or
service for any reason.
(b) Improper Activity; Quits. If the grantee's employment or service is
terminated for cause or if the grantee quits, whether or not he or she is a
party to a written contract, all options and stock appreciation rights granted
to such grantee shall terminate and expire on the day the grantee's employment
or service terminates. For purposes of this Section 2.7, a grantee's employment
or service shall be deemed to have been terminated for "cause" if he or she is
discharged on account of fraud or embezzlement or other unlawful or tortious
conduct, whether or not involving or against the Company or any Affiliate, or
for violation of a policy of the Company or any Affiliate or for serious and
willful acts of misconduct detrimental to the business or reputation of the
Company or any Affiliate (whether or not such acts constitute "cause" pursuant
to any written contract with the grantee) or if he or she is discharged for
"cause" or any like term as defined in any written contract with the grantee.
(c) Regular Termination; Leaves of Absence. If the grantee's employment
or service terminates for reasons other than as provided in subsection (b) above
or subsection (d) below, the vested portion of options and stock appreciation
rights granted to such grantee may be exercised until the earlier of (i) three
months after the day the grantee's employment or service terminates, and (ii)
the date on which the options and stock appreciation rights otherwise terminate
or expire in accordance with the applicable provisions of the Plan (disregarding
this Section 2.7) and the Plan agreement; provided that the Committee may
determine in its sole discretion such longer or shorter period for exercise in
the case of an individual whose employment or service terminates solely because
the individual's employer ceases to be an Affiliate or the individual transfers
his or her employment or service with the Company's consent to a purchaser of a
business disposed of by the Company. The Committee may in its discretion
determine (A) whether any leave of absence (including short-term or long-term
disability or medical leave) constitutes a termination of employment or service
within the meaning of the Plan, and (B) the impact, if any, of any such leave on
awards under the Plan theretofore made to a grantee who takes any such leave.
(d) Death. In the event that the grantee's employment or service
terminates by reason of death, or if the grantee's employment or service shall
terminate as described in Section 2.7(c) and the grantee dies within the period
for exercise provided for therein, the vested portion of his or her options and
stock appreciation rights shall be exercisable by the person to whom the options
and stock appreciation rights have passed under the grantee's will (or, if
applicable, pursuant to the laws of descent and distribution) until the earlier
of (i) one year after the grantee's death, and (ii) the date on which the
options and stock appreciation rights otherwise terminate or expire in
accordance with the applicable provisions of the Plan (disregarding this Section
2.7) and the Plan agreement.
SECTION 2.8 SPECIAL ISO REQUIREMENTS.
(a) In order for a grantee to receive special tax treatment with
respect to stock acquired under an option granted as an incentive stock option,
the grantee of such option must be, at all times during the period beginning on
the date of grant and ending on the day three months before the date of exercise
of such option, an employee of the Company or any of the Company's parent or
subsidiary corporations (within the meaning of Code Section 424), or of a
corporation or a parent or subsidiary corporation of such corporation issuing or
assuming a stock option in a transaction in which Code Section 424(a) applies.
(b) If an option granted under the Plan is intended to be an incentive
stock option, and if the grantee, at the time of grant, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
grantee's employer corporation or of its parent or subsidiary corporation, then
(i) the option exercise price per share shall in no event be less than 110% of
the fair market value of the Common Stock on the date of such grant, and (ii)
such option shall not be exercisable after the expiration of five years after
the date such option is granted.
(c) Notwithstanding any designation of an option as an incentive stock
option, to the extent
-6-
<PAGE> 31
that the aggregate fair market value of the shares of Common Stock with respect
to which incentive stock options are exercisable for the first time by a grantee
during any calendar year (under all plans of the Company and any parent or
subsidiary corporations within the meaning of Code Section 424(a)) exceeds
$100,000, such option shall be treated as a nonqualified stock option. The fair
market value of such shares of Common Stock shall be determined as of the time
the option with respect to such shares is granted. For purposes of applying this
Section 2.8(c), incentive stock options shall be taken into account in the order
in which they were granted.
SECTION 2.9 RESTRICTED STOCK AWARDS.
(a) The Committee may grant restricted stock awards, alone or in tandem
with other awards, under the Plan to such key personnel, subject to the terms
and provisions of the Plan and subject to such restrictions, terms and
conditions as the Committee shall determine in its sole discretion and as shall
be evidenced by written Plan agreements. The vesting of a restricted stock award
granted under the Plan may be conditioned upon the completion of a specified
period of employment or service with the Company or any Affiliate, upon the
attainment of specified performance goals, or upon such other criteria as the
Committee may determine in its sole discretion.
(b) Each Plan agreement with respect to a restricted stock award shall
set forth the amount (if any) to be paid by the grantee with respect to such
award. If a grantee made any payment for a restricted stock award that does not
vest, appropriate payment may be made to the grantee upon or following any such
forfeiture on such terms and conditions as the Committee may determine.
(c) Unless otherwise provided in the applicable Plan agreement, if a
grantee's employment or service terminates for any reason (including death)
before all of his or her restricted stock awards have vested, or in the event
any conditions to the vesting of restricted stock are not satisfied by the
deadline therefor, such awards shall terminate and expire on the day the
grantee's employment or service terminates or on the day of such deadline, as
the case may be, and such unvested shares shall be returned to the Company, all
on such terms and conditions as the Committee may determine.
(d) The Committee may provide that a certificate or certificates
representing restricted stock awards shall be registered in the grantee's name
and bear an appropriate legend specifying that such share or shares are not
transferable and are subject to the provisions of the Plan and the restrictions,
terms and conditions set forth in the applicable Plan agreement, or that such
certificate or certificates shall be held in escrow by the Company on behalf of
the grantee until such shares become vested or are forfeited, all on such terms
and conditions as the Committee may determine. Except as the applicable Plan
agreement may otherwise provide, no share of restricted stock may be assigned,
transferred, or otherwise encumbered or disposed of by the grantee until such
share has vested in accordance with the terms of such award. Subject to the
provisions of Section 3.2, as soon as practicable after any restricted stock
award shall vest, the Company shall issue or reissue to the grantee (or to the
grantee's designated beneficiary in the event of the grantee's death) a
certificate or certificates for the Common Stock represented by such restricted
stock award without such restricted legend.
(e) Except as the applicable Plan agreement may otherwise provide, a
grantee shall have the right to vote and receive dividends on a restricted stock
award granted under the Plan. To the extent provided in the applicable Plan
agreement, any stock received as a dividend on, or in connection with a stock
split of, a restricted stock award shall be subject to the same restrictions as
such restricted stock.
(f) Notwithstanding the foregoing or any other provision of the Plan,
no Plan agreement shall permit a restricted stock award to vest more than 10
years after the date of grant.
-7-
<PAGE> 32
ARTICLE III
MISCELLANEOUS
SECTION 3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS.
(a) The Board may, without stockholder approval, at any time and from
time to time, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever, except that no such amendment shall impair any rights under
any award theretofore made under the Plan without the consent of the person to
whom such award was made. Furthermore, except as and to the extent otherwise
permitted by Section 3.5 or 3.11, no such amendment shall, without stockholder
approval:
(i) materially increase the benefits accruing to grantees
under the Plan;
(ii) increase, beyond the amounts set forth in Section 1.5, the
number of shares of Common Stock in respect of which
options, unrelated stock appreciation rights and
restricted stock awards may be issued under the Plan;
(iii) modify the designation in Section 1.3 of the class of
persons eligible to receive awards under the Plan;
(iv) provide for the grant of options or stock appreciation
rights having an option exercise price or appreciation
base per share of Common Stock less than 100% of the fair
market value of a share of Common Stock on the date of
grant;
(v) permit an option or unrelated stock appreciation right 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 Plan beyond the period set forth in
Section 3.13.
(b) With the consent of the grantee and subject to the terms and
conditions of the Plan (including Section 3.1(a)), the Committee may amend
outstanding Plan agreements with such grantee, including, without limitation,
any amendment that would (i) accelerate the time or times at which an award may
vest or be exercised, or (ii) extend the scheduled expiration date of the award.
(c) Notwithstanding anything contained herein to the contrary, the
Board retains the authority to amend the provisions of Section 2.1(b), provided
that such amendments are not made more than once every six months other than (i)
to comply with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, or (ii) as otherwise provided in
Section 3.5 hereof.
SECTION 3.2 RESTRICTIONS.
(a) If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the acquisition,
issuance or purchase of shares or other rights hereunder or the taking of any
other action hereunder (each such action being hereinafter referred to as a
"Plan Action"), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained to the full
satisfaction of the Committee. Without limiting the generality of the foregoing,
in the event that (i) the Committee shall be entitled under the Plan to make any
payment in cash, Common Stock or both, and (ii) the Committee shall determine
that Consent is necessary or desirable as a condition of, or in connection with,
payment in any one or more of such forms, then the Committee shall be entitled
to determine not to make any payment whatsoever until such Consent shall have
been obtained in the manner aforesaid.
(b) The term "Consent", as used herein with respect to any Plan Action,
means (i) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or other self-regulatory
-8-
<PAGE> 33
organization or under any federal, state or local law, rule or regulation, (ii)
the expiration, elimination or satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (iii)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(iv) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any of its
Affiliates.
SECTION 3.3 NONTRANSFERABILITY. No option or stock appreciation right
granted to any grantee under the Plan or under any Plan agreement shall be
assignable or transferable by the grantee other than by will or by the laws of
descent and distribution. During the lifetime of the grantee, all rights with
respect to any option or stock appreciation right granted to the grantee under
the Plan or under any Plan agreement shall be exercisable only by the grantee.
SECTION 3.4 WITHHOLDING TAXES.
(a) Whenever under the Plan shares of Common Stock are to be delivered
upon exercise of an option or stock appreciation right or upon the lapse of
restrictions on restricted stock awards, the Committee shall be entitled to
require as a condition of delivery that the grantee remit an amount sufficient
to satisfy all federal, state and other governmental withholding tax
requirements related thereto. Whenever cash is to be paid under the Plan
(whether upon the exercise of a stock appreciation right or otherwise), the
Company shall be entitled as a condition of its payment to deduct therefrom, or
from any salary or other payments due to the grantee, an amount sufficient to
satisfy all federal, state and other governmental withholding tax requirements
related thereto or to the delivery of any shares of Common Stock under the Plan.
(b) The Committee may, in its sole discretion, permit a grantee to
satisfy, in whole or in part, the foregoing withholding requirements by delivery
of unrestricted shares of Common Stock owned by the grantee for at least six
months (or such shorter or longer period as the Committee may approve or
require) having a fair market value (determined as of the date of such delivery
by the grantee) equal to all or part of the amount to be so withheld. Without
limiting the generality of the foregoing: (i) the Committee may require, as a
condition of accepting any such delivery of shares of Common Stock, that the
grantee furnish an opinion of counsel acceptable to the Company to the effect
that such delivery would not result in the grantee incurring any liability under
Section 16(b) of the Act; and (ii) the Committee may permit any such delivery to
be made by withholding shares of Common Stock from the shares otherwise issuable
pursuant to the exercise of the award(s) giving rise to the withholding tax
obligation (in which event the date of delivery shall be deemed to be the date
the award(s) were exercised).
SECTION 3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If and to the
extent specified by the Committee, the number of shares of Common Stock which
may be issued pursuant to options under the Plan, the number of shares of Common
Stock subject to options, unrelated stock appreciation rights and restricted
stock awards theretofore granted under the Plan, the option exercise price and
appreciation base of options and stock appreciation rights theretofore granted
under the Plan, and all numerical limitations and specifications set forth in
the Plan with respect to the award of options, unrelated stock appreciation
rights and restricted stock awards, may be appropriately adjusted (as the
Committee may determine) for any increase or decrease in the number of issued
shares of Common Stock resulting from the subdivision or combination of shares
of Common Stock or other capital adjustments, or the payment of a stock dividend
after the effective date of the Plan, or other increase or decrease in such
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that any options to purchase Common Stock, unrelated stock
appreciation rights or restricted stock awards covering fractional shares of
Common Stock resulting from any such adjustment shall be eliminated, and
provided further, that each incentive stock option granted under the Plan shall
not be adjusted in a manner that causes such option to fail to continue to
qualify as an "incentive stock option" within the meaning of Code section 422.
Adjustments under this Section 3.5 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
-9-
<PAGE> 34
SECTION 3.6 RIGHT OF DISCHARGE RESERVED. Nothing in the Plan or in any
Plan agreement shall confer upon any officer, director, employee or other person
the right to continue in the employment or service of the Company or any
Affiliate or affect any right which the Company or any Affiliate may have to
terminate the employment or service of such officer, director, employee or other
person.
SECTION 3.7 NO RIGHTS AS A STOCKHOLDER. No grantee or other person
exercising an option or stock appreciation right shall have any of the rights of
a stockholder of the Company with respect to shares subject to an option or
shares deliverable upon exercise of a stock appreciation right until the
issuance of a stock certificate to the grantee or such other person for such
shares. Except as otherwise provided in Section 3.5, no adjustment shall be made
for dividends, distributions or other rights (whether ordinary or extraordinary,
and whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued. In the case of a grantee of
a restricted stock award which has not yet vested, the grantee shall have the
rights of a stockholder of the Company if and only to the extent provided in the
applicable Plan agreement.
SECTION 3.8 NATURE OF PAYMENTS.
(a) Any and all grants of options, stock appreciation rights or
restricted stock awards and payments of cash or issuances of shares of Common
Stock hereunder shall be granted, issued, delivered or paid, as the case may be,
in consideration of services performed for the Company or for its Affiliates by
the grantee.
(b) All such grants, issuances and payments shall constitute a special
incentive payment to the grantee and shall not, unless otherwise determined by
the Committee, be taken into account in computing the amount of salary or
compensation of the grantee for the purposes of determining any pension,
retirement, death or other benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate, or (ii) any
agreement between the Company or any Affiliate, on the one hand, and the grantee
on the other hand.
(c) By accepting an award under the Plan, the grantee shall thereby be
understood to have waived any claim to continued exercise or vesting of an award
or to damages or severance entitlement related to non-continuation of the award
beyond the period provided herein or in the applicable Plan agreement,
notwithstanding any contrary provision in any written contract with the grantee,
whether any such contract is executed before or after the date of grant of the
award.
SECTION 3.9 NON-UNIFORM DETERMINATIONS. The Committee's determinations
under the Plan need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, awards under the Plan (whether
or not such persons are similarly situated). Without limiting the generality of
the foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, (c) the exercise by
the Committee of its discretion in respect of the exercise of stock appreciation
rights pursuant to the terms of the Plan, and (d) the treatment of leaves of
absence pursuant to Section 2.7(c).
SECTION 3.10 OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan
shall be deemed in any way to limit or restrict the Company, any Affiliate or
the Committee from making any award or payment to any person under any other
plan, arrangement or understanding, whether now existing or hereafter in effect.
SECTION 3.11 REORGANIZATION EVENTS.
(a) In the event that the Company is merged or consolidated with
another corporation and, whether or not the Company shall be the surviving
corporation, there shall be any change in the shares of Common Stock by reason
of such merger or consolidation, or in the event that all or substantially all
of the assets of the Company are acquired by another person, or in the event of
a reorganization or liquidation of the Company (each such event being
hereinafter referred to as a "Reorganization Event") or in the event that the
Board shall propose that the Company enter into a Reorganization Event, then the
Committee may, in its discretion, by written notice to
-10-
<PAGE> 35
a grantee, provide that the grantee's options and stock appreciation rights will
be terminated unless exercised within 30 days (or such longer period as the
Committee shall determine in its sole discretion) after the date of such notice;
provided, however, that if the Committee takes such action the Committee shall
also accelerate the dates upon which all outstanding options and stock
appreciation rights of such grantee shall be exercisable. The Committee also
may, in its discretion, by written notice to a grantee, provide that the
restrictions on the grantee's restricted stock awards may lapse in the event of
a Reorganization Event upon such terms and conditions as the Committee may
determine.
(b) Whenever deemed appropriate by the Committee, the actions referred
to in Section 3.11(a) may be made conditional upon the consummation of the
applicable Reorganization Event.
SECTION 3.12 SECTION HEADINGS. The section headings contained herein
are for convenience of reference only and are not intended to define, limit or
otherwise affect the meaning of any of the terms or provisions hereof.
SECTION 3.13 EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan shall be deemed adopted upon the approval thereof by the
Board and shall become effective at such time as the Board shall determine;
provided that, notwithstanding any other provision of the Plan to the contrary,
no award made under the Plan shall be exercisable unless the Plan is approved,
directly or indirectly, by (i) the express consent of stockholders holding at
least a majority of the Company's voting stock voting in person or by proxy at a
duly held stockholders' meeting, or (ii) the unanimous written consent of the
stockholders of the Company, within 12 months before or after the date the Plan
is adopted.
(b) The Plan shall terminate 10 years after the earlier of (i) the date
on which it becomes effective, and (ii) the date on which it is approved by the
stockholders of the Company, and no awards shall be made under the Plan after
such termination date. Notwithstanding the foregoing, all awards made under the
Plan prior to such termination date shall remain in effect until such awards
have been satisfied or terminated in accordance with the terms and provisions of
the Plan and the applicable Plan agreement.
SECTION 3.14 GOVERNING LAW. The Plan shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to the conflicts of laws principles thereof.
-11-
<PAGE> 36
- --------------------------------------------------------------------------------
TRACTOR SUPPLY COMPANY
P ANNUAL MEETING OF STOCKHOLDERS
R
O PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
Y The undersigned hereby appoints Calvin B. Massmann and David
C. Lewis 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 27, 2000 and at any adjournment
thereof.
------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
------------
- --------------------------------------------------------------------------------
<PAGE> 37
- --------------------------------------------------------------------------------
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 AND 3. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ITEMS 1, 2 AND 3.
1. Election of two Class III Directors for a three year term ending at the
2003 Annual Meeting of Stockholders.
NOMINEES FOR CLASS III DIRECTORS:
Joseph H. Scarlett, Jr. and S. P. Braud
FOR WITHHOLD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
----------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Approval of the 2000 Stock Incentive Plan [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of the reappointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as independent
certified public accountants for the fiscal
year ending December 30, 2000
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_______________
Signature:________________________________ Date_______________
- --------------------------------------------------------------------------------
