| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On February 26, 2021, Dan “Mac” Chandler, III, age 53, was appointed as the President and Chief Executive Officer of PS Business Parks, Inc., a California company (the “Company”), effective April 5, 2021. John W. Petersen will continue to serve as the Company’s interim President and Chief Executive Officer until April 5, 2021, when he will continue serving as the Company’s Executive Vice President and Chief Operating Officer.
Mr. Chandler will join the Company from Regency Centers Corporation (NASDAQ:REG) (“Regency”), a publicly traded real estate investment trust that acquires, develops, owns, and operates open-air shopping centers in the United States, where he served as Executive Vice President and Chief Investment Officer since August 2019, Executive Vice President of Investments since 2017, Executive Vice President of Development since January 2016, and in various other leadership roles during his nearly 22-year career at Regency and Pacific Retail Trust (prior to its merger with Regency). Mr. Chandler holds a Master in Business Administration, a Master of Real Estate Development, and a Bachelor of Science in Urban Planning from the University of Southern California.
In connection with Mr. Chandler’s appointment, the Company provided Mr. Chandler with an offer letter (the “Offer Letter”), which provides that Mr. Chandler will be paid an annual base salary of $600,000, to be increased to $650,000 effective January 1, 2023. The Offer Letter further provides that Mr. Chandler will be eligible to receive a target annual cash incentive award equal to 100% of his base salary; provided, however, that in 2021, his target annual cash incentive award will be guaranteed at no less than target and will not be prorated. Mr. Chandler will also be entitled, beginning in the 2022 performance year, to a target annual equity award no less than the share-equivalent number of restricted stock units (“RSUs”) equal to $2.6 million. These RSUs will vest in five equal installments, with the first installment vesting on the grant date and annually thereafter, subject to continued employment. Mr. Chandler will receive dividend-equivalent rights on these RSUs.
In addition, upon his start date or promptly thereafter, Mr. Chandler will receive (i) a one-time RSU award (“Sign-On Award”) having a value on the grant date equal to $3.325 million, and (ii) a retention RSU award having a value on the grant date equal to $2.6 million. These RSUs will vest ratably over five years subject to continued employment. Mr. Chandler will receive cash dividends on these RSUs.
In the event of a Change of Control (as such term is defined in the Company’s 2012 Equity and Performance-Based Incentive Compensation Plan (the “2012 Plan”)), any unvested equity awards on the date of separation will vest in accordance with the terms of the 2012 Plan, including the double-trigger requirement in the event the awards are assumed.
Mr. Chandler’s employment is at will and he may be terminated with or without cause at any time. Pursuant to the Offer Letter, if Mr. Chandler is terminated without cause or if he terminates his employment for “good reason” (as defined below) (i) prior to the second anniversary of his start date, he will receive a lump sum cash payment equal to $1.2 million, and (ii) at any time during his term of employment, any portion of the Sign-On Award that remains unvested will vest immediately upon the date of separation from the Company. Alternatively, Mr. Chandler may choose to participate in any severance program adopted by the Company.
For purposes of the Offer Letter, “good reason” includes, in summary, a termination in the event the Company: (i) breaches its obligations to pay any salary, benefit, or bonus due or otherwise materially breaches a material term of the Offer Letter or other material agreement with Mr. Chandler; (ii) diminishes Mr. Chandler’s title or assigns to him any duties inconsistent his position with the Company or adversely alters the nature or status of his responsibilities, authority, or the conditions of his employment (or requires him to report to any person other than the Board of Directors); (iii) reduces Mr. Chandler’s salary and/or annual target bonus opportunity; or (iv) requires Mr. Chandler’s employment to be based anywhere other than the Company’s principal executive offices in Glendale, California, without his consent.
Upon commencement of employment, Mr. Chandler will be entitled to 12 years of service credit to applied towards meeting the eligibility requirements under any Company retirement plan. Mr. Chandler will also be entitled to participate in benefit programs generally available to executive officers of the Company, including health insurance, retirement, and other benefits. The Company will reimburse Mr. Chandler for the cost of medical and dental coverage pursuant to COBRA for the period between his start date and the date upon which he becomes eligible to participate in the Company’s medical and dental plans.
