Item
5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain
Officers.
On
November 29, 2007, Advance Auto Parts, Inc. (“Company”) announced that its Board
of Directors (“Board”) had appointed Darren R. Jackson as the Company’s
President and Chief Executive Officer, effective January 7, 2008,
and that John
C. Brouillard, who had been serving as the Company’s Interim Chair, President
and Chief Executive Officer would become the non-executive Chair
of the Board of
Directors. As Chair, Mr. Brouillard will preside over the meetings of
the non-management and independent directors.
Mr.
Jackson will continue to serve as a member of the Board; however,
effective
January 7, 2008, he is ineligible to serve as a member of the Board’s
independent Audit Committee. The Board, after consultation with and
upon the recommendation of the Nominating and Corporate Governance
Committee,
has determined that, effective January 7, 2008, Mr. Brouillard
meets the
independence, experience and other qualification requirements of
the New York
Stock Exchange Listing Standards, Section 10A(m)(3) of the Securities
Exchange
Act of 1934, and the rules and regulations of the Securities and
Exchange
Commission, and appointed him to serve as the third member of the
Board’s Audit
Committee. Mr. Brouillard will serve on the Audit Committee with
Carlos A. Saladrigas and Nicholas J. LaHowchic.
Effective
January 7, 2008, the Company and Mr. Jackson have entered into
an employment
agreement with an initial three-year term, which will be automatically
renewable
for additional one-year terms unless either party provides notice
of non-renewal
at least 90 days prior to the end of the then effective term. Mr.
Jackson’s initial base salary will be $800,000 per year. Commencing
with the Company’s 2008 fiscal year, he will be eligible for an annual
performance-based cash bonus with a target of 1.5 times his then
annual base
salary, the metrics of which will be determined consistent with
the metrics
applied to other senior officers. In addition, the Company will pay
Mr. Jackson a one-time payment equal to the bonus for 2007 he would
have earned
under his former employer’s executive bonus plan up to a maximum of $975,000
(subject to a minimum of $650,000) to be payable at the time that
the former
employer’s bonuses for 2007 are paid, but in any event by June 30,
2008. Mr. Jackson will be eligible to participate in all of the
Company’s applicable benefit plans and programs pursuant to the terms of
such
programs.
Effective
January 7, 2008, Mr. Jackson will also receive equity grants under
the Company’s
2004 Long-Term Incentive Plan (“2004 LTIP”) consisting of (a) 110,000 shares of
restricted stock which will cliff vest on the third anniversary
of the effective
date of the grant and (b) 225,000 stock appreciation rights
(“SARs”). One fourth of the SARs will be vested immediately with a
one-year holding period before they may be exercised, and the remaining
three
fourths of the SARs will vest equally on the first, second and
third
anniversaries of the grant date. In the event of death or
“Disability” (as defined), the grants of restricted stock and SARs will vest
to
the extent they have not already vested. The base value of the stock
appreciation rights to be awarded to Mr. Jackson will be the closing
price of
the Company’s common stock on January 7, 2008. The equity award
replaces the equity rights Mr. Jackson forfeited upon the termination
of his
employment with his former employer. In addition, as provided under
the Company’s 2004 LTIP, the Compensation Committee has agreed to establish
a
pool of restricted stock units with a value on
January
7, 2008, of $3,000,000 to be used, at Mr. Jackson’s discretion consistent with
the terms of the 2004 LTIP, to reward Company employees who would
not otherwise
participate in equity awards for extraordinary service to customers
and the
Company. Mr. Jackson voluntarily waived receipt of an additional
grant of equity in order to create the pool of restricted stock
units for
employee awards described in the previous sentence.
If
the Company terminates Mr. Jackson’s employment without “Cause” (as defined) or
if Mr. Jackson terminates his employment for “Good Reason” (as defined) (other
than following a Change of Control), he will be entitled to severance
in an
amount equal to one year of his base salary at the rate then in
effect, plus an
amount equal to his target bonus for such year. In addition, the
Company will pay his COBRA premium for continuation of health coverage
plus
provide certain outplacement services, all subject to Mr. Jackson’s signing a
general release and complying with the non-competition and non-solicitation
agreements described below. In addition, Mr. Jackson’s equity rights
will be governed by the terms of the Company’s equity programs applicable in
such circumstances.
If
within twelve months after a “Change of Control”
(as defined), the Company terminates Mr. Jackson’s employment without Cause or
Mr. Jackson terminates his employment for Good Reason, he will
be entitled to a
severance payment equal to two times his base salary at the rate then in
effect, plus two times his target bonus, together with the other
benefits and
equity rights as specified in the preceding paragraph. In the event
of a Change in Control, Mr. Jackson will also be entitled to a
tax gross-up
payment intended to make him whole for excise taxes that may be
imposed on the
Change in Control payments.
Mr.
Jackson will be subject to standard confidentiality and non-disparagement
agreements during and following his employment as well as customary
non-competition and non-solicitation covenants which will continue
following the
termination of his employment.
The
above
description of the employment agreement is not complete and is
qualified in its
entirety by the full text of the employment agreement, which is
filed as Exhibit
10.32 to this Current Report on Form 8-K.
Item
9.01 Financial Statements
and Exhibits.