EXHIBIT 10.50
PS BUSINESS PARKS, INC.
2003 STOCK OPTION AND INCENTIVE PLAN
STOCK OPTION AGREEMENT
     This Stock Option Agreement (the “Option Agreement”) is made as of the ____
day of ______, 200__ (the “Grant Date”), by and between PS Business Parks, Inc.
(the “Corporation”) and ______________, an Outside Director of the Corporation
(the “Optionee”). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Corporation’s 2003 Stock Option and Incentive
Plan (the “Plan”).
     WHEREAS, the assumption and adoption of the Plan as a new plan of the
Corporation has been duly approved by the Board of Directors of the Corporation
(the “Board”) and the shareholders of the Corporation;
     WHEREAS, the Plan provides for the grant to Outside Directors of options
for the purchase of a specified number of shares of the Corporation’s Common
Stock, par value $.01 per share (the “Common Stock”), following the first Annual
Meeting of Shareholders of the Corporation held after the Effective Date, upon
initial election to the Board thereafter and following each subsequent Annual
Meeting of Shareholders of the Corporation;
     WHEREAS, the Optionee was [re-]elected to the Board at the 200_ Annual
Meeting of Shareholders held on __________________ ___, 200__;
     NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
     1. GRANT OF OPTION.
          Subject to the terms of the Plan (the terms of which are incorporated
by reference herein), the Corporation hereby grants to the Optionee the right
and option (the “Option”) to purchase, on the terms and subject to the
conditions hereinafter set forth, _________ shares of Common Stock. This Option
shall not constitute an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended.
     2. PRICE.
          The purchase price (the “Option Price”) of the shares of Common Stock
subject to the Option evidenced by this Option Agreement is $______ per share
(the Fair Market Value on the Grant Date).
     3. EXERCISE OF OPTION.
          Except as otherwise provided herein, the Option granted pursuant to
this Option Agreement shall be subject to exercise as follows:
          3.1 Time of Exercise of Option.
               The Optionee may exercise the Option (subject to the limitations
on exercise set forth in the Plan or in this Option Agreement), in installments
as follows:

 

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(i) prior to the first anniversary of the Grant Date, the Option shall not be
exercisable; (ii) on the first anniversary of the Grant Date, the Option shall
become exercisable with respect to one-fifth of the shares of Common Stock
subject to the Option; (iii) on the second anniversary of the Grant Date, the
Option shall become exercisable with respect to an additional one-fifth of the
shares of Common Stock subject to the Option; (iii) on the third anniversary of
the Grant Date, the Option shall become exercisable with respect to an
additional one-fifth of the shares subject to the Option; (iv) on the fourth
anniversary of the Grant Date, the Option shall become exercisable with respect
to an additional one-fifth of the shares subject to the Option; and (v) on the
fifth anniversary of the Grant Date, the Option shall become exercisable with
respect to the remaining shares of Common Stock subject to the Option. The
foregoing installments, to the extent not exercised, shall accumulate and be
exercisable, in whole or in part, at any time and from time to time, after
becoming exercisable and prior to the termination of the Option; provided, that
no single exercise of the Option shall be for less than 100 shares, unless the
number of shares purchased is the total number at the time available for
purchase under this Option.
               Notwithstanding the foregoing vesting schedule, in the event that
the Optionee is not re-nominated for election to the Board because he or she
would attain the age of 70 during such subsequent Board term, the Option granted
hereunder shall immediately vest and become exercisable effective as of the
Optionee’s retirement date, which shall be the date of the Corporation’s next
annual meeting (the “Retirement Date”), and shall remain exercisable for one
years from the Retirement Date unless the Option otherwise expires pursuant to
its original term.
          3.2 Exercise by Optionee.
               During the lifetime of the Optionee, only the Optionee (or, in
the event of the Optionee’s legal incapacity or incompetency, the Optionee’s
guardian or legal representative) or a person or entity to whom the Optionee has
transferred the Option in accordance with Section 5 hereof may exercise the
Option.
          3.3 Term of Option.
               The Option shall have a term of ten years, subject to earlier
termination in accordance with this Agreement or the terms of the Plan.
          3.4 Limitations on Exercise of Option.
               In no event may the Option be exercised, in whole or in part,
after ten years following the Grant Date, or after the occurrence of an event
referred to in Section 7 below which results in termination of the Option. In no
event may the Option be exercised for a fractional Share.
          3.5 Termination of Service.
               Subject to Sections 3.1, 3.6 and 3.7 hereof, upon the termination
of service (a “Service Termination”) of the Optionee as a director of the
Corporation, other than by reason of the retirement, death or permanent and
total disability of the Optionee, the Optionee shall have the right at any time
within 30 days after such Service Termination and prior to termination of the
Option pursuant to Section 3.4 above, to exercise, in whole or in

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part, any Option held by such Optionee at the date of such Service Termination,
to the extent such Option was exercisable immediately prior to such Service
Termination.
          3.6 Rights in the Event of Death.
               If the Optionee dies while in service as a director of the
Corporation, the executors or administrators or legatees or distributees of the
Optionee’s estate shall have the right, at any time within one year after the
date of the Optionee’s death and prior to termination of the Option pursuant to
Section 3.4 above, to exercise the Option with respect to all shares subject to
the Option, whether or not the Option was exercisable immediately prior to the
Optionee’s death.
          3.7 Rights in the Event of Disability.
               If there is a Service Termination by reason of the permanent and
total disability of the Optionee, then the Optionee shall have the right, for a
period of one year after such Service Termination and prior to termination of
the Option pursuant to Section 3.4 above, to exercise the Option to the extent
such Option was exercisable immediately prior to such Service Termination or
becomes exercisable within such one year period pursuant to Section 3.1 above.
Whether a Service Termination is to be considered by reason of permanent and
total disability for purposes of this Option Agreement shall be determined by
the Committee, which determination shall be final and conclusive.
          3.8 Reduction in Number of Shares Subject to Option.
               The number of shares which may be purchased upon exercise of the
Option pursuant to this Section 3 shall be reduced by the number of shares
previously purchased upon exercise of the Option pursuant to this Section 3.
     4. METHOD OF EXERCISE OF OPTION.
          The Option may be exercised to the extent that it has become
exercisable hereunder by delivery to the Corporation on any business day, at its
principal office addressed to the attention of the Committee, of written notice
of exercise, which notice shall specify the number of shares for which the
Option is being exercised, and shall be accompanied by payment in full of the
Option Price of the shares for which the Option is being exercised. Payment of
the Option Price for the shares of Common Stock purchased pursuant to the
exercise of the Option shall be made (a) in cash or by check payable to the
order of PS Business Parks, L.P. (the “Partnership”) or such other person or
entity as may be specified by the Corporation (the “Payee”); (b) through the
tender to the Payee of shares of Common Stock, which shares shall be valued, for
purposes of determining the extent to which the Option Price has been paid
thereby, at their Fair Market Value on the date of exercise; or (c) by a
combination of the methods described in (a) and (b). Payment in full of the
Option Price need not accompany the written notice of exercise provided the
notice directs that the Common Stock certificate or certificates for the shares
for which the Option is exercised be delivered to a specified licensed broker
acceptable to the Corporation as the agent for the Optionee and, at the time
such Common Stock certificate or certificates are delivered, the broker tenders
to the Payee cash (or cash equivalents acceptable to the Payee) equal to the
Option Price plus the amount, if any, of federal and/or other taxes which the
Corporation or the Payee may, in its judgment, be required to withhold with
respect to the exercise of the

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Option. An attempt to exercise the Option granted other than as set forth above
shall be invalid and of no force or effect. Promptly after the exercise of the
Option and the payment in full of the Option Price of the shares of Common Stock
covered thereby, the Optionee shall be entitled to the issuance of a Common
Stock certificate or certificates evidencing the Optionee’s ownership of such
shares.
     5. LIMITATIONS ON TRANSFER.
          The Option is not transferable by the Optionee, other than by will or
the laws of descent and distribution in the event of death of the Optionee, and
except that the Optionee may transfer the Option in whole or in part, for no
consideration, to (i) the spouse, children (including step-children and adopted
children) or grandchildren of the Optionee (“Family Members”), (ii) a trust for
the exclusive benefit of one or more Family Members, or (iii) a partnership of
which the Optionee and/or one or more Family Members are the only partners,
provided that the transferee, in connection with the transfer, agrees in writing
to be bound by all of the terms of this Option Agreement and the Plan and
further agrees not to transfer the Option other than by will or the laws of
descent and distribution in the event of the death of the transferee. Following
any transfer permitted by this Section 5, the transferee shall have all of the
rights of the Optionee hereunder, and the Option shall be exercisable by the
transferee only to the extent that the Option would have been exercisable by the
Optionee had the Option not been transferred. The Option shall not be pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
     6. RIGHTS AS SHAREHOLDER.
          Neither the Optionee nor any executor, administrator, distributee or
legatee of the Optionee’s estate shall be, or have any of the rights or
privileges of, a shareholder of the Corporation in respect of any shares
issuable hereunder unless and until such shares have been fully paid and
certificates representing such shares have been endorsed, transferred and
delivered, and the name of the Optionee (or of such personal representative,
administrator, distributee or legatee of the Optionee’s estate) has been entered
as the shareholder of record on the books of the Corporation.
     7. EFFECT OF CHANGES IN CAPITALIZATION.
          7.1 Changes in Shares.
               If the number of outstanding shares of Common Stock is increased
or decreased or changed into or exchanged for a different number or kind of
stock or other securities of the Corporation by reason of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Corporation occurring after the date the Option is granted, a proportionate
and appropriate adjustment shall be made by the Corporation in the number and
kind of shares subject to the Option, so that the proportionate interest of the
Optionee immediately following such event shall, to the extent practicable, be
the same as immediately prior to such event. Any such adjustment in the Option
shall not change the total Option Price with respect to shares subject to the
unexercised portion of the Option but shall include a corresponding
proportionate adjustment in the Option Price per share.

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          7.2 Reorganization in Which the Corporation Is the Surviving Entity
and in Which No Change of Control Occurs.
               Subject to Section 7.3 hereof, if the Corporation shall be the
surviving entity in any reorganization, merger or consolidation of the
Corporation with one or more other entities, the Option shall pertain to and
apply to the securities to which a holder of the number of shares subject to the
Option would have been entitled immediately following such reorganization,
merger or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price immediately prior to such reorganization,
merger or consolidation.
          7.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control.
               Subject to the exceptions set forth in the last sentence of this
Section 7.3, fifteen days prior to the scheduled consummation of a Change of
Control, the Option shall become immediately exercisable with respect to all
shares subject to the Option and shall remain exercisable for a period of
fifteen days. Any exercise of the Option during such fifteen-day period shall be
conditioned upon the consummation of the Change of Control and shall be
effective only immediately before the consummation of the Change of Control.
Upon consummation of any Change of Control, unless exercised the Option shall
terminate. The Committee shall send written notice of an event that will result
in such a termination to the Optionee not later than the time at which the
Corporation gives notice thereof to its shareholders. For purposes of this
Section 7.3, a “Change of Control” shall be deemed to occur upon (i) the
dissolution or liquidation of the Corporation or upon a merger, consolidation,
or reorganization of the Corporation with one or more other entities in which
the Corporation is not the surviving entity, (ii) a sale of substantially all of
the assets of the Corporation to another entity, or (iii) any transaction
(including without limitation a merger or reorganization in which the
Corporation is the surviving corporation) which results in any person or entity
owning 50% or more of the combined voting power of all classes of stock of the
Corporation. This Section 7.3 shall not apply to any Change of Control to the
extent that (A) provision is made in writing in connection with such Change of
Control for the assumption of the Option, or for the substitution for the Option
of a new option covering the stock of a successor corporation, or a parent,
subsidiary or affiliate thereof, with appropriate adjustments as to the number
and kind of shares and exercise prices, in which event the Option shall continue
in the manner and under the terms so provided or (B) a majority of the full
Board determines that such Change of Control shall not trigger application of
the provisions of this Section 7.3.
          7.4 Adjustments.
          Adjustments specified in this Section 7 relating to shares of Common
Stock or securities of the Corporation shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share.

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     8. GENERAL RESTRICTIONS.
          The Corporation shall not be required to sell or issue any shares of
Common Stock under the Option if the sale or issuance of such shares would
constitute a violation by the individual exercising the Option or by the
Corporation 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 Corporation shall determine, in its discretion,
that the listing, registration or qualification of any shares of Common Stock
subject to the Option 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 issuance or purchase
of shares hereunder, the Option may not be exercised 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 Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically, in connection with the Securities Act of 1933, upon
notice of exercise of the Option, unless a registration statement under such Act
is in effect with respect to the shares covered by the Option, the Corporation
shall not be required to sell or issue such shares unless the Committee has
received evidence satisfactory to the Committee that the holder of the Option
may acquire such shares pursuant to an exemption from registration under such
Act. Any determination in this connection by the Committee shall be final,
binding, and conclusive. The Corporation shall not be obligated to take any
affirmative action in order to cause the exercise of the Option or the issuance
of shares of Common Stock pursuant thereto to comply with any law or regulation
of any governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Option shall not be exercisable unless and until the shares
covered by the Option are registered or are subject to an available exemption
from registration, the exercise of the Option (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.
     9. DISCLAIMER OF RIGHTS.
          No provision in this Option Agreement shall be construed to confer
upon the Optionee the right to continue as a director of the Corporation.
     10. WITHHOLDING TAXES
          Upon the request of the Corporation or the Payee, the Optionee shall
promptly pay to the Corporation or the Payee, or make arrangements satisfactory
to the Corporation or the Payee regarding payment of, any federal, state or
local taxes of any kind required by law to be withheld as a result of the
Optionee’s exercise of the Option. The Corporation or the Payee shall have the
right to deduct from payments of any kind otherwise due to the Optionee any such
taxes. The Optionee shall make any such payments in cash or cash equivalents or,
subject to the prior approval of the Committee, which may be withheld in the
Committee’s sole discretion, the Optionee may elect to satisfy the withholding
obligation, in whole or in part, (i) by causing the Corporation or the Payee to
withhold shares of Common Stock otherwise issuable to the Optionee pursuant to
the Option or (ii) by delivering to the Corporation or the Payee shares of
Common Stock already owned by the Optionee. The shares of Common Stock so
delivered or withheld shall have an aggregate Fair Market Value equal to the
applicable withholding obligations. The Optionee may deliver or have

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withheld only shares of Common Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
     11. INTERPRETATION OF THIS OPTION AGREEMENT.
          All decisions and interpretations made by the Committee with regard to
any question arising under the Plan or this Option Agreement shall be binding
and conclusive on the Corporation and the Optionee and any other person entitled
to exercise the Option as provided for herein. In the event that there is any
inconsistency between the provisions of this Option Agreement and of the Plan,
the provisions of the Plan shall govern.
     12. GOVERNING LAW.
          This Option Agreement is executed pursuant to and shall be governed by
the laws of the State of California (but not including the choice of law rules
thereof).
     13. BINDING EFFECT.
          Subject to all restrictions provided for in this Option Agreement and
by applicable law relating to assignment and transfer of this Option Agreement
and the option provided for herein, this Option Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, and assigns.
     14. NOTICE.
          Any notice hereunder by the Optionee to the Corporation shall be in
writing and shall be deemed duly given if mailed or delivered to the Corporation
at its principal office, addressed to the attention of the Corporate Secretary,
or if so mailed or delivered to such other address as the Corporation may
hereafter designate by notice to the Optionee. Any notice hereunder by the
Corporation to the Optionee shall be in writing and shall be deemed duly given
if mailed or delivered to the Optionee at the address specified below by the
Optionee for such purpose, or if so mailed or delivered to such other address as
the Optionee may hereafter designate by written notice given to the Corporation.
     15. ENTIRE AGREEMENT.
          This Option Agreement constitutes the entire agreement and supersedes
all prior understandings and agreements, written or oral, of the parties hereto
with respect to the subject matter hereof. Neither this Option Agreement nor any
term hereof may be amended, waived, discharged or terminated except by a written
instrument signed by the Corporation and the Optionee; provided, however, that
the Corporation unilaterally may waive any provision hereof in writing to the
extent that such waiver does not adversely affect the interests of the Optionee
hereunder, but no such waiver shall operate as or be construed to be a
subsequent waiver of the same provision or a waiver of any other provision
hereof.

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed on their behalf,
as of the day and year first above written.

            PS BUSINESS PARKS, INC.

      By:           David Goldberg        Vice President     

     
 
  OPTIONEE:
 
   
 
   
 
 
 
 
   
 
  ADDRESS FOR NOTICE TO OPTIONEE:
 
   
 
   
 
 
 
 
  Number                     Street
 
   
 
 
 
 
  City                            State                     Zip Code

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