| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On August 20, 2023, the Board of Directors (the “Board”) of Advance Auto Parts, Inc. (the “Company”) appointed Shane M. O’Kelly, 54, to the position of President, Chief Executive Officer and as a director of the Company, commencing September 11, 2023.
Mr. O’Kelly joins the Company from HD Supply, a national distributor and provider of maintenance, repair and operations (“MRO”) products and a wholly owned subsidiary of The Home Depot, Inc. (the “Home Depot”), a leading home improvement retailer, where he has served as Chief Executive Officer since December 2020. From March 2018 through December 2020, Mr. O’Kelly served as Chief Executive Officer of Interline Brands, Inc., a leading national distributor and marketer of MRO products that was merged into Home Depot in December 2020. He previously served as Chief Executive Officer of PetroChoice Holdings, Inc., a leading national lubricant distributor, from June 2011 to March 2018, and as Chief Executive Officer of AH Harris & Sons, Inc., a specialty construction supply distributor, from January 2008 to June 2011. Mr. O’Kelly formerly served as a Captain in the U.S. Army.
On August 21, 2023, the Company and Mr. O’Kelly entered into an Employment Agreement, commencing September 11, 2023 (the “Employment Agreement”), pursuant to which Mr. O’Kelly will be entitled to an annual base salary of $1,125,000 and, beginning in 2024, will be eligible to participate in the Company’s annual incentive bonus plan with a bonus target of 150% of base salary (the “Target Bonus Amount”) and a maximum bonus opportunity of 200% of the Target Bonus Amount, based on the Company’s performance as measured against such corporate and individual performance goals and criteria as may be established by the Compensation Committee of the Board (the “Committee”) from time to time. He will also receive the following one-time cash signing bonuses: (1) $1,000,000, payable as soon as practicable following September 11, 2023, (2) $500,000 payable on or prior to March 15, 2024 and (3) $500,000 payable upon his relocation to Raleigh, North Carolina not later than September 15, 2024, each of which are subject to repayment in part or full under certain separation circumstances within the first and second anniversaries of the respective bonus payment dates as further described in the Employment Agreement. Until his relocation is complete, Mr. O’Kelly will be entitled to receive certain lodging expenses and commercial air travel commuting expenses as described in the Employment Agreement.
Mr. O’Kelly is eligible to receive annual equity grants under the Company’s 2023 Omnibus Incentive Compensation Plan with a grant type mix determined by the Committee consistent with that used for other executives of the Company. Under the Employment Agreement, his annual equity award for 2024 will have a grant-date fair value of $6,500,000. In addition, in connection with his appointment, Mr. O’Kelly will receive a sign-on equity award consisting of 78,982 restricted stock units and 150,000 stock options, each vesting ratably over a three-year term subject to continued employment with the Company through such dates of vesting.
Upon termination of employment by Mr. O’Kelly for Good Reason or by the Company without Due Cause (and not in connection with a Change in Control) (as each such terms are defined in the Employment Agreement), Mr. O’Kelly will be entitled to: (1) one and a half times the sum of (a) his base salary and (b) the three-year average of his annual bonus payments (or, if termination occurs before he has received an annual bonus payment, his Target Bonus Amount), (2) the pro rata portion of any annual cash bonus that would have been payable to him, provided that the criteria for such bonus other than his continued employment have been satisfied, (3) outplacement assistance, at a cost to the Company not to exceed $12,000, for a period of up to 12 months, (4) continuing medical, dental and vision benefits and premiums for up to 18 months post-termination, (5) if not already paid, the second of the three sign-on cash bonuses enumerated above and (6) if not fully vested, acceleration of the unvested sign-on restricted stock units and stock options. Upon termination of employment other than death, Disability (as such term is defined in the Employment Agreement) or Due Cause, or upon resignation for Good Reason, within three months prior to or 12 months following a Change in Control, Mr. O’Kelly will receive the same such benefits except that the multiplier for the base salary and bonus payments shall be two times such amounts. Any severance benefits paid would be subject to Mr. O’Kelly’s execution (without revocation) of a general release of claims against the Company.
