Exhibit 10.3

PS BUSINESS PARKS, INC.

2012 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN

FORM OF RESTRICTED SHARE UNIT AGREEMENT

THIS RESTRICTED SHARE UNIT AGREEMENT is entered into as of             , by and
between PS Business Parks, Inc. (the “Company”), and             , an employee
of the Company, a Subsidiary or a Service Provider (the “Grantee”).

Recitals:

WHEREAS, the PS Business Parks, Inc. 2012 Equity and Performance-Based Incentive
Compensation Plan (the “Plan”) has been duly approved by the Board of Companyees
of the Company and the shareholders of the Company;

WHEREAS, under the Plan the Company is authorized to issue, inter alia,
Restricted Share Units relating to shares of common stock of the Company, par
value $.01 per share (the “Shares”); and

WHEREAS, the Company desires to grant Restricted Share Units to the Grantee
under the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the mutual benefits hereinafter provided,
and each intending to be legally bound, the Company and the Grantee hereby agree
as follows:

 

1.   GRANT OF RESTRICTED SHARE UNITS.

The Company hereby grants to the Grantee             Restricted Share Units,
subject to the terms of this Restricted Share Unit Agreement and the Plan. The
Grant Date of the Restricted Share Units is             . All terms and
conditions of the Plan are hereby incorporated into this Agreement by reference
and shall be deemed to be part of this Agreement, without regard to whether such
terms and conditions are not otherwise set forth in this Agreement. To the
extent that any capitalized words used in this Agreement are not defined, they
shall have the definitions stated for them in the Plan. In the event that there
is any inconsistency between the provisions of this Agreement and the provisions
of the Plan, the provisions of the Plan shall govern.

 

2.   VESTING OF RESTRICTED SHARE UNITS.

2.1. Service Requirement.

Rights in respect of [            ]% of the number of Restricted Share Units
specified in Section 1 above shall vest on each of the [            ]
anniversary[ies] of the Grant Date, provided that the Grantee is in service on
the applicable vesting date. As used herein, “service” shall mean service to the
Company, a Subsidiary or the Partnership as an employee, Companyee, consultant,
service provider or independent contractor. For purposes of this Agreement,
termination of service would not be deemed to occur if the Grantee, after
terminating service in one capacity, continues to provide service to the
Company, any Subsidiary, the Partnership or any affiliate of the Company in
another capacity. Termination of service is sometimes referred to below as
termination of employment or other relationship with the Company. As used
herein, references to the “Company” shall be deemed to include its Subsidiaries
and affiliates, including the Partnership. The period during which the
Restricted Share Units have not vested and therefore are subject to a
substantial risk of forfeiture is referred to below as the Restricted Period.

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2.2. Restrictions on Transfer.

The Grantee may not sell, transfer, assign, pledge or otherwise encumber or
dispose of the Restricted Share Units.

2.3. Payment for Vested Restricted Share Units.

When a portion of the Restricted Share Units shall vest pursuant to Section 2.1,
the Company shall, upon payment by the Grantee of the aggregate par value of the
Shares represented by such Restricted Share Units, deliver to the Grantee a
certificate or electronic confirmation of ownership, as applicable, for the
number of Shares represented by the Restricted Share Units which have vested.

 

3.   TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.

Upon the termination of the Grantee’s employment or other relationship with the
Company other than by reason of death or permanent and total disability, any
Restricted Share Units held by the Grantee that have not vested shall terminate
immediately, and the Grantee shall forfeit any rights with respect to such
Restricted Share Units. If the Grantee’s employment or other relationship with
the Company is terminated because of his death, his legal guardian, or the
executor or administrator of the estate of the Grantee, or the person or persons
to whom rights under the Restricted Share Unit Agreement have passed by bequest
or inheritance, as the case may be, shall immediately be vested in all
Restricted Share Units that have not previously vested. If the Grantee’s
employment or other relationship with the Company is terminated because of the
Grantee’s permanent and total disability, the Grantee’s Restricted Share Units
shall continue to vest in accordance with the terms of this Agreement for a
period of one year thereafter. At the end of such one-year period, any
Restricted Share Units that have not vested shall terminate and shall be
forfeited.

 

4.   DIVIDEND AND VOTING RIGHTS.

The Grantee shall have none of the rights of a shareholder with respect to the
Restricted Share Units. The Grantee shall be entitled to receive, upon the
Company’s payment of a cash dividend on its outstanding Shares, a cash payment
for each Restricted Share Unit held as of the record date for such dividend
equal to the per-share dividend paid on the Shares.

 

5.   REQUIREMENTS OF LAW.

The Company shall not be required to deliver any Shares under this Restricted
Share Unit Agreement if the delivery of such Shares would constitute a violation
by the Grantee or by the Company of any provision of any law or regulation of
any governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the delivery of Shares hereunder, the
Restricted Share Units shall not vest in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company. Specifically in
connection with the Securities Act of 1933 (as now in effect or as hereafter
amended), unless a registration statement under such Act is in effect with
respect to the Shares, the Company shall not be required to deliver such Shares
unless the Company has received evidence satisfactory to it that the Grantee may
acquire such Shares pursuant to an exemption from registration under such Act.
Any determination in this connection by the Company shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended). The Company shall not be obligated to take any
affirmative action in order to cause the delivery of Shares pursuant thereto to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that the Restricted Share
Units shall not vest unless and until the Shares are registered or are subject
to an available exemption from registration, the vesting of the Restricted Share
Units (under circumstances in which the laws of such jurisdiction apply) shall
be deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.

 

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6.   WITHHOLDING OF TAXES.

The Company, the Partnership and any Subsidiary shall have the right to deduct
from payments of any kind otherwise due to the Grantee any federal, state, or
local taxes of any kind required by law to be withheld with respect to the
termination of the Restricted Period with respect to the Restricted Share Units.
At the termination of the Restricted Period, the Grantee shall pay to the
Company, the Partnership or the Subsidiary, as applicable, any amount that the
Company, the Partnership or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company, the Partnership or the Subsidiary, as applicable, which may be
withheld by the Company, the Partnership or the Subsidiary in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company, the Partnership or the Subsidiary to withhold
Shares otherwise deliverable or (ii) by delivering to the Company, the
Partnership or the Subsidiary Shares already owned by the Grantee. The Shares so
delivered or withheld shall have a fair market value equal to such withholding
obligations. The Fair Market Value of the Shares used to satisfy such
withholding obligation shall be determined by the Company, the Partnership or
the Subsidiary as of the date that the amount of tax to be withheld is to be
determined. A Grantee who has made an election pursuant to this Section 6 may
satisfy his or her withholding obligation only with Shares that are not subject
to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.

 

7.   PARACHUTE LIMITATIONS

Notwithstanding any other provision of this Agreement or of any other agreement,
contract, or understanding heretofore or hereafter entered into by the Grantee
and the Company, the Partnership or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section (the “Other Agreements”), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company (or the Partnership or any Subsidiary) for the
direct or indirect compensation of the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified
individual,” as defined in Section 280G(c) of the Code, the Restricted Share
Units and any right to receive any payment or other benefit under this Agreement
shall not become vested (i) to the extent that such right to payment or benefit,
taking into account all other rights, payments, or benefits to or for Grantee
under the Plan, all Other Agreements, and all Benefit Arrangements, would cause
any payment or benefit to the Grantee under this Agreement to be considered a
“parachute payment” within the meaning of Section 280G(b)(2) of the Code as then
in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a
Parachute Payment, the aggregate after-tax amounts received by the Grantee from
the Company under this Agreement, the Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, payment, or benefit under this Agreement, in conjunction with all
other rights, payments, or benefits to or for the Grantee under the Plan, any
Other Agreement or any Benefit Arrangement would cause the Grantee to be
considered to have received a Parachute Payment under this Agreement that would
have the effect of decreasing the after-tax amount received by the Grantee as
described in clause (ii) of the preceding sentence, then the Grantee shall have
the right, in the Grantee’s sole discretion, to designate those rights,
payments, or benefits under this Agreement, the Plan, any Other Agreements, and
any Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Grantee under this Agreement be deemed to
be a Parachute Payment.

 

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8.   DISCLAIMER OF RIGHTS.

No provision of this Agreement shall be construed to confer upon the Grantee the
right to be employed by the Company, the Partnership, any Subsidiary or any
affiliate, or to interfere in any way with the right and authority of the
Company, the Partnership, any Subsidiary or any affiliate either to increase or
decrease the compensation of the Grantee at any time, or to terminate any
employment or other relationship between the Grantee and the Company, the
Partnership, any Subsidiary, any Service Provider or any affiliate of any of the
foregoing.

 

9.   GOVERNING LAW.

This Agreement shall be governed by the laws of the State of California (but not
including the choice of law rules thereof).

IN WITNESS WHEREOF, the parties hereto have caused this Restricted Share Unit
Agreement to be duly executed as of the date first above written.

 

PS BUSINESS PARKS, INC. By:      

 

GRANTEE:

     

 

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