Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
(a)
Resignation of Director
On August 13, 2018, Advance Auto Parts, Inc. (the “Company”), announced
that Reuben E. Slone, who has served as an independent member of the
Company’s Board of Directors (the “Board”) since March 2016, has been
named to serve as the Company’s Executive Vice President, Supply Chain,
effective October 3, 2018. In conjunction with that appointment, Mr.
Slone tendered his resignation as a member of the Audit Committee of the
Board effective as of August 7, 2018, and as a member of the Board,
effective October 3, 2018. As a result, the Company’s Board has made a
determination that Mr. Slone should no longer be deemed independent and
appointed John F. Ferraro, an independent member of the Company’s Board,
to serve as a member of the Audit Committee, effective August 7, 2018.
Mr. Slone’s resignation is not the result of any disagreement regarding
the Company’s operations, financial reporting or accounting policies,
procedures, estimates or judgments.
(c)
Appointment of Principal Financial Officer
On August 13, 2018, the Company announced that Jeffrey W. Shepherd has
been appointed by the Company’s Board to serve as the Company’s
Executive Vice President, Chief Financial Officer, Controller and Chief
Accounting Officer (Principal Accounting Officer), effective August 12,
2018. Mr. Shepherd, 46, has served as the Company’s Senior Vice
President, Controller and Chief Accounting Officer since March 2017 and
assumed the additional role of Interim Chief Financial Officer on April
13, 2018.
Employment Agreement
In connection with his appointment, Mr. Shepherd and the Company have
agreed to a compensation arrangement, which has been approved by the
Compensation Committee of the Board (“Committee”). Pursuant to the
compensation arrangement, Mr. Shepherd’s annual base salary will be
increased to $525,000, and he is eligible to participate in the
Company's annual incentive bonus plan with a bonus target of 85 percent
of base salary (“Target Bonus Amount”) and a maximum bonus opportunity
of 200 percent of the Target Bonus Amount, based on the Company’s
performance as measured against the same bonus criteria applied to other
senior executives of the Company.
Mr. Shepherd is eligible to receive annual equity grants under the
Company's 2014 Long-Term Incentive Plan (the “2014 LTIP”) consistent
with the Company’s compensation program for other executives of the
Company. The grant-date fair value of Mr. Shepherd’s annual equity grant
for the 2019-2021 performance cycle will be $600,000, with a grant-type
mix determined by the Committee and will be granted at the same time
that annual grants for the same cycle are made to other executives.
In addition, Mr. Shepherd and the Company expect to enter into an
employment agreement effective August 12, 2018, which provides for an
initial one-year employment term with automatic renewals on each
anniversary date for successive one-year periods unless either party
provides the other party with 90 days’ prior notice of non-renewal.
Upon termination without Cause or resignation for Good Reason (not in
connection with a change in control) (each as defined in the employment
agreement), Mr. Shepherd would be entitled to:
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Severance equal to one times the sum of (a) his base salary and (b)
the 3-year average actual bonus for the three completed fiscal years
immediately prior to the date of his termination, or shorter period
if Mr. Shepherd does not have 3-year employment history (or, if he
has been employed by the Company for fewer than three years, an
amount equal to the average value of the annual bonuses that Mr.
Shepherd has received during the period of his employment);
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Continued medical, dental and vision benefits for 365 days
post-termination at the same cost as active employees;
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Outplacement assistance, at a cost to the Company not to exceed
$12,000, for a period of up to 12 months; and
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Equity awards treated as set forth in the 2014 LTIP and the
applicable award agreements.
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A notice of non-renewal provided by the Company to Mr. Shepherd will be
treated as a termination of Mr. Shepherd’s employment without Cause (as
defined in his employment agreement) as of the expiration of the
employment term. Upon termination without Cause or resignation for Good
Reason within 12 months after a Change in Control (as defined in his
employment agreement) of the Company, Mr. Shepherd would be entitled to
the same benefits as described in the immediately preceding paragraph,
except that his severance would be equal to two times the sum of his
base salary and target bonus. In addition, his employment agreement
provides for the reduction of Change in Control payments to the maximum
amount that could be paid to him without giving rise to the excise tax
imposed by Section 4999 of the Internal Revenue Code if a reduction
would provide him with a greater after tax benefit than if payments were
not reduced.
Any severance benefits paid would be subject to Mr. Shepherd’s execution
(without revocation) of a general release of claims against the Company.
Pursuant to the terms of his employment agreement, Mr. Shepherd is
subject to certain restrictive covenants, including the following, among
others: non-disclosure of confidential information; non-disparagement;
non-solicitation of customers, suppliers, employees, agents or
independent contractors, which runs for one year following his
termination of employment; and non-competition, which runs for one year
following his termination of employment
(d)
Election of New Director
On August 8, 2018, the Board of Advance Auto Parts, Inc. appointed Nigel
Travis to become an independent director of the Company, effective
August 9, 2018. Mr. Travis will serve as a director until the next
annual meeting of stockholders or until his successor is duly elected
and qualified. Mr. Travis’s compensation for his services as a
non-employee director will be consistent with the Company’s compensation
practices for non-employee directors described in the Company’s
Definitive Proxy Statement on Schedule 14A filed with the United States
Securities and Exchange Commission on April 18, 2018, under the caption
“Director Compensation.”
Mr. Travis, age 68, has been Executive Chairman of the Board for Dunkin’
Brands Group, Inc., a quick-service restaurant franchisor, since July
2018. Previously, he served as Chief Executive Officer of Dunkin’
Brands from January 2009 to July 2018, and added the responsibility as
Chairman of the Board in May 2013. Previously, Mr. Travis served in
executive leadership roles at various companies within the retail and
restaurant industries. He has served as a Director of Office Depot,
Inc. since March 2012.
In connection with the appointment of Mr. Travis as a director,
effective as of August 9, 2018, the size of Advance’s Board was
increased from 10 members to 11 members.