Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Harry A. Lawton III Employment Agreement
On December 4, 2019, Harry A. Lawton III and Tractor Supply Company (the
"Company") entered into an employment agreement (the "Employment Agreement"),
which sets forth the obligations of the Company to Mr. Lawton and certain
rights, responsibilities and duties of Mr. Lawton as President and Chief
Executive Officer of the Company. The Employment Agreement has a term of three
(3) years commencing on January 13, 2020 (the "Effective Date"). Pursuant to the
Employment Agreement, Mr. Lawton will be entitled to an initial base salary of
$1,125,000 per year ("Minimum Base Salary"), be eligible to participate in such
bonus plans as the Company's Board of Directors (the "Board") may determine
appropriate for executive officers of the Company (Mr. Lawton's annual target
bonus shall be no less than 125% of the Minimum Base Salary) and be eligible to
participate in such equity incentive plans as the Company's Compensation
Committee may determine appropriate for executive officers of the Company
beginning in 2021. At the first Board meeting following the Effective Date, Mr.
Lawton will receive the following equity awards: (i) a restricted stock unit
award with a fair value, as determined by the Board, of $1,500,000 (such
restricted stock unit award shall vest on the first anniversary of the grant
date provided that Mr. Lawton has been continuously employed by the Company
through such date); (ii) performance share units having a fair value, as
determined by the Board, of $2,500,000 (the performance targets for the
performance share units shall be the same as the targets included in the
Company's performance share unit awards granted in 2019 and shall have the same
performance period as those awards); (iii) restricted stock units, having a fair
value, as determined by the Board, of $1,925,000; (iv) performance share units
having a fair value, as determined by the Board, of $1,925,000; and (v) stock
options having a fair value, as determined by the Board, of $1,650,000. Mr.
Lawton will be paid a signing bonus in cash in the amount of $1,000,000 (the
"Signing Bonus") payable within thirty (30) days of the Effective Date. The
Signing Bonus will vest on the second anniversary of the Effective Date, and Mr.
Lawton shall be required to repay the full amount of the Signing Bonus if he
voluntarily terminates his employment with the Company on or before the second
anniversary of the Effective Date. The Company will reimburse Mr. Lawton for
reasonable relocation costs and temporary housing costs for a period not to
exceed eight (8) months in accordance with Company policy.
In the event that Mr. Lawton's employment is terminated by the Company without
cause (as defined in the Employment Agreement) or by Mr. Lawton for good reason
(as defined in the Employment Agreement), and if Mr. Lawton signs a customary
release of all claims in favor of the Company, Mr. Lawton would be entitled to
payment of his base salary for a period of two (2) years, an amount equal to two
(2) times his target cash bonus for such year multiplied by the average of the
bonus percentage applied to other executive officers' target cash bonuses for
the prior three (3) fiscal years pursuant to any cash bonus plan maintained by
the Company in respect of the fiscal years preceding the date of termination and
a lump sum payment equal to the estimated cost of procuring for Mr. Lawton and
his dependents: life, disability, accident and health insurance benefits for a
period of two (2) years following the date of termination. The Company's
obligation to make such payments will be reduced dollar-for-dollar by the amount
of compensation earned by Mr. Lawton from other employment during the period the
Company is required to make any severance payments. In the event of termination
due to death or disability, Mr. Lawton would be entitled to base salary and
benefits earned through the date of termination and an amount equal to the
pro-rata portion of the actual cash bonus earned for the year in which the date
of termination occurs. In the event of a termination by the Company for cause or
by Mr. Lawton without good reason, Mr. Lawton would receive only base salary and
benefits earned through the date of termination.
The Employment Agreement also provides that upon termination due to death or
disability, Mr. Lawton will be fully vested in all then-outstanding stock
options and all then-outstanding restricted stock units of the Company and all
such options shall remain exercisable until the earlier of (i) the second
anniversary of the date of termination and (ii) the otherwise applicable normal
expiration date of such option. In the event of termination of Mr. Lawton's
employment by the Company without cause or by Mr. Lawton for good reason, the
vesting of all of the outstanding stock options and restricted shares of stock
and restricted stock units held by Mr. Lawton scheduled to vest in the twelve
(12) month period following the date of termination will be accelerated and any
such options shall remain exercisable until the earlier of (i) the second
anniversary of the date of termination and (ii) the otherwise applicable normal
expiration date of such option. The vesting of any performance share units or
performance-based restricted stock or performance-based restricted stock unit
awards shall vest according to the terms of the applicable award agreement in
the case of Mr. Lawton's termination due to death or disability or as a result
of termination without cause by the Company or by Mr. Lawton for good reason.
The Employment Agreement also contains covenants regarding the confidentiality
of the Company's trade secrets and non-solicitation of Company employees and
non-competition with the Company for a period of two (2) years following any
termination of his employment.
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The foregoing description of the Employment Agreement is qualified in its
entirety by reference to the Employment Agreement, a copy of which is attached
as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by
reference.
Harry A. Lawton III Appointment to Board of Directors
On or before January 13, 2020, the Company intends to increase the size of the
Board from nine to ten, and appoint Mr. Lawton as a member of the Board with a
term commencing on January 13, 2020.
Harry A. Lawton III Change in Control Agreement
On December 4, 2019, Mr. Lawton and the Company entered into a change in control
agreement effective as of January 13, 2020 (the "Change in Control Agreement").
Pursuant to the Change in Control Agreement, if Mr. Lawton's employment is
terminated during the term of the agreement following a change in control of the
Company other than (i) by the Company for cause, (ii) by reason of death,
disability or retirement or (iii) by Mr. Lawton without good reason (as such
terms are defined in the agreement), Mr. Lawton will receive: (a) an amount
equal to two (2) times Mr. Lawton's (x) base salary as in effect immediately
prior to the date of termination or, if higher, in effect immediately prior to
the first occurrence of an event or circumstance constituting good reason (as
defined in the Change in Control Agreement), and (y) Mr. Lawton's target annual
cash bonus in the fiscal year of (1) the date of termination or, (2) if higher,
in respect of the fiscal year preceding the change in control (the higher of (1)
or (2) being the "Measurement Period") pursuant to any cash bonus plan
maintained by the Company in respect of the fiscal years preceding the date of
termination or change in control, multiplied by the average of the bonus
percentage applied to the other executive officers' target cash bonus for the
three (3) fiscal years preceding the Measurement Period; (b) an amount equal to
the estimated cost of procuring for Mr. Lawton and his dependents life,
disability, accident and health insurance benefits for a period of two (2) years
following the date of termination payable in a lump sum, in cash; (c)
outplacement services capped at $40,000; (d) an amount equal to the average of
Mr. Lawton's target annual cash bonus pursuant to any cash bonus plan maintained
by the Company in the fiscal year of the date of termination, multiplied by the
average of the bonus percentage applied to the other executive officers' target
cash bonus for the three (3) most recent fiscal years which occurred immediately
prior to the date of termination, multiplied by a fraction, the numerator of
which is the number of days in the then-current fiscal year through and
including the date of termination, and the denominator of which is 365; (e) the
stock options outstanding at the date of termination will become fully vested
and continue to be exercisable until the earlier of (i) the second anniversary
of the date of termination or (ii) the otherwise applicable expiration date of
the term of such option, or, at the Company's election, may be canceled upon
lump sum payment of the cash equivalent of the excess of the fair market value
of the related options; and (f) all restricted stock units and other
equity-based awards outstanding at the date of termination will become fully
vested (including restricted stock units of the Company and, except as otherwise
provided in the applicable award agreement, any awards subject to
performance-vesting conditions shall be settled assuming the "target" level of
performance shall have been achieved) or, at the Company's election may be
canceled upon lump sum payment of the cash equivalent of the fair market value
. . .
Item 8.01 Other Events.
On December 5, 2019, the Company issued a press release announcing the
appointment of Mr. Lawton as President and Chief Executive Officer and the
transition of Mr. Sandfort from Chief Executive Officer. A copy of the press
release is furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
10.1 Employment Agreement, dated December 4, 2019, by and between Tractor Supply
Company and Harry A. Lawton III.
10.2 Change in Control Agreement, dated December 4, 2019, by and between Tractor
Supply Company and Harry A. Lawton III.
99.1 Press Release of Tractor Supply Company dated December 5, 2019.
104 The cover page from this Current Report on Form 8-K, formatted in Inline
XBRL.
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