Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
Approval
of Revisions to Director Compensation Policy
On
January 11, 2021, the Board of Directors (the “Board”) of Innovative Industrial Properties, Inc. (the “Company”)
amended the Company’s director compensation policy as follows, with such changes retroactive to January 1, 2021: each non-employee
director receives an annual retainer of $75,000 in cash (except in the case of Gary Kreitzer, the Company’s Vice Chairman,
who receives an annual retainer of $150,000 in cash) and an annual retainer of $160,000 payable in restricted shares of common
stock under the Company’s 2016 Omnibus Incentive Plan (the “Incentive Plan”) (except in the case of Mr. Kreitzer,
who receives an annual retainer of $200,000 payable in restricted shares of common stock under the Incentive Plan), which vest
in their entirety one year from the date of grant. The audit committee chair continues to receive an additional annual retainer
of $10,000 in cash and any other committee chair continues to receive an additional annual retainer of $5,000 in cash. All non-employee
directors continue to be reimbursed for their costs and expenses in attending the Company’s Board meetings. The Company also
will grant $160,000 in restricted shares of common stock under the Incentive Plan to each non-employee director who is initially
elected or appointed to the Board on the date of such initial election or appointment, which vest in their entirety one year from
the date of grant. Any member of the Company’s Board who is also an employee of the Company continues to not receive additional
compensation for serving as a director.
Approval
of Form of Performance Share Unit Award Agreement
On
January 11, 2021, the Compensation Committee (the “Compensation Committee”) of the Board adopted a form of Performance
Share Unit Award Agreement (the “PSU Agreement”) under the Company’s Incentive Plan.
The
PSU Agreement provides for the issuance of target performance share units (“PSUs”). The ultimate value of the PSUs
depends on the Company’s total stockholder return (“TSR”) over a period commencing January 11, 2021 and
ending on December 31, 2023 (the “Performance Period”). At the end of the Performance Period, the PSUs vest and
are settled in shares of common stock (the “Award Shares”) at a rate depending on the Company’s TSR over the
Performance Period as compared to two different comparator groups, as certified by the Compensation Committee: i) 25
real estate companies; and ii) the companies in the FTSE NAREIT All Equity REIT Index. A recipient of PSUs may receive as few as zero Award
Shares or as many as 150% of the number of target PSUs in Award Shares, plus deemed dividends (as described below).
The
chart below sets forth the vesting schedule as a percentage of the target PSUs that applies at the end of the Performance Period.
However, the number of Award Shares that may be earned at vesting of the PSUs will be reduced as necessary so the total value at
the vesting date does not exceed 800% of the grant date PSU price. In addition, if the Company’s absolute TSR during the
Performance Period is negative, the payout of Award Shares will be capped at the target number of PSUs, notwithstanding the Company’s
outperformance of the comparator groups.
The Company’s TSR Ranking within the Two Comparator
Groups
|
|
PSU Payout
(as a % of Target)
|
|
At or above 80th percentile TSR
|
|
150%
|
|
Between the 80th percentile TSR and 55th percentile TSR
|
|
Determined by linear interpolation(1)
|
|
At the 55th percentile TSR
|
|
100%
|
|
Between the 25th percentile TSR and 55th percentile TSR
|
|
Determined by linear interpolation(2)
|
|
At or below the 25th percentile TSR
|
|
0%
|
|
|
(1)
|
Determined by linear interpolation between the comparator group’s 80th and 55th percentile
TSRs.
|
|
|
(2)
|
Determined by linear interpolation between the comparator group’s 25th and 55th percentile
TSRs.
|
No
dividends are paid to the recipient during the Performance Period. At the end of the Performance Period, if the Company’s
TSR is such that the recipient earns Award Shares, the recipient will receive additional shares of common stock relating to dividends
deemed to have been paid and reinvested on the Award Shares. The recipient of the Award Shares may not sell, transfer or otherwise
dispose of the Award Shares for a one-year period following the vesting date of the Award Shares.
The
terms of the PSU Agreement supersede any conflicting terms of any severance agreement or plan applicable to the recipient, including
each executive officer’s Change of Control and Severance Agreement with the Company and IIP Operating Partnership, LP, the
Company’s operating partnership subsidiary (the “Operating Partnership”).
The
PSU Agreement provides that upon the recipient’s (a) death; (b) “disability”; (c) termination of employment or
service by the Company without “cause” or by the recipient for “good reason”; or (d) “qualifying
retirement” (each a “Qualifying Event”) prior to a change of control of the Company, the PSUs will continue to
vest, except that if the PSUs were granted less than twelve months prior to the date of the Qualifying Event, then the potential
payout of Award Shares is prorated based on the number of months that the recipient was employed or provided service to the Company
since the date of grant through the date of the Qualifying Event, divided by twelve months. After a change of control, the PSUs
(as adjusted as a result of the change of control) continue to vest in full regardless of the date of grant, upon the occurrence
of a Qualifying Event.
For
any other termination of employment or service to the Company by the recipient other than a Qualifying Event, any unvested PSUs
are forfeited in their entirety.
Executive
Compensation Decisions
On
January 11, 2021, the Compensation Committee adjusted the annual base salaries of the Company’s executive officers for 2021,
determined the executive officers’ year-end 2020 cash bonuses and granted executive officers awards of restricted stock units
(“RSUs”), restricted shares of common stock and PSUs pursuant to the PSU Agreement. These salaries, bonuses and grants
of restricted stock, RSUs and PSUs are summarized in the following table:
|
Name and Position
|
|
2021 Base
Salary(1)
|
|
|
2020 Year-
End Cash
Bonus
|
|
|
RSU
Awards(2)
|
|
|
Restricted
Stock Awards(3)
|
|
|
Target
PSU
Awards
|
|
|
Alan Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Chairman
|
|
$
|
1,023,750
|
|
|
$
|
853,125
|
|
|
|
12,612
|
|
|
|
—
|
|
|
|
31,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Smithers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
840,000
|
|
|
|
420,000
|
|
|
|
6,654
|
|
|
|
—
|
|
|
|
21,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catherine Hastings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
308,500
|
|
|
|
246,750
|
|
|
|
2,607
|
|
|
|
—
|
|
|
|
8,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Wolfe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, General Counsel and Secretary
|
|
|
295,000
|
|
|
|
241,500
|
|
|
|
—
|
|
|
|
2,553
|
|
|
|
7,080
|
|
|
|
(1)
|
Adjustments to the executive officers’ base salaries are effective as of January 1, 2021.
|
|
|
(2)
|
The RSUs vest ratably on each of January 1, 2022, January 1, 2023 and January 1, 2024
for Messrs. Gold and Smithers and Ms. Hastings, provided that he or she continues to be an employee of the Company or a non-employee
member of the Board on each such date. The RSUs were issued to Messrs. Gold and Smithers and Ms. Hastings pursuant to a Restricted
Stock Unit Award Agreement (“RSU Agreement”) under the Company’s Incentive Plan.
|
|
|
(3)
|
The restricted stock award vests ratably on each of January 1, 2022, January 1, 2023
and January 1, 2024 for Mr. Wolfe, provided that he continues to be an employee of the Company or a non-employee member of the
Board on each such date. The restricted stock awards were issued to Mr. Wolfe pursuant to a Restricted Stock Award Agreement (“Restricted
Stock Award Agreement”) under the Company’s Incentive Plan.
|
Copies of the
Director Compensation Policy, RSU Agreement, Restricted Stock Award Agreement and PSU Agreement are filed as Exhibits 10.1, 10.2,
10.3 and 10.4, respectively, and are incorporated herein by reference. The foregoing descriptions of the Director Compensation
Policy, RSU Agreement, Restricted Stock Award Agreement and PSU Agreement are qualified in their entirety by reference to the full
texts of the Director Compensation Policy, RSU Agreement, Restricted Stock Award Agreement and PSU Agreement.