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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECURITIES AND
EXCHANGE COMMISSION </FONT></H1>

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<A NAME=A002></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549 </FONT></H1>

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<A NAME=A003></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form S-8 </FONT></H1>

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<A NAME=A004></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REGISTRATION STATEMENT </FONT></H1>

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<A NAME=A005></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under </FONT></H1>

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<A NAME=A006></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Securities Act of
1933 </FONT></H1>

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<A NAME=A007></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS BUSINESS PARKS, INC. </FONT></H1>

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<A NAME=A008></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Exact name of
registrant as specified in its charter) </FONT></P>

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<A NAME=A009></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>California </FONT></P>

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<A NAME=A010></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(State or other
jurisdiction of incorporation or organization) </FONT></P>

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<A NAME=A011></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>95-4300881 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(I.R.S.
          Employer Identification No.) </FONT></P>

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<A NAME=A012></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>701 Western Avenue </FONT></P>

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<A NAME=A013></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Glendale, California
91201-2349 </FONT></P>

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<A NAME=A014></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Address of Principal
Executive Offices with Zip Code) </FONT></P>

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<A NAME=A015></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS BUSINESS PARKS,
INC. 2003 STOCK OPTION AND INCENTIVE PLAN </FONT></H1>

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<A NAME=A016></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Full Title of the
Plans) </FONT></P>

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<A NAME=A017></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>HARVEY LENKIN </FONT></P>

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<A NAME=A018></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS Business Parks, Inc. </FONT></P>

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<A NAME=A019></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>701 Western Avenue </FONT></P>

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<A NAME=A020></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Glendale, California
91201-2349 </FONT></P>

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<A NAME=A021></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(818) 244-8080 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Name,
address, including zip code, and telephone number, </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>including
area code, of agent for service) </FONT></P>

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<A NAME=A022></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With a copy to: </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DAVID GOLDBERG, ESQ. </FONT></P>

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<A NAME=A024></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS Business Parks, Inc. </FONT></P>

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<A NAME=A025></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>701 Western Avenue </FONT></P>

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<A NAME=A026></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Glendale, California
91201-2349 </FONT></P>

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<A NAME=A027></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CALCULATION OF
REGISTRATION FEE </FONT></H1>

<PRE>
------------------------------------------ ------------ -------------------- -------------------- ----------------
                                                           Proposed maximum     Proposed maximum
                                              Amount to     offering price     aggregate offering      Amount of
                                                 be            per share              price          registration
    Title of Securities to be Registered     registered                                                   fee
  ------------------------------------------ ------------ -------------------- -------------------- ----------------
  Common Stock, $.01 par value per
  share....................................     1,500,000       $30.20 (2)           $45,300,000        $3,665 (2)
  ------------------------------------------ ------------ -------------------- -------------------- ----------------
</PRE>
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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Issuable under the PS Business Parks, Inc. Stock Option and Incentive Plan. </FONT></TD>
          </TR>
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          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Estimated pursuant to Rule 457(h) under the Securities Act of 1933 as of April
          11, 2003 solely for the purpose of calculating the registration fee. </FONT></TD>
          </TR>
          </TABLE>
          <BR>


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<A NAME=A028></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I </FONT></H1>

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<A NAME=A029></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INFORMATION REQUIRED
IN THE SECTION 10(a) PROSPECTUS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Documents
containing the information required to be provided in this Part I will be separately sent
or given to employees as contemplated by Rule 428(b)(1) under the Securities Act of 1933,
as amended (the &#147;Securities Act&#148;). In accordance with the instructions to Part I
of Form S-8, such documents will not be filed with the Securities and Exchange Commission
(the &#147;Commission&#148;) either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act. </FONT></P>

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<A NAME=A030></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>

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<A NAME=A031></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INFORMATION REQUIRED
IN THE REGISTRATION STATEMENT </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 3. Incorporation of
Documents by Reference </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PS
Business  Parks,  Inc. (the "Company")  hereby  incorporates  by reference into this
 Registration  Statement the following documents: </FONT></P>


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          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The Company&#146;s Annual Report on Form 10-K for the fiscal year ended December
          31, 2002; </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          All reports filed by the Company with the Commission under Section 13(a) or
          15(d) of the Securities Exchange Act of 1934, as amended (the &#147;Exchange
          Act&#148;), since December 31, 2002; </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The description of the Company&#146;s Common Stock, $.01 par value per share,
          contained in the Company&#146;s Registration Statement on Form 8-A, effective
          March 15, 1991, as supplemented by the description of the Company&#146;s Common
          Stock contained in the Prospectus dated May 7, 2001 included in the
          Company&#146;s Registration Statement on Form S-3 (File No. 333-78627); </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          All documents subsequently filed by the Company pursuant to Section 13(a),
          13(c), 14, or 15(d) of the Exchange Act, prior to the filing of a post-effective
          amendment which indicates that all securities offered have been sold or which
          deregisters all securities remaining unsold. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
statement contained in a document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded to the extent that a statement contained in
any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such prior statement. The documents required to be
so modified or superseded shall not be deemed to constitute a part of this Registration
Statement, except as so modified or superseded. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that any proxy statement is incorporated by reference herein, such
incorporation shall not include any information contained in such proxy statement which is
not, pursuant to the Commission&#146;s rules, deemed to be &#147;filed&#148; with the
Commission or subject to the liabilities of Section 18 of the Exchange Act. </FONT></P>


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<A NAME=A033></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 4. Description of
Securities </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
description of the Company&#146;s Common Stock, $.01 par value per share, is incorporated
by reference under Item 3. </FONT></P>

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<A NAME=A034></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 5. Interests of
Named Experts and Counsel </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David
Goldberg, vice president and counsel of the Company, has delivered an opinion to the
effect that the shares of Common Stock covered by this Registration Statement will be
legally issued, fully paid and non-assessable. Mr. Goldberg owns 3,113 shares of the
Company&#146;s Common Stock, and has options to acquire an additional 3,995 shares of the
Company&#146;s Common Stock. </FONT></P>

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<A NAME=A035></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 6. Indemnification
of Directors and Officers </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company&#146;s Restated Articles of Incorporation provide that the Company may indemnify
the agents of the Company to the maximum extent permitted under California law. The
Company has also entered into indemnity agreements with its management and non-management
directors and executive officers. The agreements permit the Company to indemnify directors
and executive officers to the maximum extent permitted under California law and prohibit
the Company from terminating its indemnification obligations as to acts or omissions of
any director or executive officer occurring before the termination. The indemnification
and limitations on liability permitted by the Restated Articles of Incorporation and the
agreements are subject to the limitations set forth by California law. The Company
believes the indemnification agreements will assist it in attracting and retaining
qualified individuals to serve as directors and executive officers of the Company. </FONT></P>

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<A NAME=A036></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 7. Exemption From
Registration Claimed </FONT></H1>

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<A NAME=A037></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

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<A NAME=A038></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 8. Exhibits </FONT></H1>

<PRE>
  --------------------- ---------------------------------------------------------------------------------------
  Exhibit Number                                             Description
  --------------------- ---------------------------------------------------------------------------------------
          5.1           Opinion of David Goldberg as to the legality of the securities being registered.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.1          Consent of Independent Auditors.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.2          Consent of David Goldberg (included in Exhibit 5.1).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          24.1          Power of Attorney (contained in this Registration Statement).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          99.1          The Company's 2003 Stock Option and Incentive Plan.
  --------------------- ---------------------------------------------------------------------------------------
</PRE>
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<A NAME=A039></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM 9. Undertakings </FONT></H1>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          The undersigned Registrant hereby undertakes: </FONT></P>

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               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               To file, during any period in which offers or sales are being made, a
               post-effective amendment to this Registration Statement: </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TD ALIGN=RIGHT WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
          <TD ALIGN=LEFT WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

           To include any prospectus required by Section 10(a)(3) of the Securities Act; </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD ALIGN=RIGHT WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>
          <TD ALIGN=LEFT WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

           To reflect in the prospectus any facts or events arising after the effective
          date of the Registration Statement (or the most recent post-effective amendment
          thereof) which, individually or in the aggregate, represent a fundamental change
          in the information set forth in the Registration Statement; </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD ALIGN=RIGHT WIDTH=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>
          <TD ALIGN=LEFT WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

           To include any material information with respect to the plan of distribution
          not previously disclosed in the Registration Statement or any material change to
          such information in the Registration Statement; provided, however, that
          paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to
          be included in a post-effective amendment by those paragraphs is contained in
          periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
          of the Exchange Act that are incorporated by reference in this Registration
          Statement. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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               <TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               That, for the purpose of determining any liability under the Securities Act,
               each such post-effective amendment shall be deemed to be a new Registration
               Statement relating to the securities offered therein, and the offering of such
               securities at that time shall be deemed to be the initial bona fide offering
               thereof. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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               <TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               To remove from registration by means of a post-effective amendment any of the
               securities being registered that remain unsold at the termination of the
               offering. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The undersigned Registrant hereby undertakes that, for purposes of determining
          any liability under the Securities Act, each filing of the Registrant&#146;s
          annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
          that is incorporated by reference in this Registration Statement shall be deemed
          to be a new Registration Statement relating to the securities offered therein,
          and the offering of such securities at that time shall be deemed to be the
          initial bona fide offering thereof. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c) </FONT></TD>
          <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Insofar as indemnification for liabilities arising under the Securities Act may
          be permitted to directors, officers, and controlling persons of the Registrant
          pursuant to the foregoing provisions, or otherwise, the Registrant has been
          advised that in the opinion of the Commission such indemnification is against
          public policy as expressed in the Securities Act and is, therefore,
          unenforceable. In the event that a claim for indemnification against such
          liabilities (other than the payment by the Registrant of expenses incurred or
          paid by a director, officer or controlling person of the Registrant in the
          successful defense of any action, suit or proceeding) is asserted by such
          director, officer or controlling person in connection with the securities being
          registered, the Registrant will, unless in the opinion of its counsel the matter
          has been settled by controlling precedent, submit to a court of appropriate
          jurisdiction the question whether such indemnification by it is against public
          policy as expressed in the Securities Act and will be governed by the final
          adjudication of such issue. </FONT></TD>
          </TR>
          </TABLE>
          <BR>


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<A NAME=A040></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing on Form S-8
and has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Glendale, State of California, on
the 15th day of April, 2003. </FONT></P>

<PRE>
                                                             PS BUSINESS PARKS, INC.


                                                              By:      /S/ DAVID GOLDBERG
                                                                       David Goldberg, Vice President
</PRE>

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<A NAME=A041></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>POWER OF ATTORNEY </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
director and officer of PS Business Parks, Inc. whose signature appears below hereby
authorizes Ronald L. Havner, Jr. and Harvey Lenkin, and each of them, as attorney-in-fact
and agent, with full powers of substitution and resubstitution, to sign on his behalf,
individually and in each capacity stated below, any amendment, including post-effective
amendments to this Registration Statement and/or to sign any related registration
statement filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and in
each case to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, with full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting
alone, or his substitute(s), may lawfully do or cause to be done by virtue hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated. </FONT></P>

<PRE>
        Signature                                                 Title                               Date

                                                Chairman of the Board and Chief  Executive
        /s/ Ronald L. Havner, Jr.               Officer (principal executive officer)
        Ronald L. Havner, Jr.                                                                    April 15, 2003

                                                Vice   President   and   Chief   Financial
        /s/ Jack E. Corrigan                    Officer  (principal  financial officer and
        Jack E. Corrigan                        principal accounting officer)                    April 15, 2003


        /s/ Harvey Lenkin
        Harvey Lenkin                           Director                                         April 15, 2003


        /s/ Vern O. Curtis
        Vern O. Curtis                          Director                                         April 15, 2003


        /s/ James H. Kropp
        James H. Kropp                          Director                                         April 15, 2003


        /s/ Jack D. Steele
        Jack D. Steele                          Director                                         April 15, 2003


        /s/ Alan K. Pribble
        Alan K. Pribble                         Director                                         April 15, 2003


        /s/ Arthur M. Friedman
        Arthur M. Friedman                      Director                                         April 15, 2003
</PRE>

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<A NAME=A042></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXHIBIT INDEX </FONT></H1>

<PRE>
  --------------------- ---------------------------------------------------------------------------------------
  Exhibit Number                                             Description
  --------------------- ---------------------------------------------------------------------------------------
          5.1           Opinion of David Goldberg as to the legality of the securities being registered.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.1          Consent of Independent Auditors.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.2          Consent of David Goldberg (included in Exhibit 5.1).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          24.1          Power of Attorney (contained on page 5 of this Registration Statement).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          99.1          The Company's 2003 Stock Option and Incentive Plan.
  --------------------- ---------------------------------------------------------------------------------------
</PRE>
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<A NAME=A043></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 5.1 </FONT></H1>

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<A NAME=A044></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DAVID GOLDBERG </FONT></P>

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<A NAME=A045></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President and
Counsel </FONT></P>

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<A NAME=A046></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>701 Western Avenue </FONT></P>

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<A NAME=A047></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Glendale, California
91201-2349 </FONT></P>

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<A NAME=A048></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>April 15, 2003 </FONT></P>

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<A NAME=A049></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS Business Parks, Inc. </FONT></P>

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<A NAME=A050></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>701 Western Avenue </FONT></P>

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<A NAME=A051></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Glendale, California 91201-2349 </FONT></P>

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<A NAME=A052></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gentlemen: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
Vice President and Counsel of PS Business Parks, Inc. (the &#147;Company&#148;), I have
examined the Registration Statement on Form S-8, which is being filed by the Company on or
about the date hereof with the Securities and Exchange Commission (the &#147;Registration
Statement&#148;), relating to the offer and sale of up to 1,500,000 shares of the
Company&#146;s Common Stock, par value $.10 per share, (the &#147;securities&#148;),
pursuant to the Company&#146;s 2003 Stock Option and Incentive Plan (the
&#147;Plan&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
am familiar with the proceedings taken and proposed to be taken by the Company relating to
the authorization and issuance of the Securities in the manner set forth in the
Registration Statement and the Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the taking of the contemplated proceedings in connection with the foregoing matters, I
am of the opinion that the Securities, when issued and sold in the manner set forth in the
Registration Statement and the Plan, will be legally issued and outstanding, fully paid
and non-assessable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
hereby consent to the reference to me under the caption &#147;Interests of Named Experts
and Counsel&#148; in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement. </FONT></P>

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<A NAME=A053></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Very truly yours, </FONT></P>

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<A NAME=A054></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ DAVID GOLDBERG </FONT></P>


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<A NAME=A055></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23.1 </FONT></H1>

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<A NAME=A056></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
AUDITORS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference in the Registration Statement on Form S-8 (No. 333-____________) of PS Business
Parks, Inc. pertaining to the PS Business Parks, Inc. 2003 Stock Option and Incentive Plan
of our report dated February 14, 2003, with respect to the consolidated financial
statements and schedule of PS Business Parks, Inc. included in its Annual Report on Form
10-K for the year ended December 31, 2003 filed with the Securities and Exchange
Commission. </FONT></P>

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<A NAME=A057></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ ERNST &amp; YOUNG
LLP </FONT></P>

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<A NAME=A058></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Los Angeles, California
<BR>April 15, 2003 </FONT></P>


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<A NAME=A059></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 99.1 </FONT></H1>

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<A NAME=A060></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PS BUSINESS PARKS, INC. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<A NAME=A061></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003 STOCK OPTION AND
INCENTIVE PLAN </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PS
Business Parks,  Inc., a California  corporation (the "Company"),  sets forth herein the
terms of its 2003 Stock Option and Incentive Plan (the "Plan") as follows: </FONT></P>


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<A NAME=A062></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
PURPOSE</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan is intended to enhance the Company&#146;s ability to attract and retain highly
qualified officers, key employees, outside directors, and other persons to advance the
interests of the Company by providing such persons with stronger incentives to continue to
serve the Company and its affiliates (as defined herein) and to expend maximum effort to
improve the business results and earnings of the Company. The Plan is intended to
accomplish this objective by providing to eligible persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of the
Company. To this end, the Plan provides for the grant of stock options, restricted stock
and restricted stock units in accordance with the terms hereof. Stock options granted
under the Plan may be non-qualified stock options or incentive stock options, as provided
herein, except that stock options granted to outside directors shall in all cases be
non-qualified stock options. </FONT></P>

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<A NAME=A063></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
DEFINITIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1
&#147;Affiliate&#148; of, or person &#147;affiliated&#148; with, a person means any
company or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under the 1933 Act
(as defined herein). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2
&#147;Award Agreement&#148; means the stock option agreement, restricted stock agreement,
restricted stock unit agreement or other written agreement between the Company and a
Grantee that evidences and sets out the terms and conditions of a Grant. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3
&#147;Benefit Arrangement&#147; shall have the meaning set forth in Section 14 hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4
&#147;Board&#147; means the Board of Directors of the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5
&#147;Code&#147; means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6
&#147;Committee&#148; means one or more committees of the Board, as designated from time
to time by resolution of the Board, each of which shall have all powers, privileges and
obligations vested by the Plan in the Committee to the extent specified in such
resolution. At least one committee of the Board that is designated by the Board as a
Committee shall consist of no fewer than two members of the Board, none of whom shall be
an officer or other salaried employee of the Company or any affiliate, and each of whom
shall qualify in all respects as a &#147;non-employee director&#148; within the meaning of
Rule 16b-3 under the Exchange Act or any successor rule or regulation and as an
&#147;outside director&#148; within the meaning of Section 162(m) of the Code. Until such
time as the Board shall determine otherwise, the Compensation Committee of the Board shall
be such Committee. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7
&#147;Company&#148; means PS Business Parks, Inc. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8
&#147;Effective Date&#147; means February 27, 2003, the date on which the Plan was adopted by the Board. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9
&#147;Exchange Act&#147; means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10
&#147;Fair Market Value&#148; means the value of a share of Stock, determined as follows:
if on the Grant Date or other determination date the Stock is listed on an established
national or regional stock exchange, is admitted to quotation on the Nasdaq National
Market, or is publicly traded on an established securities market, the Fair Market Value
of a share of Stock shall be the closing price of the Stock on such exchange or in such
market (the closing price on the principal such exchange or market if there is more than
one such exchange or market) on the Grant Date or such other determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices on such
trading day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market Value
shall be the value of the Stock as determined by the Committee in good faith. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11
&#147;Grant&#147; means an award of an Option, Restricted Stock or Restricted Stock Units under the Plan. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12
&#147;Grant Date&#148; means (a) for Grants other than Grants to Outside Directors, the
later of (i)&nbsp;the date as of which the Committee approves the Grant or (ii)&nbsp;the
date as of which the Grantee and the Company or Service Provider enter into the
relationship resulting in the Grantee&#146;s becoming eligible to receive a Grant, and (b)
for Grants to Outside Directors, the date on which such Grant is made in accordance with
Section&nbsp;7 hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13
&#147;Grantee&#148; means a person who receives or holds an Option, Restricted Stock or
Restricted Stock Units under the Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14
&#147;Incentive Stock Option&#148; means an &#147;incentive stock option&#148; within the
meaning of Section&nbsp;422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15
&#147;Option&#147; means an option to purchase one or more shares of Stock pursuant to the Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16
&#147;Option Period&#147; means the period during which Options may be exercised as set forth in Section 11 hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17
&#147;Option Price&#147; means the purchase price for each share of Stock subject to an Option. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18
&#147; Other Agreement&#147; shall have the meaning set forth in Section 14 hereof.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19
&#147;Outside Director&#147; means a member of the Board who is not an officer or employee of the Company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.20
&#147; Partnership&#147; means PS Business Parks, L.P., a California limited partnership.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.21
&#147;Plan&#147; means the PS Business Parks, Inc. 2003 Stock Option and Incentive Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.22
&#147;Reporting Person&#147; means a person who is required to file reports under Section 16(a) of the Exchange Act. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.23
&#147;Restricted Period&#148; means the period during which Restricted Stock or Restricted
Stock Units are subject to restrictions or conditions pursuant to Section&nbsp;13.2
hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.24
&#147;Restricted Stock&#148; means shares of Stock, awarded to a Grantee pursuant to
Section&nbsp;13 hereof, that are subject to restrictions and to a risk of forfeiture. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.25
&#147;Restricted Stock Unit&#148; means a unit awarded to a Grantee pursuant to
Section&nbsp;13 hereof, which represents a conditional right to receive a share of Stock
in the future, and which is subject to restrictions and to a risk of forfeiture. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.26
&#147;Securities Act&#147; means the Securities Act of 1933, as now in effect or as hereafter amended. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.27
&#147;Service Provider&#148; means a consultant or adviser to the Company, a manager of
the Company&#146;s properties or affairs, or other similar service provider or affiliate
of the Company, or any corporation or other entity in which the Company owns at least a
ninety percent (90%) economic interest, and employees of any of the foregoing, as such
persons may be designated from time to time by the Committee pursuant to Section&nbsp;6
hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.28
    &#147;Stock&#147; means the common stock, par value $0.10 per share, of the Company. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.29
&#147;Subsidiary&#148; means any &#147;subsidiary corporation&#148; of the Company within
the meaning of Section&nbsp;424(f) of the Code and any &#147;parent corporation&#148; of
the Committee within the meaning of Section 442(e) of the Code. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.30
    &#147;Termination  Date&#147; shall be the date upon which an Option shall  terminate or
expire,  as set forth in  Section 11.2 hereof.</FONT></P>



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<A NAME=A066></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.
ADMINISTRATION OF THE PLAN</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>General</U>. Subject to Section 3.2 hereof, the Plan shall be administered by the
Committee. The Board may remove members, add members, and fill vacancies on the Committee
from time to time, all in accordance with the Company&#146;s articles of incorporation and
by-laws and applicable law. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>Plenary Authority of the Committee</U>. Subject to Section 3.4 hereof, the Committee
shall have such powers and authorities related to the administration of the Plan as are
consistent with the Company&#146;s articles of incorporation and by-laws and applicable
law. The Committee shall have full power and authority to take all actions and to make all
determinations required or provided for under the Plan, subject to any limitations imposed
by the resolutions of the Board designating and empowering such Committee, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the Plan that
the Committee deems to be necessary or appropriate to the administration of the Plan. In
the event, however, that more than one committee of the Board is authorized to act as the
Committee, (i) each such committee shall have the power and authority to take actions and
make determinations required or provided for under an outstanding Grant or Award Agreement
only if such Grant or Award Agreement was initially authorized by such committee, and (ii)
only a committee comprised solely of &#147;non-employee directors&#148; within the meaning
of Rule 16b-3 under the Exchange Act and &#147;outside directors&#148; within the meaning
of Section 162(m) of the Code shall have the authority to approve a Grant to any officer
who is then a Reporting Person. All such actions and determinations shall be by the
affirmative vote of a majority of the members of the Committee present at a meeting or by
unanimous consent of the Committee executed in writing in accordance with the
Company&#146;s articles of incorporation and by-laws and applicable law. The
interpretation and construction by the Committee of any provision of the Plan, any Grant
or any Award Agreement shall be final and conclusive. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3
<U>Discretionary Grants</U>. Subject to Section&nbsp;3.4 hereof and to the other terms and
conditions of the Plan, the Committee shall have full and final authority to designate
Grantees, (i)&nbsp;to determine the type or types of Grant to be made to a Grantee,
(ii)&nbsp;to determine the number of shares of Stock to be subject to a Grant,
(iii)&nbsp;to establish the terms and conditions of each Grant (including, but not limited
to, the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or conditions
that may be necessary to qualify Options as Incentive Stock Options), (iv)&nbsp;to
prescribe the form of each Award Agreement evidencing a Grant, and (v) to amend, modify,
or supplement the terms of any outstanding Grant; provided, however, that the Committee
shall not have the authority to reduce the exercise price of any outstanding Option other
than pursuant to Section&nbsp;17 hereof. Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but without amending the Plan,
to modify Grants to eligible individuals who are foreign nationals or are individuals who
are employed outside the United&nbsp;States to recognize differences in local law, tax
policy, or custom. As a condition to any subsequent Grant, the Committee shall have the
right, at its discretion, to require Grantees to return to the Company Grants previously
awarded under the Plan. Subject to the terms and conditions of the Plan, any such new
Grant shall be upon such terms and conditions as are specified by the Committee at the
time the new Grant is made. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Grants to Outside Directors.</U> With respect to Grants of Options to Outside Directors
pursuant to Section&nbsp;7 hereof, the Committee&#146;s responsibilities under the Plan
shall be limited to taking all legal actions necessary to document the Options so granted,
to interpret the Award Agreements evidencing such Options, to maintain appropriate records
and reports regarding such Options, and to take all acts authorized by this Plan or
otherwise reasonably necessary to effect the purposes hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<U>No Liability</U>. No member of the Board or of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Grant or Award
Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6
<U>Applicability of Rule 16b-3</U>. Those provisions of the Plan that make express
reference to Rule&nbsp;16b-3 under the Exchange Act shall apply only to Reporting Persons. </FONT></P>

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<A NAME=A067></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
STOCK SUBJECT TO THE PLAN</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to adjustment as provided in Section&nbsp;16 hereof, the number of shares of Stock
available for issuance under the Plan shall be 1,500,000. Stock issued or to be issued
under the Plan shall be authorized but unissued shares. If any shares covered by a Grant
are not purchased or are forfeited, or if a Grant otherwise terminates without delivery of
any Stock subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Grant shall, to
the extent of any such forfeiture or termination, again be available for making Grants
under the Plan. </FONT></P>

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<A NAME=A068></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
EFFECTIVE DATE AND TERM OF THE PLAN</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1
<U>Effective Date</U>. The Plan shall be effective as of the Effective Date, subject to
approval of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of shareholders, provided that the total votes cast
represent a majority of all shares entitled to vote. Upon approval of the Plan by the
shareholders of the Company as set forth above, all Grants made under the Plan on or after
the Effective Date shall be fully effective as if the shareholders of the Company had
approved the Plan on the Effective Date. If the shareholders fail to approve the Plan
within one year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2
<U>Term</U>. The Plan has no termination date; however, no Incentive Stock Option may be
granted on or after the tenth anniversary of the Effective Date. </FONT></P>

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<A NAME=A069></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.
DISCRETIONARY GRANTS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1
<U>Company or Subsidiary Employees</U>. Grants (including Grants of Incentive Stock
Options) may be made under the Plan to any employee of the Company or of any Subsidiary,
including any such employee who is an officer or director of the Company or of any
Subsidiary, as the Committee shall determine and designate from time to time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2
<U>Service Providers</U>. Grants may be made under the Plan to any Service Provider whose
participation in the Plan is determined by the Committee to be in the best interests of
the Company and is so designated by the Committee; <U>provided</U>, <U>however</U>, that
Grants to Service Providers who are not employees of the Company or of any Subsidiary
shall not be Incentive Stock Options. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3
     Successive  Grants. An eligible person may receive more than one Grant,  subject to
such restrictions as are provided herein.</FONT></P>




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<A NAME=A071></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.
GRANTS TO OUTSIDE DIRECTORS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1
<U>Initial Grants of Options</U>. Each Outside Director who is initially elected to the
Board on or after the Effective Date shall, upon the date of his or her initial election
by the Board or the shareholders of the Company, automatically be awarded a Grant of an
Option, which shall not be an Incentive Stock Option, to purchase 10,000 shares of Stock
(which amount shall be subject to adjustment as provided in Section&nbsp;17 hereof). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2
<U>Subsequent Grants of Options</U>. Immediately following each Annual Meeting of
Shareholders of the Company held after the Effective Date, each Outside Director then duly
elected and serving (other than an Outside Director initially elected to the Board at such
Annual Meeting of Shareholders) shall automatically be awarded a Grant of an Option, which
shall not be an Incentive Stock Option, to purchase 2,000 shares of Stock (which amount
shall be subject to adjustment as provided in Section&nbsp;16 hereof). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3
<U>Vesting</U>. Options granted to Outside Directors pursuant to Sections 7.1 and 7.2
shall vest in five equal annual installments in accordance with the schedule set forth in
the first sentence of Section 11.1 hereof. </FONT></P>

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<A NAME=A072></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.
LIMITATIONS ON GRANTS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1
<U>Limitation on Shares of Stock Subject to Grants.</U> The maximum number of shares of
Stock subject to Options that can be awarded under the Plan to any person eligible for a
Grant under Section&nbsp;6 hereof is 800,000 during the first ten years after the
Effective Date and 250,000 per year thereafter. The maximum number of shares of Restricted
Stock that can be awarded under the Plan (including for this purpose any shares of Stock
represented by Restricted Stock Units) to any person eligible for a Grant under
Section&nbsp;6 hereof is 250,000 per year. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2
<U>Limitations on Incentive Stock Options.</U> An Option shall constitute an Incentive
Stock Option only (i) if the Grantee of such Option is an employee of the Company or any
Subsidiary of the Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Stock with respect to which all Incentive
Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee&#146;s employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by taking Options
into account in the order in which they were granted. </FONT></P>

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<A NAME=A073></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.
AWARD AGREEMENT</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the option of the Company, each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or forms as the
Committee shall from time to time determine. Award Agreements granted from time to time or
at the same time need not contain similar provisions but shall be consistent with the
terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify
whether such Options are intended to be non-qualified stock options or Incentive Stock
Options. </FONT></P>

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<A NAME=A074></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.
OPTION PRICE</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Option Price of each Option shall be fixed by the Committee and stated in the Award
Agreement evidencing such Option. The Option Price shall be the aggregate Fair Market
Value on the Grant Date of the shares of Stock subject to the Option; <U>provided</U>,
<U>however</U>, that in the event that a Grantee would otherwise be ineligible to receive
an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of
the Code (relating to ownership of more than ten percent of the Company&#146;s outstanding
Stock), the Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than the greater of the par value of a share of
Stock or 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no
case shall the Option Price of any Option be less than the par value of a share of Stock. </FONT></P>

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<A NAME=A075></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.
VESTING, TERM AND EXERCISE OF OPTIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1
<U>Vesting and Option Period</U>. Unless otherwise provided in an Award Agreement
evidencing the Grant of an Option, each Option granted under the Plan shall become
exercisable in accordance with the following schedule: (i)&nbsp;prior to the first
anniversary of the Grant Date, the Option shall not be exercisable; (ii)&nbsp;on the first
anniversary of the Grant Date, the Option shall become exercisable with respect to
one-fifth of the shares of Stock subject to such Option; (iii)&nbsp;on the second
anniversary of the Grant Date, the Option shall become exercisable with respect to an
additional one-fifth of the shares of Stock subject to such Option (iv) on the third
anniversary of the Grant Date, the Option shall become exercisable as to additional
one-fifth of the shares of Stock subject to such Option; (v) on the fourth anniversary of
the Grant Date, the Option shall become exercisable as to additional one-fifth of the
shares of Stock subject to such Option; and (vi)&nbsp;on the fifth anniversary of the
Grant Date, the Option shall become exercisable with respect to the remaining shares of
Stock subject to such Option and shall remain exercisable in full up to (but not
including) the Termination Date (as defined in Section&nbsp;11.2 hereof). For purposes of
this Section&nbsp;11.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any Option shall
be exercisable in accordance with the foregoing schedule shall constitute the &#147;Option
Period&#148; with respect to such Option. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2
<U>Term</U>. Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten years from the
date such Option is granted, or under such circumstances and on such date prior thereto as
is set forth in the Plan or as may be fixed by the Committee and stated in the Award
Agreement relating to such Option (the &#147;Termination Date&#148;); <U>provided</U>,
<U>however</U>, that in the event that the Grantee would otherwise be ineligible to
receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to ownership of more than ten percent of the outstanding
Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option
shall not be exercisable after the expiration of five years from its Grant Date. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3
<U>Acceleration</U>. Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Committee, in its sole discretion,
at any time and from time to time after the Grant Date of such Option, so as to accelerate
the time at which the Option may be exercised. Notwithstanding any other provision of the
Plan, no Option shall be exercisable in whole or in part prior to the date the Plan is
approved by the shareholders of the Company as provided in Section&nbsp;5.1 hereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4
<U>Termination of Employment or Other Relationship</U>. Upon the termination (i) of the
employment of a Grantee with the Company or a Service Provider, (ii) of a Service
Provider&#146;s relationship with the Company, or (iii) of an Outside Director&#146;s
service to the Company, other than, in the case of individuals, by reason of death or
&#147;permanent and total disability&#148; (within the meaning of Section&nbsp;22(e)(3) of
the Code), any Option or portion thereof held by such Grantee that has not vested in
accordance with the provisions of Section&nbsp;11.1 hereof shall terminate immediately,
and any Option or portion thereof that has vested in accordance with the provisions of
Section&nbsp;11.1 hereof but has not been exercised shall terminate at the close of
business on the thirtieth day following the Grantee&#146;s termination of service,
employment, or other relationship, unless the Committee, in its discretion, extends the
period during which the Option may be exercised (which period may not be extended beyond
the original term of the Option). Upon termination of an Option or portion thereof, the
Grantee shall have no further right to purchase shares of Stock pursuant to such Option or
portion thereof. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment for purposes of the Plan shall be determined
by the Committee, which determination shall be final and conclusive. For purposes of the
Plan, a termination of employment, service or other relationship shall not be deemed to
occur if the Grantee is immediately thereafter employed with the Company or any other
Service Provider, or is engaged as a Service Provider or an Outside Director of the
Company. Whether a termination of a Service Provider&#146;s or an Outside Director&#146;s
relationship with the Company shall have occurred shall be determined by the Committee,
which determination shall be final and conclusive. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5
<U>Rights in the Event of Death</U>. If a Grantee dies while employed by the Company or a
Service Provider, or while serving as a Service Provider or an Outside Director, all
Options granted to such Grantee shall fully vest on the date of death, and the executors
or administrators or legatees or distributees of such Grantee&#146;s estate shall have the
right, at any time within one year after the date of such Grantee&#146;s death (or such
longer period as the Committee, in its discretion, may determine prior to the expiration
of such one-year period) and prior to termination of the Option pursuant to
Section&nbsp;11.2 above, to exercise any Option held by such Grantee at the date of such
Grantee&#146;s death. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6
<U>Rights in the Event of Disability</U>. If a Grantee terminates employment with the
Company or a Service Provider, or (if the Grantee is a Service Provider who is an
individual or is an Outside Director) ceases to provide services to the Company, in either
case by reason of the &#147;permanent and total disability&#148; (within the meaning of
Section&nbsp;22(e)(3) of the Code) of such Grantee, such Grantee&#146;s Options shall
continue to vest, and shall be exercisable to the extent that they are vested, for a
period of one year after such termination of employment or service (or such longer period
as the Committee, in its discretion, may determine prior to the expiration of such
one-year period), subject to earlier termination of the Option as provided in
Section&nbsp;11.2 above. Whether a termination of employment or service is to be
considered by reason of &#147;permanent and total disability&#148; for purposes of the
Plan shall be determined by the Committee, which determination shall be final and
conclusive. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7
<U>Limitations on Exercise of Option</U>. Notwithstanding any other provision of the Plan,
in no event may any Option be exercised, in whole or in part, prior to the date the Plan
is approved by the shareholders of the Company as provided herein, or after ten years
following the date upon which the Option is granted, or after the occurrence of an event
referred to in Section&nbsp;17 hereof which results in termination of the Option. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8
<U>Method of Exercise</U>. An Option that is exercisable may be exercised by the
Grantee&#146;s delivery to the Company of written notice of exercise on any business day,
at the Company&#146;s principal office, addressed to the attention of the Committee. Such
notice shall specify the number of shares of Stock with respect to 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. The minimum number of shares of Stock with
respect to which an Option may be exercised, in whole or in part, at any time shall be the
lesser of (i)&nbsp;100&nbsp;shares or such lesser number set forth in the applicable Award
Agreement and (ii)&nbsp;the maximum number of shares available for purchase under the
Option at the time of exercise. Payment of the Option Price for the shares purchased
pursuant to the exercise of an Option shall be made (i)&nbsp;in cash or in cash
equivalents; (ii)&nbsp;through the tender to the Company of shares of 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, and which shares, if
acquired by the Grantee from the Company, shall have been held by the Grantee for at least
six months; or (iii) by a combination of the methods described in (i) and (ii). The
Committee may provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of exercise
provided that the notice of exercise directs that the certificate or certificates for the
shares of Stock for which the Option is exercised be delivered to a licensed broker
acceptable to the Company as the agent for the individual exercising the Option and, at
the time such certificate or certificates are delivered, the broker tenders to the Company
cash (or cash equivalents acceptable to the Company) equal to the Option Price for the
shares of Stock purchased pursuant to the exercise of the Option plus the amount (if any)
of federal and/or other taxes which the Company may in its judgment, be required to
withhold with respect to the exercise of the Option. An attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no force and
effect. Unless otherwise stated in the applicable Award Agreement, an individual holding
or exercising an Option shall have none of the rights of a shareholder (for example, the
right to receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock) until the shares
of Stock covered thereby are fully paid and issued to him. Except as provided in
Section&nbsp;17 hereof, no adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date of such issuance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9
<U>Delivery of Stock Certificates</U>. Promptly after the exercise of an Option by a
Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the
issuance of a stock certificate or certificates evidencing his or her ownership of the
shares of Stock subject to the Option. </FONT></P>

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<A NAME=A076></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.
TRANSFERABILITY OF OPTIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option granted pursuant to this Plan shall, during a Grantee&#146;s lifetime, be
exercisable only by the Grantee or his or her permitted transferees, and neither the
Option nor any right thereunder shall be transferable by the Grantee, by operation of law
or otherwise, other than as may be provided in the Award Agreement evidencing such Option
or as may be provided by will or the laws of descent and distribution. Except as may be
provided in the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution, attachment or
similar processes. </FONT></P>

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<A NAME=A077></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.
RESTRICTED STOCK</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1
<U>Grant of Restricted Stock or Restricted Stock Units</U>. The Committee may from time to
time grant Restricted Stock or Restricted Stock Units to persons eligible to receive such
Grants as set forth in Section&nbsp;6 hereof, subject to such restrictions, conditions and
other terms as the Committee may determine. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2
<U>Restrictions</U>. At the time a Grant of Restricted Stock or Restricted Stock Units is
made, the Committee shall establish a period of time (the &#147;Restricted Period&#148;)
applicable to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period. The
Committee may, in its sole discretion, at the time a Grant of Restricted Stock or
Restricted Stock Units is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the Restricted
Stock or Restricted Stock Units. Such performance objectives shall be established in
writing by the Committee prior to the ninetieth day of the year in which the Grant is made
and while the outcome is substantially uncertain. Performance objectives shall be based on
Stock price, market share, sales, earnings per share, return on equity or costs.
Performance objectives may include positive results, maintaining the status quo or
limiting economic losses. The Committee also may, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to all or a
portion of the Restricted Stock or Restricted Stock Units. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered
or disposed of during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Stock or
Restricted Stock Units. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3
<U>Restricted Stock Certificates</U>. The Company shall issue, in the name of each Grantee
to whom Restricted Stock has been granted, stock certificates representing the total
number of shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Secretary of the Company shall hold such
certificates for the Grantee&#146;s benefit until such time as the Restricted Stock is
forfeited to the Company, or the restrictions lapse. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.4
<U>Rights of Holders of Restricted Stock</U>. Unless the Committee otherwise provides in
an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock
and the right to receive any dividends declared or paid with respect to such Stock. The
Committee may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.5
<U>Rights of Holders of Restricted Stock Units</U>. Unless the Committee otherwise
provides in an Award Agreement, holders of Restricted Stock Units shall have no rights as
stockholders of the Company. The Committee may provide in an Award Agreement evidencing a
Grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be
entitled to receive, upon the Company&#146;s payment of a cash dividend on its outstanding
Stock, a cash payment for each Restricted Stock Unit held as of the record date for such
dividend equal to the per-share dividend paid on the Stock. Such Award Agreement may also
provide that such cash payment will be deemed reinvested in additional Restricted Stock
Units at a price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.6
<U>Termination of Employment or Other Relationship</U>. Upon the termination of the
employment of a Grantee with the Company, the Partnership or a Service Provider, or of a
Service Provider&#146;s relationship with the Company, in either case other than, in the
case of individuals, by reason of death or &#147;permanent and total disability&#148;
(within the meaning of Section&nbsp;22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect to which
all applicable restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Committee, in its discretion, determines otherwise. Upon forfeiture
of Restricted Stock or Restricted Stock Units, the Grantee shall have no further rights
with respect to such Grant, including but not limited to any right to vote Restricted
Stock or any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or government
service shall constitute a termination of employment for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive. For
purposes of the Plan, a termination of employment, service or other relationship shall not
be deemed to occur if the Grantee is immediately thereafter employed with the Company or
any other Service Provider, or is engaged as a Service Provider. Whether a termination of
a Service Provider&#146;s relationship with the Company shall have occurred shall be
determined by the Committee, which determination shall be final and conclusive. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.7
<U>Rights in the Event of Death</U>. If a Grantee dies while employed by the Company, the
Partnership or a Service Provider or while serving as a Service Provider, all Restricted
Stock or Restricted Stock Units granted to such Grantee shall fully vest on the date of
death, and the shares of Stock represented thereby shall be deliverable in accordance with
the terms of the Plan to the executors, administrators, legatees or distributees of the
Grantee&#146;s estate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.8
<U>Rights in the Event of Disability</U>. If a Grantee terminates employment with the
Company, the Partnership or a Service Provider, or (if the Grantee is a Service Provider
who is an individual) ceases to provide services to the Company, in either case by reason
of the &#147;permanent and total disability&#148; (within the meaning of
Section&nbsp;22(e)(3) of the Code) of such Grantee, such Grantee&#146;s Restricted Stock
or Restricted Stock Units shall continue to vest in accordance with the applicable Award
Agreement for a period of one year after such termination of employment or service (or
such longer period as the Committee, in its discretion, may determine prior to the
expiration of such one-year period), subject to the earlier forfeiture of such Restricted
Stock or Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered by reason of
&#147;permanent and total disability&#148; for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.9
<U>Delivery of Stock and Payment Therefor</U>. Upon the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee, the restrictions applicable to shares of Restricted Stock or Restricted Stock
Units shall lapse, and, upon payment by the Grantee to the Company, in cash or by check,
of the aggregate par value of the shares of Stock represented by such Restricted Stock or
Restricted Stock Units, a stock certificate for such shares shall be delivered, free of
all such restrictions, to the Grantee or the Grantee&#146;s beneficiary or estate, as the
case may be. </FONT></P>

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<A NAME=A078></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.
PARACHUTE LIMITATIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
any other provision of this Plan or of any other agreement, contract, or understanding
heretofore or hereafter entered into by a Grantee with the Company or any Subsidiary,
except an agreement, contract, or understanding hereafter entered into that expressly
modifies or excludes application of this paragraph (an &#147;Other Agreement&#148;), and
notwithstanding any formal or informal plan or other arrangement for the direct or
indirect provision of compensation to 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 &#147;Benefit Arrangement&#148;), if the Grantee is a &#147;disqualified
individual,&#148; as defined in Section&nbsp;280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any payment
or other benefit under this Plan shall not become exercisable or vested (i)&nbsp;to the
extent that such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to the
Grantee under this Plan to be considered a &#147;parachute payment&#148; within the
meaning of Section&nbsp;280G(b)(2) of the Code as then in effect (a &#147;Parachute
Payment&#148;) <U>and </U>(ii)&nbsp;if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the Company under this Plan, all
Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax
amount that could be received by the 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, vesting, payment, or benefit under this Plan, in conjunction with all other
rights, payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a Parachute
Payment under this Plan that would have the effect of decreasing the after-tax amount
received by the Grantee as described in clause&nbsp;(ii) of the preceding sentence, then
the Grantee shall have the right, in the Grantee&#146;s sole discretion, to designate
those rights, payments, or benefits under this 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 Plan be deemed to be a Parachute Payment. </FONT></P>

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<A NAME=A079></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.
REQUIREMENTS OF LAW</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1
<U>General</U>. The Company shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares would constitute a violation by the
Grantee, any other individual exercising an Option, or 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 subject to a
Grant upon any securities exchange or under any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the issuance or purchase of shares
hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual
exercising an Option pursuant to such Grant unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Company, and any delay caused thereby shall in no way
affect the date of termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of
Restricted Stock or Stock underlying Restricted Stock Units, unless a registration
statement under such Act is in effect with respect to the shares of Stock covered by such
Grant, the Company shall not be required to sell or issue such shares unless the Committee
has received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the Committee 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. The Company shall
not be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly imposes
the requirement that an Option shall not be exercisable until the shares of Stock covered
by such Option are registered or are exempt from registration, the exercise of such 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. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2
<U>Rule 16b-3</U>. It is the intent of the Company that Grants pursuant to the Plan and
the exercise of Options granted hereunder will qualify for the exemption provided by Rule
16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by
the Committee does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative to the extent permitted by law and deemed advisable by the Committee, and
shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement. </FONT></P>

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<A NAME=A080></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.
AMENDMENT AND TERMINATION OF THE PLAN</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any shares of Stock as to which Grants have not been made; <U>provided</U>,
<U>however</U>, that the Board shall not, without approval of the Company&#146;s
shareholders, amend the Plan such that it does not comply with the Code. The Company may
retain the right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of the Grantee taking actions in &#147;competition with the
Company,&#148; as defined in the applicable Award Agreement. Furthermore, the Company may
annul a Grant if the Grantee is an employee of the Company or an affiliate and is
terminated &#147;for cause&#148; as defined in the applicable Award Agreement. Except as
permitted under this Section&nbsp;16 or Section&nbsp;17 hereof, no amendment, suspension,
or termination of the Plan shall, without the consent of the Grantee, alter or impair
rights or obligations under any Grant theretofore awarded under the Plan. </FONT></P>

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<A NAME=A081></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.
EFFECT OF CHANGES IN CAPITALIZATION</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.1
<U>Changes in Stock</U>. If the number of outstanding shares of Stock is increased or
decreased or the shares of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company on account 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 Company occurring
after the Effective Date, the number and kinds of shares for which Grants of Options,
Restricted Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind of shares
for which Grants are outstanding shall be adjusted proportionately and accordingly so that
the proportionate interest of the Grantee immediately following such event shall, to the
extent practicable, be the same as immediately before such event. Any such adjustment in
outstanding Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of the Option outstanding but shall
include a corresponding proportionate adjustment in the Option Price per share. In the
event of a spin-off by the Company of the shares of a subsidiary, a stock dividend for
which the Company will claim a dividends paid deduction under Section 561 of the Code (or
any successor provision), or a pro rata distribution to all shareholders of other assets
of the Company, the Committee may, but shall not be required to, make appropriate
adjustments to (i) the number and kind of shares or other assets for which outstanding
Options are exercisable and (ii) the per-share exercise price of outstanding Options. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.2
<U>Reorganization in Which the Company Is the Surviving Entity and in Which No Change of
Control Occurs</U>. Subject to Section&nbsp;17.3 hereof, if the Company shall be the
surviving entity in any reorganization, merger, or consolidation of the Company with one
or more other entities, any Option theretofore granted pursuant to the Plan shall pertain
to and apply to the securities to which a holder of the number of shares of Stock subject
to such 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 of the shares remaining subject to the Option immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an Award
Agreement evidencing a Grant of Restricted Stock, any restrictions applicable to such
Restricted Stock shall apply as well to any replacement shares received by the Grantee as
a result of the reorganization, merger or consolidation. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.3
<U>Reorganization, Sale of Assets or Sale of Stock Which Involves a Change of Control</U>.
Subject to the exceptions set forth in the last sentence of this Section&nbsp;17.3, (i)
upon the occurrence of a &#147;Change of Control&#148; (as defined below), all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have vested, and
all restrictions and conditions applicable to such shares of Restricted Stock and
Restricted Stock Units shall be deemed to have lapsed immediately prior to the occurrence
of such Change of Control, and (ii) fifteen days prior to the scheduled consummation of a
Change of Control, all Options outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen days. Any exercise of an 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, the Plan and all outstanding but
unexercised Options shall terminate. The Committee shall send written notice of an event
that will result in such a termination to all individuals who hold Options not later than
the time at which the Company gives notice thereof to its shareholders. For purposes of
this Section&nbsp;17.3, a &#147;Change of Control&#148; shall be deemed to occur upon (i)
the dissolution or liquidation of the Company or upon a merger, consolidation, or
reorganization of the Company with one or more other entities in which the Company is not
the surviving entity, (ii) a sale of substantially all of the assets of the Company to
another entity, or (iii) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving corporation) which results in any
person or entity (other than B.&nbsp;Wayne Hughes and members of his family and their
affiliates) owning 50% or more of the combined voting power of all classes of stock of the
Company. This Section&nbsp;17.3 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
continuation of the Plan or the assumption of the Options, Restricted Stock and Restricted
Stock Units theretofore granted, or for the substitution for such Options, Restricted
Stock and Restricted Stock Units of new options, restricted stock and restricted stock
units 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 Plan and Options, Restricted Stock and Restricted Stock Units
theretofore granted 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&nbsp;17.3. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.4
<U>Adjustments</U>. Adjustments under this Section&nbsp;17 related to shares of Stock or
securities of the Company shall be made by the Committee, whose determination in that
respect shall be final, binding and conclusive. No fractional shares or other securities
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. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.5
<U>No Limitations on Company</U>. The making of Grants pursuant to the Plan shall not
affect or limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business structure or to
merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its
business or assets. </FONT></P>

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<A NAME=A082></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.
DISCLAIMER OF RIGHTS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or any
affiliate, or to interfere in any way with any contractual or other right or authority of
the Company or any Service Provider either to increase or decrease the compensation or
other payments to any individual at any time, or to terminate any employment or other
relationship between any individual and the Company or a Service Provider. No provision in
the Plan or in any Grant awarded or Award Agreement entered into pursuant to the Plan
shall be construed to confer upon any individual the right to remain in the service of the
Company as a director (including as an Outside Director), or shall interfere with or
restrict in any way the rights of the Company&#146;s shareholders to remove any director
pursuant to the provisions of the California General Corporation Law, as from time to time
amended. In addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Award Agreement, no Grant awarded under the Plan
shall be affected by any change of duties or position of the Optionee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee continues
to be a director, officer, consultant, employee, or independent contractor (as the case
may be) of the Company or a Service Provider. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay
only those amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Company to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any participant or beneficiary under the terms of the Plan. No Grantee shall
have any of the rights of a shareholder with respect to the shares of Stock subject to an
Option except to the extent the certificates for such shares of Stock shall have been
issued upon the exercise of the Option. </FONT></P>

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<A NAME=A083></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.
NONEXCLUSIVITY OF THE PLAN</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the adoption of the Plan nor the submission of the Plan to the shareholders of the Company
for approval shall be construed as creating any limitations upon the right and authority
of the Board to adopt such other incentive compensation arrangements (which arrangements
may be applicable either generally to a class or classes of individuals or specifically to
a particular individual or particular individuals) as the Board in its discretion
determines desirable, including, without limitation, the granting of stock options
otherwise than under the Plan. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left-TNR" FSL="Workstation" -->
<A NAME=A084></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.
WITHHOLDING TAXES</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company, a Subsidiary or a Service Provider, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state, or local
taxes of any kind required by law to be withheld with respect to the vesting of or other
lapse of restrictions applicable to Restricted Stock or Restricted Stock Units or upon the
issuance of any shares of Stock upon the exercise of an Option. At the time of such
vesting, lapse, or exercise, the Grantee shall pay to the Company, the Subsidiary or the
Service Provider, as the case may be, any amount that the Company, the Subsidiary or the
Service Provider may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company, the Subsidiary or the Service
Provider, which may be withheld by the Company, the Subsidiary or the Service Provider, as
the case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i)&nbsp;by causing the Company, the Subsidiary or the
Service Provider to withhold shares of Stock otherwise issuable to the Grantee or
(ii)&nbsp;by delivering to the Company, the Subsidiary or the Service Provider shares of
Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall
have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market
Value of the shares of Stock used to satisfy such withholding obligation shall be
determined by the Company, the Subsidiary or the Service Provider 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&nbsp;20 may satisfy his or her withholding obligation only with
shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting,
or other similar requirements. </FONT></P>

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<A NAME=A085></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.
CAPTIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such Award
Agreement. </FONT></P>

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<A NAME=A086></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.
OTHER PROVISIONS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Grant awarded under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Committee, in its sole discretion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left-TNR" FSL="Workstation" -->
<A NAME=A087></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.
NUMBER AND GENDER</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left-TNR" FSL="Workstation" -->
<A NAME=A088></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.
SEVERABILITY</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and
thereof shall be severable and enforceable in accordance with their terms, and all
provisions shall remain enforceable in any other jurisdiction. </FONT></P>

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<A NAME=A089></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.
GOVERNING LAW</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
validity and construction of this Plan and the instruments evidencing the Grants awarded
hereunder shall be governed by the laws of the State of California. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan was duly adopted and approved by the Board of Directors of the Company as of the 27th
day of February, 2003. </FONT></P>

<PRE>
                                                            /S/ JACK E. CORRIGAN
                                             Jack E. Corrigan
                                                              Secretary of the Company
</PRE>
<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan was duly approved by the shareholders of the Company on the ______ day of May, 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Page Rule Single" FSL="Default" -->
     <HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE>

<PRE>
                                                             Jack E. Corrigan
                                                              Secretary of the Company
</PRE>
</BODY>
</HTML>
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{"company-data": {"conformed-name": "PS BUSINESS PARKS INC/CA", "cik": "0000866368", "assigned-sic": "6798", "irs-number": "954300881", "state-of-incorporation": "CA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-104604", "film-number": "03654133"}, "business-address": {"street1": "701 WESTERN AVE", "street2": "SUITE 200", "city": "GLENDALE", "state": "CA", "zip": "91201-2397", "phone": "(818) 244-8080"}, "mail-address": {"street1": "701 WESTERN AVE", "street2": "SUITE 200", "city": "GLENDALE", "state": "CA", "zip": "91201"}, "former-company": {"former-conformed-name": "PUBLIC STORAGE PROPERTIES XI INC", "date-changed": "19930328"}}
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-8
REGISTRATION STATEMENT
Under
The Securities Act of
1933
PS BUSINESS PARKS, INC.
(Exact name of
registrant as specified in its charter)
California
(State or other
jurisdiction of incorporation or organization)
95-4300881
(I.R.S.
          Employer Identification No.)
701 Western Avenue
Glendale, California
91201-2349
(Address of Principal
Executive Offices with Zip Code)
PS BUSINESS PARKS,
INC. 2003 STOCK OPTION AND INCENTIVE PLAN
(Full Title of the
Plans)
HARVEY LENKIN
PS Business Parks, Inc.
701 Western Avenue
Glendale, California
91201-2349
(818) 244-8080
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
With a copy to:
DAVID GOLDBERG, ESQ.
PS Business Parks, Inc.
701 Western Avenue
Glendale, California
91201-2349
CALCULATION OF
REGISTRATION FEE
------------------------------------------ ------------ -------------------- -------------------- ----------------
                                                           Proposed maximum     Proposed maximum
                                              Amount to     offering price     aggregate offering      Amount of
                                                 be            per share              price          registration
    Title of Securities to be Registered     registered                                                   fee
  ------------------------------------------ ------------ -------------------- -------------------- ----------------
  Common Stock, $.01 par value per
  share....................................     1,500,000       $30.20 (2)           $45,300,000        $3,665 (2)
  ------------------------------------------ ------------ -------------------- -------------------- ----------------
(1)
Issuable under the PS Business Parks, Inc. Stock Option and Incentive Plan.
(2)
Estimated pursuant to Rule 457(h) under the Securities Act of 1933 as of April
          11, 2003 solely for the purpose of calculating the registration fee.
PART I
INFORMATION REQUIRED
IN THE SECTION 10(a) PROSPECTUS
Documents
containing the information required to be provided in this Part I will be separately sent
or given to employees as contemplated by Rule 428(b)(1) under the Securities Act of 1933,
as amended (the "Securities Act"). In accordance with the instructions to Part I
of Form S-8, such documents will not be filed with the Securities and Exchange Commission
(the "Commission") either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act.
PART II
INFORMATION REQUIRED
IN THE REGISTRATION STATEMENT
ITEM 3. Incorporation of
Documents by Reference
PS
Business  Parks,  Inc. (the "Company")  hereby  incorporates  by reference into this
 Registration  Statement the following documents:
(a)
The Company's Annual Report on Form 10-K for the fiscal year ended December
          31, 2002;
(b)
All reports filed by the Company with the Commission under Section 13(a) or
          15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
          Act"), since December 31, 2002;
(c)
The description of the Company's Common Stock, $.01 par value per share,
          contained in the Company's Registration Statement on Form 8-A, effective
          March 15, 1991, as supplemented by the description of the Company's Common
          Stock contained in the Prospectus dated May 7, 2001 included in the
          Company's Registration Statement on Form S-3 (File No. 333-78627);
(d)
All documents subsequently filed by the Company pursuant to Section 13(a),
          13(c), 14, or 15(d) of the Exchange Act, prior to the filing of a post-effective
          amendment which indicates that all securities offered have been sold or which
          deregisters all securities remaining unsold.
Any
statement contained in a document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded to the extent that a statement contained in
any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such prior statement. The documents required to be
so modified or superseded shall not be deemed to constitute a part of this Registration
Statement, except as so modified or superseded.
To
the extent that any proxy statement is incorporated by reference herein, such
incorporation shall not include any information contained in such proxy statement which is
not, pursuant to the Commission's rules, deemed to be "filed" with the
Commission or subject to the liabilities of Section 18 of the Exchange Act.
ITEM 4. Description of
Securities
A
description of the Company's Common Stock, $.01 par value per share, is incorporated
by reference under Item 3.
ITEM 5. Interests of
Named Experts and Counsel
David
Goldberg, vice president and counsel of the Company, has delivered an opinion to the
effect that the shares of Common Stock covered by this Registration Statement will be
legally issued, fully paid and non-assessable. Mr. Goldberg owns 3,113 shares of the
Company's Common Stock, and has options to acquire an additional 3,995 shares of the
Company's Common Stock.
ITEM 6. Indemnification
of Directors and Officers
The
Company's Restated Articles of Incorporation provide that the Company may indemnify
the agents of the Company to the maximum extent permitted under California law. The
Company has also entered into indemnity agreements with its management and non-management
directors and executive officers. The agreements permit the Company to indemnify directors
and executive officers to the maximum extent permitted under California law and prohibit
the Company from terminating its indemnification obligations as to acts or omissions of
any director or executive officer occurring before the termination. The indemnification
and limitations on liability permitted by the Restated Articles of Incorporation and the
agreements are subject to the limitations set forth by California law. The Company
believes the indemnification agreements will assist it in attracting and retaining
qualified individuals to serve as directors and executive officers of the Company.
ITEM 7. Exemption From
Registration Claimed
Not
applicable.
ITEM 8. Exhibits
--------------------- ---------------------------------------------------------------------------------------
  Exhibit Number                                             Description
  --------------------- ---------------------------------------------------------------------------------------
          5.1           Opinion of David Goldberg as to the legality of the securities being registered.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.1          Consent of Independent Auditors.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.2          Consent of David Goldberg (included in Exhibit 5.1).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          24.1          Power of Attorney (contained in this Registration Statement).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          99.1          The Company's 2003 Stock Option and Incentive Plan.
  --------------------- ---------------------------------------------------------------------------------------
ITEM 9. Undertakings
(a)       
          The undersigned Registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a
               post-effective amendment to this Registration Statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
To reflect in the prospectus any facts or events arising after the effective
          date of the Registration Statement (or the most recent post-effective amendment
          thereof) which, individually or in the aggregate, represent a fundamental change
          in the information set forth in the Registration Statement;
(iii)
To include any material information with respect to the plan of distribution
          not previously disclosed in the Registration Statement or any material change to
          such information in the Registration Statement; provided, however, that
          paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to
          be included in a post-effective amendment by those paragraphs is contained in
          periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
          of the Exchange Act that are incorporated by reference in this Registration
          Statement.
(2)
That, for the purpose of determining any liability under the Securities Act,
               each such post-effective amendment shall be deemed to be a new Registration
               Statement relating to the securities offered therein, and the offering of such
               securities at that time shall be deemed to be the initial bona fide offering
               thereof.
(3)
To remove from registration by means of a post-effective amendment any of the
               securities being registered that remain unsold at the termination of the
               offering.
(b)
The undersigned Registrant hereby undertakes that, for purposes of determining
          any liability under the Securities Act, each filing of the Registrant's
          annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
          that is incorporated by reference in this Registration Statement shall be deemed
          to be a new Registration Statement relating to the securities offered therein,
          and the offering of such securities at that time shall be deemed to be the
          initial bona fide offering thereof.
(c)
Insofar as indemnification for liabilities arising under the Securities Act may
          be permitted to directors, officers, and controlling persons of the Registrant
          pursuant to the foregoing provisions, or otherwise, the Registrant has been
          advised that in the opinion of the Commission such indemnification is against
          public policy as expressed in the Securities Act and is, therefore,
          unenforceable. In the event that a claim for indemnification against such
          liabilities (other than the payment by the Registrant of expenses incurred or
          paid by a director, officer or controlling person of the Registrant in the
          successful defense of any action, suit or proceeding) is asserted by such
          director, officer or controlling person in connection with the securities being
          registered, the Registrant will, unless in the opinion of its counsel the matter
          has been settled by controlling precedent, submit to a court of appropriate
          jurisdiction the question whether such indemnification by it is against public
          policy as expressed in the Securities Act and will be governed by the final
          adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing on Form S-8
and has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Glendale, State of California, on
the 15th day of April, 2003.
PS BUSINESS PARKS, INC.

                                                              By:      /S/ DAVID GOLDBERG
                                                                       David Goldberg, Vice President
POWER OF ATTORNEY
Each
director and officer of PS Business Parks, Inc. whose signature appears below hereby
authorizes Ronald L. Havner, Jr. and Harvey Lenkin, and each of them, as attorney-in-fact
and agent, with full powers of substitution and resubstitution, to sign on his behalf,
individually and in each capacity stated below, any amendment, including post-effective
amendments to this Registration Statement and/or to sign any related registration
statement filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and in
each case to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, with full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting
alone, or his substitute(s), may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature                                                 Title                               Date

                                                Chairman of the Board and Chief  Executive
        /s/ Ronald L. Havner, Jr.               Officer (principal executive officer)
        Ronald L. Havner, Jr.                                                                    April 15, 2003

                                                Vice   President   and   Chief   Financial
        /s/ Jack E. Corrigan                    Officer  (principal  financial officer and
        Jack E. Corrigan                        principal accounting officer)                    April 15, 2003

        /s/ Harvey Lenkin
        Harvey Lenkin                           Director                                         April 15, 2003

        /s/ Vern O. Curtis
        Vern O. Curtis                          Director                                         April 15, 2003

        /s/ James H. Kropp
        James H. Kropp                          Director                                         April 15, 2003

        /s/ Jack D. Steele
        Jack D. Steele                          Director                                         April 15, 2003

        /s/ Alan K. Pribble
        Alan K. Pribble                         Director                                         April 15, 2003

        /s/ Arthur M. Friedman
        Arthur M. Friedman                      Director                                         April 15, 2003
EXHIBIT INDEX
--------------------- ---------------------------------------------------------------------------------------
  Exhibit Number                                             Description
  --------------------- ---------------------------------------------------------------------------------------
          5.1           Opinion of David Goldberg as to the legality of the securities being registered.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.1          Consent of Independent Auditors.
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          23.2          Consent of David Goldberg (included in Exhibit 5.1).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          24.1          Power of Attorney (contained on page 5 of this Registration Statement).
  --------------------- ---------------------------------------------------------------------------------------
  --------------------- ---------------------------------------------------------------------------------------
          99.1          The Company's 2003 Stock Option and Incentive Plan.
  --------------------- ---------------------------------------------------------------------------------------
Exhibit 5.1
DAVID GOLDBERG
Vice President and
Counsel
701 Western Avenue
Glendale, California
91201-2349
April 15, 2003
PS Business Parks, Inc.
701 Western Avenue
Glendale, California 91201-2349
Gentlemen:
As
Vice President and Counsel of PS Business Parks, Inc. (the "Company"), I have
examined the Registration Statement on Form S-8, which is being filed by the Company on or
about the date hereof with the Securities and Exchange Commission (the "Registration
Statement"), relating to the offer and sale of up to 1,500,000 shares of the
Company's Common Stock, par value $.10 per share, (the "securities"),
pursuant to the Company's 2003 Stock Option and Incentive Plan (the
"Plan").
I
am familiar with the proceedings taken and proposed to be taken by the Company relating to
the authorization and issuance of the Securities in the manner set forth in the
Registration Statement and the Plan.
Subject
to the taking of the contemplated proceedings in connection with the foregoing matters, I
am of the opinion that the Securities, when issued and sold in the manner set forth in the
Registration Statement and the Plan, will be legally issued and outstanding, fully paid
and non-assessable.
I
hereby consent to the reference to me under the caption "Interests of Named Experts
and Counsel" in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
/s/ DAVID GOLDBERG
Exhibit 23.1
CONSENT OF INDEPENDENT
AUDITORS
We consent to the incorporation by
reference in the Registration Statement on Form S-8 (No. 333-____________) of PS Business
Parks, Inc. pertaining to the PS Business Parks, Inc. 2003 Stock Option and Incentive Plan
of our report dated February 14, 2003, with respect to the consolidated financial
statements and schedule of PS Business Parks, Inc. included in its Annual Report on Form
10-K for the year ended December 31, 2003 filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG
LLP
Los Angeles, California
April 15, 2003
Exhibit 99.1
PS BUSINESS PARKS, INC.
2003 STOCK OPTION AND
INCENTIVE PLAN
PS
Business Parks,  Inc., a California  corporation (the "Company"),  sets forth herein the
terms of its 2003 Stock Option and Incentive Plan (the "Plan") as follows:
1.
PURPOSE
The
Plan is intended to enhance the Company's ability to attract and retain highly
qualified officers, key employees, outside directors, and other persons to advance the
interests of the Company by providing such persons with stronger incentives to continue to
serve the Company and its affiliates (as defined herein) and to expend maximum effort to
improve the business results and earnings of the Company. The Plan is intended to
accomplish this objective by providing to eligible persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of the
Company. To this end, the Plan provides for the grant of stock options, restricted stock
and restricted stock units in accordance with the terms hereof. Stock options granted
under the Plan may be non-qualified stock options or incentive stock options, as provided
herein, except that stock options granted to outside directors shall in all cases be
non-qualified stock options.
2.
DEFINITIONS
For
purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:
2.1
"Affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under the 1933 Act
(as defined herein).
2.2
"Award Agreement" means the stock option agreement, restricted stock agreement,
restricted stock unit agreement or other written agreement between the Company and a
Grantee that evidences and sets out the terms and conditions of a Grant.
2.3
"Benefit Arrangement" shall have the meaning set forth in Section 14 hereof.
2.4
"Board" means the Board of Directors of the Company.
2.5
"Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.
2.6
"Committee" means one or more committees of the Board, as designated from time
to time by resolution of the Board, each of which shall have all powers, privileges and
obligations vested by the Plan in the Committee to the extent specified in such
resolution. At least one committee of the Board that is designated by the Board as a
Committee shall consist of no fewer than two members of the Board, none of whom shall be
an officer or other salaried employee of the Company or any affiliate, and each of whom
shall qualify in all respects as a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act or any successor rule or regulation and as an
"outside director" within the meaning of Section 162(m) of the Code. Until such
time as the Board shall determine otherwise, the Compensation Committee of the Board shall
be such Committee.
2.7
"Company" means PS Business Parks, Inc.
2.8
"Effective Date" means February 27, 2003, the date on which the Plan was adopted by the Board.
2.9
"Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
2.10
"Fair Market Value" means the value of a share of Stock, determined as follows:
if on the Grant Date or other determination date the Stock is listed on an established
national or regional stock exchange, is admitted to quotation on the Nasdaq National
Market, or is publicly traded on an established securities market, the Fair Market Value
of a share of Stock shall be the closing price of the Stock on such exchange or in such
market (the closing price on the principal such exchange or market if there is more than
one such exchange or market) on the Grant Date or such other determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices on such
trading day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market Value
shall be the value of the Stock as determined by the Committee in good faith.
2.11
"Grant" means an award of an Option, Restricted Stock or Restricted Stock Units under the Plan.
2.12
"Grant Date" means (a) for Grants other than Grants to Outside Directors, the
later of (i) the date as of which the Committee approves the Grant or (ii) the
date as of which the Grantee and the Company or Service Provider enter into the
relationship resulting in the Grantee's becoming eligible to receive a Grant, and (b)
for Grants to Outside Directors, the date on which such Grant is made in accordance with
Section 7 hereof.
2.13
"Grantee" means a person who receives or holds an Option, Restricted Stock or
Restricted Stock Units under the Plan.
2.14
"Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15
"Option" means an option to purchase one or more shares of Stock pursuant to the Plan.
2.16
"Option Period" means the period during which Options may be exercised as set forth in Section 11 hereof.
2.17
"Option Price" means the purchase price for each share of Stock subject to an Option.
2.18
" Other Agreement" shall have the meaning set forth in Section 14 hereof.
2.19
"Outside Director" means a member of the Board who is not an officer or employee of the Company.
2.20
" Partnership" means PS Business Parks, L.P., a California limited partnership.
2.21
"Plan" means the PS Business Parks, Inc. 2003 Stock Option and Incentive Plan.
2.22
"Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act.
2.23
"Restricted Period" means the period during which Restricted Stock or Restricted
Stock Units are subject to restrictions or conditions pursuant to Section 13.2
hereof.
2.24
"Restricted Stock" means shares of Stock, awarded to a Grantee pursuant to
Section 13 hereof, that are subject to restrictions and to a risk of forfeiture.
2.25
"Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
Section 13 hereof, which represents a conditional right to receive a share of Stock
in the future, and which is subject to restrictions and to a risk of forfeiture.
2.26
"Securities Act" means the Securities Act of 1933, as now in effect or as hereafter amended.
2.27
"Service Provider" means a consultant or adviser to the Company, a manager of
the Company's properties or affairs, or other similar service provider or affiliate
of the Company, or any corporation or other entity in which the Company owns at least a
ninety percent (90%) economic interest, and employees of any of the foregoing, as such
persons may be designated from time to time by the Committee pursuant to Section 6
hereof.
2.28
    "Stock" means the common stock, par value $0.10 per share, of the Company.
2.29
"Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code and any "parent corporation" of
the Committee within the meaning of Section 442(e) of the Code.
2.30
    "Termination  Date" shall be the date upon which an Option shall  terminate or
expire,  as set forth in  Section 11.2 hereof.
3.
ADMINISTRATION OF THE PLAN
3.1
General
. Subject to Section 3.2 hereof, the Plan shall be administered by the
Committee. The Board may remove members, add members, and fill vacancies on the Committee
from time to time, all in accordance with the Company's articles of incorporation and
by-laws and applicable law.
3.2
Plenary Authority of the Committee
. Subject to Section 3.4 hereof, the Committee
shall have such powers and authorities related to the administration of the Plan as are
consistent with the Company's articles of incorporation and by-laws and applicable
law. The Committee shall have full power and authority to take all actions and to make all
determinations required or provided for under the Plan, subject to any limitations imposed
by the resolutions of the Board designating and empowering such Committee, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the Plan that
the Committee deems to be necessary or appropriate to the administration of the Plan. In
the event, however, that more than one committee of the Board is authorized to act as the
Committee, (i) each such committee shall have the power and authority to take actions and
make determinations required or provided for under an outstanding Grant or Award Agreement
only if such Grant or Award Agreement was initially authorized by such committee, and (ii)
only a committee comprised solely of "non-employee directors" within the meaning
of Rule 16b-3 under the Exchange Act and "outside directors" within the meaning
of Section 162(m) of the Code shall have the authority to approve a Grant to any officer
who is then a Reporting Person. All such actions and determinations shall be by the
affirmative vote of a majority of the members of the Committee present at a meeting or by
unanimous consent of the Committee executed in writing in accordance with the
Company's articles of incorporation and by-laws and applicable law. The
interpretation and construction by the Committee of any provision of the Plan, any Grant
or any Award Agreement shall be final and conclusive.
3.3
Discretionary Grants
. Subject to Section 3.4 hereof and to the other terms and
conditions of the Plan, the Committee shall have full and final authority to designate
Grantees, (i) to determine the type or types of Grant to be made to a Grantee,
(ii) to determine the number of shares of Stock to be subject to a Grant,
(iii) to establish the terms and conditions of each Grant (including, but not limited
to, the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or conditions
that may be necessary to qualify Options as Incentive Stock Options), (iv) to
prescribe the form of each Award Agreement evidencing a Grant, and (v) to amend, modify,
or supplement the terms of any outstanding Grant; provided, however, that the Committee
shall not have the authority to reduce the exercise price of any outstanding Option other
than pursuant to Section 17 hereof. Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but without amending the Plan,
to modify Grants to eligible individuals who are foreign nationals or are individuals who
are employed outside the United States to recognize differences in local law, tax
policy, or custom. As a condition to any subsequent Grant, the Committee shall have the
right, at its discretion, to require Grantees to return to the Company Grants previously
awarded under the Plan. Subject to the terms and conditions of the Plan, any such new
Grant shall be upon such terms and conditions as are specified by the Committee at the
time the new Grant is made.
3.4
Grants to Outside Directors.
With respect to Grants of Options to Outside Directors
pursuant to Section 7 hereof, the Committee's responsibilities under the Plan
shall be limited to taking all legal actions necessary to document the Options so granted,
to interpret the Award Agreements evidencing such Options, to maintain appropriate records
and reports regarding such Options, and to take all acts authorized by this Plan or
otherwise reasonably necessary to effect the purposes hereof.
3.5
No Liability
. No member of the Board or of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Grant or Award
Agreement.
3.6
Applicability of Rule 16b-3
. Those provisions of the Plan that make express
reference to Rule 16b-3 under the Exchange Act shall apply only to Reporting Persons.
4.
STOCK SUBJECT TO THE PLAN
Subject
to adjustment as provided in Section 16 hereof, the number of shares of Stock
available for issuance under the Plan shall be 1,500,000. Stock issued or to be issued
under the Plan shall be authorized but unissued shares. If any shares covered by a Grant
are not purchased or are forfeited, or if a Grant otherwise terminates without delivery of
any Stock subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Grant shall, to
the extent of any such forfeiture or termination, again be available for making Grants
under the Plan.
5.
EFFECTIVE DATE AND TERM OF THE PLAN
5.1
Effective Date
. The Plan shall be effective as of the Effective Date, subject to
approval of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of shareholders, provided that the total votes cast
represent a majority of all shares entitled to vote. Upon approval of the Plan by the
shareholders of the Company as set forth above, all Grants made under the Plan on or after
the Effective Date shall be fully effective as if the shareholders of the Company had
approved the Plan on the Effective Date. If the shareholders fail to approve the Plan
within one year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2
Term
. The Plan has no termination date; however, no Incentive Stock Option may be
granted on or after the tenth anniversary of the Effective Date.
6.
DISCRETIONARY GRANTS
6.1
Company or Subsidiary Employees
. Grants (including Grants of Incentive Stock
Options) may be made under the Plan to any employee of the Company or of any Subsidiary,
including any such employee who is an officer or director of the Company or of any
Subsidiary, as the Committee shall determine and designate from time to time.
6.2
Service Providers
. Grants may be made under the Plan to any Service Provider whose
participation in the Plan is determined by the Committee to be in the best interests of
the Company and is so designated by the Committee;
provided
,
however
, that
Grants to Service Providers who are not employees of the Company or of any Subsidiary
shall not be Incentive Stock Options.
6.3
     Successive  Grants. An eligible person may receive more than one Grant,  subject to
such restrictions as are provided herein.
7.
GRANTS TO OUTSIDE DIRECTORS
7.1
Initial Grants of Options
. Each Outside Director who is initially elected to the
Board on or after the Effective Date shall, upon the date of his or her initial election
by the Board or the shareholders of the Company, automatically be awarded a Grant of an
Option, which shall not be an Incentive Stock Option, to purchase 10,000 shares of Stock
(which amount shall be subject to adjustment as provided in Section 17 hereof).
7.2
Subsequent Grants of Options
. Immediately following each Annual Meeting of
Shareholders of the Company held after the Effective Date, each Outside Director then duly
elected and serving (other than an Outside Director initially elected to the Board at such
Annual Meeting of Shareholders) shall automatically be awarded a Grant of an Option, which
shall not be an Incentive Stock Option, to purchase 2,000 shares of Stock (which amount
shall be subject to adjustment as provided in Section 16 hereof).
7.3
Vesting
. Options granted to Outside Directors pursuant to Sections 7.1 and 7.2
shall vest in five equal annual installments in accordance with the schedule set forth in
the first sentence of Section 11.1 hereof.
8.
LIMITATIONS ON GRANTS
8.1
Limitation on Shares of Stock Subject to Grants.
The maximum number of shares of
Stock subject to Options that can be awarded under the Plan to any person eligible for a
Grant under Section 6 hereof is 800,000 during the first ten years after the
Effective Date and 250,000 per year thereafter. The maximum number of shares of Restricted
Stock that can be awarded under the Plan (including for this purpose any shares of Stock
represented by Restricted Stock Units) to any person eligible for a Grant under
Section 6 hereof is 250,000 per year.
8.2
Limitations on Incentive Stock Options.
An Option shall constitute an Incentive
Stock Option only (i) if the Grantee of such Option is an employee of the Company or any
Subsidiary of the Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Stock with respect to which all Incentive
Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by taking Options
into account in the order in which they were granted.
9.
AWARD AGREEMENT
At
the option of the Company, each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or forms as the
Committee shall from time to time determine. Award Agreements granted from time to time or
at the same time need not contain similar provisions but shall be consistent with the
terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify
whether such Options are intended to be non-qualified stock options or Incentive Stock
Options.
10.
OPTION PRICE
The
Option Price of each Option shall be fixed by the Committee and stated in the Award
Agreement evidencing such Option. The Option Price shall be the aggregate Fair Market
Value on the Grant Date of the shares of Stock subject to the Option;
provided
,
however
, that in the event that a Grantee would otherwise be ineligible to receive
an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of
the Code (relating to ownership of more than ten percent of the Company's outstanding
Stock), the Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than the greater of the par value of a share of
Stock or 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no
case shall the Option Price of any Option be less than the par value of a share of Stock.
11.
VESTING, TERM AND EXERCISE OF OPTIONS
11.1
Vesting and Option Period
. Unless otherwise provided in an Award Agreement
evidencing the Grant of an Option, each Option granted under the Plan shall become
exercisable in accordance with the following schedule: (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 Stock subject to such 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 Stock subject to such Option (iv) on the third
anniversary of the Grant Date, the Option shall become exercisable as to additional
one-fifth of the shares of Stock subject to such Option; (v) on the fourth anniversary of
the Grant Date, the Option shall become exercisable as to additional one-fifth of the
shares of Stock subject to such Option; and (vi) on the fifth anniversary of the
Grant Date, the Option shall become exercisable with respect to the remaining shares of
Stock subject to such Option and shall remain exercisable in full up to (but not
including) the Termination Date (as defined in Section 11.2 hereof). For purposes of
this Section 11.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any Option shall
be exercisable in accordance with the foregoing schedule shall constitute the "Option
Period" with respect to such Option.
11.2
Term
. Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten years from the
date such Option is granted, or under such circumstances and on such date prior thereto as
is set forth in the Plan or as may be fixed by the Committee and stated in the Award
Agreement relating to such Option (the "Termination Date");
provided
,
however
, that in the event that the Grantee would otherwise be ineligible to
receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to ownership of more than ten percent of the outstanding
Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option
shall not be exercisable after the expiration of five years from its Grant Date.
11.3
Acceleration
. Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Committee, in its sole discretion,
at any time and from time to time after the Grant Date of such Option, so as to accelerate
the time at which the Option may be exercised. Notwithstanding any other provision of the
Plan, no Option shall be exercisable in whole or in part prior to the date the Plan is
approved by the shareholders of the Company as provided in Section 5.1 hereof.
11.4
Termination of Employment or Other Relationship
. Upon the termination (i) of the
employment of a Grantee with the Company or a Service Provider, (ii) of a Service
Provider's relationship with the Company, or (iii) of an Outside Director's
service to the Company, other than, in the case of individuals, by reason of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of
the Code), any Option or portion thereof held by such Grantee that has not vested in
accordance with the provisions of Section 11.1 hereof shall terminate immediately,
and any Option or portion thereof that has vested in accordance with the provisions of
Section 11.1 hereof but has not been exercised shall terminate at the close of
business on the thirtieth day following the Grantee's termination of service,
employment, or other relationship, unless the Committee, in its discretion, extends the
period during which the Option may be exercised (which period may not be extended beyond
the original term of the Option). Upon termination of an Option or portion thereof, the
Grantee shall have no further right to purchase shares of Stock pursuant to such Option or
portion thereof. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment for purposes of the Plan shall be determined
by the Committee, which determination shall be final and conclusive. For purposes of the
Plan, a termination of employment, service or other relationship shall not be deemed to
occur if the Grantee is immediately thereafter employed with the Company or any other
Service Provider, or is engaged as a Service Provider or an Outside Director of the
Company. Whether a termination of a Service Provider's or an Outside Director's
relationship with the Company shall have occurred shall be determined by the Committee,
which determination shall be final and conclusive.
11.5
Rights in the Event of Death
. If a Grantee dies while employed by the Company or a
Service Provider, or while serving as a Service Provider or an Outside Director, all
Options granted to such Grantee shall fully vest on the date of death, and the executors
or administrators or legatees or distributees of such Grantee's estate shall have the
right, at any time within one year after the date of such Grantee's death (or such
longer period as the Committee, in its discretion, may determine prior to the expiration
of such one-year period) and prior to termination of the Option pursuant to
Section 11.2 above, to exercise any Option held by such Grantee at the date of such
Grantee's death.
11.6
Rights in the Event of Disability
. If a Grantee terminates employment with the
Company or a Service Provider, or (if the Grantee is a Service Provider who is an
individual or is an Outside Director) ceases to provide services to the Company, in either
case by reason of the "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall
continue to vest, and shall be exercisable to the extent that they are vested, for a
period of one year after such termination of employment or service (or such longer period
as the Committee, in its discretion, may determine prior to the expiration of such
one-year period), subject to earlier termination of the Option as provided in
Section 11.2 above. Whether a termination of employment or service is to be
considered by reason of "permanent and total disability" for purposes of the
Plan shall be determined by the Committee, which determination shall be final and
conclusive.
11.7
Limitations on Exercise of Option
. Notwithstanding any other provision of the Plan,
in no event may any Option be exercised, in whole or in part, prior to the date the Plan
is approved by the shareholders of the Company as provided herein, or after ten years
following the date upon which the Option is granted, or after the occurrence of an event
referred to in Section 17 hereof which results in termination of the Option.
11.8
Method of Exercise
. An Option that is exercisable may be exercised by the
Grantee's delivery to the Company of written notice of exercise on any business day,
at the Company's principal office, addressed to the attention of the Committee. Such
notice shall specify the number of shares of Stock with respect to 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. The minimum number of shares of Stock with
respect to which an Option may be exercised, in whole or in part, at any time shall be the
lesser of (i) 100 shares or such lesser number set forth in the applicable Award
Agreement and (ii) the maximum number of shares available for purchase under the
Option at the time of exercise. Payment of the Option Price for the shares purchased
pursuant to the exercise of an Option shall be made (i) in cash or in cash
equivalents; (ii) through the tender to the Company of shares of 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, and which shares, if
acquired by the Grantee from the Company, shall have been held by the Grantee for at least
six months; or (iii) by a combination of the methods described in (i) and (ii). The
Committee may provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of exercise
provided that the notice of exercise directs that the certificate or certificates for the
shares of Stock for which the Option is exercised be delivered to a licensed broker
acceptable to the Company as the agent for the individual exercising the Option and, at
the time such certificate or certificates are delivered, the broker tenders to the Company
cash (or cash equivalents acceptable to the Company) equal to the Option Price for the
shares of Stock purchased pursuant to the exercise of the Option plus the amount (if any)
of federal and/or other taxes which the Company may in its judgment, be required to
withhold with respect to the exercise of the Option. An attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no force and
effect. Unless otherwise stated in the applicable Award Agreement, an individual holding
or exercising an Option shall have none of the rights of a shareholder (for example, the
right to receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock) until the shares
of Stock covered thereby are fully paid and issued to him. Except as provided in
Section 17 hereof, no adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date of such issuance.
11.9
Delivery of Stock Certificates
. Promptly after the exercise of an Option by a
Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the
issuance of a stock certificate or certificates evidencing his or her ownership of the
shares of Stock subject to the Option.
12.
TRANSFERABILITY OF OPTIONS
Each
Option granted pursuant to this Plan shall, during a Grantee's lifetime, be
exercisable only by the Grantee or his or her permitted transferees, and neither the
Option nor any right thereunder shall be transferable by the Grantee, by operation of law
or otherwise, other than as may be provided in the Award Agreement evidencing such Option
or as may be provided by will or the laws of descent and distribution. Except as may be
provided in the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution, attachment or
similar processes.
13.
RESTRICTED STOCK
13.1
Grant of Restricted Stock or Restricted Stock Units
. The Committee may from time to
time grant Restricted Stock or Restricted Stock Units to persons eligible to receive such
Grants as set forth in Section 6 hereof, subject to such restrictions, conditions and
other terms as the Committee may determine.
13.2
Restrictions
. At the time a Grant of Restricted Stock or Restricted Stock Units is
made, the Committee shall establish a period of time (the "Restricted Period")
applicable to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period. The
Committee may, in its sole discretion, at the time a Grant of Restricted Stock or
Restricted Stock Units is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the Restricted
Stock or Restricted Stock Units. Such performance objectives shall be established in
writing by the Committee prior to the ninetieth day of the year in which the Grant is made
and while the outcome is substantially uncertain. Performance objectives shall be based on
Stock price, market share, sales, earnings per share, return on equity or costs.
Performance objectives may include positive results, maintaining the status quo or
limiting economic losses. The Committee also may, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to all or a
portion of the Restricted Stock or Restricted Stock Units. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered
or disposed of during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Stock or
Restricted Stock Units.
13.3
Restricted Stock Certificates
. The Company shall issue, in the name of each Grantee
to whom Restricted Stock has been granted, stock certificates representing the total
number of shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Secretary of the Company shall hold such
certificates for the Grantee's benefit until such time as the Restricted Stock is
forfeited to the Company, or the restrictions lapse.
13.4
Rights of Holders of Restricted Stock
. Unless the Committee otherwise provides in
an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock
and the right to receive any dividends declared or paid with respect to such Stock. The
Committee may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
13.5
Rights of Holders of Restricted Stock Units
. Unless the Committee otherwise
provides in an Award Agreement, holders of Restricted Stock Units shall have no rights as
stockholders of the Company. The Committee may provide in an Award Agreement evidencing a
Grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be
entitled to receive, upon the Company's payment of a cash dividend on its outstanding
Stock, a cash payment for each Restricted Stock Unit held as of the record date for such
dividend equal to the per-share dividend paid on the Stock. Such Award Agreement may also
provide that such cash payment will be deemed reinvested in additional Restricted Stock
Units at a price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
13.6
Termination of Employment or Other Relationship
. Upon the termination of the
employment of a Grantee with the Company, the Partnership or a Service Provider, or of a
Service Provider's relationship with the Company, in either case other than, in the
case of individuals, by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect to which
all applicable restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Committee, in its discretion, determines otherwise. Upon forfeiture
of Restricted Stock or Restricted Stock Units, the Grantee shall have no further rights
with respect to such Grant, including but not limited to any right to vote Restricted
Stock or any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or government
service shall constitute a termination of employment for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive. For
purposes of the Plan, a termination of employment, service or other relationship shall not
be deemed to occur if the Grantee is immediately thereafter employed with the Company or
any other Service Provider, or is engaged as a Service Provider. Whether a termination of
a Service Provider's relationship with the Company shall have occurred shall be
determined by the Committee, which determination shall be final and conclusive.
13.7
Rights in the Event of Death
. If a Grantee dies while employed by the Company, the
Partnership or a Service Provider or while serving as a Service Provider, all Restricted
Stock or Restricted Stock Units granted to such Grantee shall fully vest on the date of
death, and the shares of Stock represented thereby shall be deliverable in accordance with
the terms of the Plan to the executors, administrators, legatees or distributees of the
Grantee's estate.
13.8
Rights in the Event of Disability
. If a Grantee terminates employment with the
Company, the Partnership or a Service Provider, or (if the Grantee is a Service Provider
who is an individual) ceases to provide services to the Company, in either case by reason
of the "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock
or Restricted Stock Units shall continue to vest in accordance with the applicable Award
Agreement for a period of one year after such termination of employment or service (or
such longer period as the Committee, in its discretion, may determine prior to the
expiration of such one-year period), subject to the earlier forfeiture of such Restricted
Stock or Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
13.9
Delivery of Stock and Payment Therefor
. Upon the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee, the restrictions applicable to shares of Restricted Stock or Restricted Stock
Units shall lapse, and, upon payment by the Grantee to the Company, in cash or by check,
of the aggregate par value of the shares of Stock represented by such Restricted Stock or
Restricted Stock Units, a stock certificate for such shares shall be delivered, free of
all such restrictions, to the Grantee or the Grantee's beneficiary or estate, as the
case may be.
14.
PARACHUTE LIMITATIONS
Notwithstanding
any other provision of this Plan or of any other agreement, contract, or understanding
heretofore or hereafter entered into by a Grantee with the Company or any Subsidiary,
except an agreement, contract, or understanding hereafter entered into that expressly
modifies or excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement for the direct or
indirect provision of compensation to 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, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any payment
or other benefit under this Plan shall not become exercisable or vested (i) to the
extent that such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to the
Grantee under this Plan 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 Plan, all
Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax
amount that could be received by the 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, vesting, payment, or benefit under this Plan, in conjunction with all other
rights, payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a Parachute
Payment under this Plan 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 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 Plan be deemed to be a Parachute Payment.
15.
REQUIREMENTS OF LAW
15.1
General
. The Company shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares would constitute a violation by the
Grantee, any other individual exercising an Option, or 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 subject to a
Grant upon any securities exchange or under any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the issuance or purchase of shares
hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual
exercising an Option pursuant to such Grant unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Company, and any delay caused thereby shall in no way
affect the date of termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of
Restricted Stock or Stock underlying Restricted Stock Units, unless a registration
statement under such Act is in effect with respect to the shares of Stock covered by such
Grant, the Company shall not be required to sell or issue such shares unless the Committee
has received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the Committee 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. The Company shall
not be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly imposes
the requirement that an Option shall not be exercisable until the shares of Stock covered
by such Option are registered or are exempt from registration, the exercise of such 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.
15.2
Rule 16b-3
. It is the intent of the Company that Grants pursuant to the Plan and
the exercise of Options granted hereunder will qualify for the exemption provided by Rule
16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by
the Committee does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative to the extent permitted by law and deemed advisable by the Committee, and
shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
16.
AMENDMENT AND TERMINATION OF THE PLAN
The
Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any shares of Stock as to which Grants have not been made;
provided
,
however
, that the Board shall not, without approval of the Company's
shareholders, amend the Plan such that it does not comply with the Code. The Company may
retain the right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of the Grantee taking actions in "competition with the
Company," as defined in the applicable Award Agreement. Furthermore, the Company may
annul a Grant if the Grantee is an employee of the Company or an affiliate and is
terminated "for cause" as defined in the applicable Award Agreement. Except as
permitted under this Section 16 or Section 17 hereof, no amendment, suspension,
or termination of the Plan shall, without the consent of the Grantee, alter or impair
rights or obligations under any Grant theretofore awarded under the Plan.
17.
EFFECT OF CHANGES IN CAPITALIZATION
17.1
Changes in Stock
. If the number of outstanding shares of Stock is increased or
decreased or the shares of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company on account 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 Company occurring
after the Effective Date, the number and kinds of shares for which Grants of Options,
Restricted Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind of shares
for which Grants are outstanding shall be adjusted proportionately and accordingly so that
the proportionate interest of the Grantee immediately following such event shall, to the
extent practicable, be the same as immediately before such event. Any such adjustment in
outstanding Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of the Option outstanding but shall
include a corresponding proportionate adjustment in the Option Price per share. In the
event of a spin-off by the Company of the shares of a subsidiary, a stock dividend for
which the Company will claim a dividends paid deduction under Section 561 of the Code (or
any successor provision), or a pro rata distribution to all shareholders of other assets
of the Company, the Committee may, but shall not be required to, make appropriate
adjustments to (i) the number and kind of shares or other assets for which outstanding
Options are exercisable and (ii) the per-share exercise price of outstanding Options.
17.2
Reorganization in Which the Company Is the Surviving Entity and in Which No Change of
Control Occurs
. Subject to Section 17.3 hereof, if the Company shall be the
surviving entity in any reorganization, merger, or consolidation of the Company with one
or more other entities, any Option theretofore granted pursuant to the Plan shall pertain
to and apply to the securities to which a holder of the number of shares of Stock subject
to such 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 of the shares remaining subject to the Option immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an Award
Agreement evidencing a Grant of Restricted Stock, any restrictions applicable to such
Restricted Stock shall apply as well to any replacement shares received by the Grantee as
a result of the reorganization, merger or consolidation.
17.3
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 17.3, (i)
upon the occurrence of a "Change of Control" (as defined below), all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have vested, and
all restrictions and conditions applicable to such shares of Restricted Stock and
Restricted Stock Units shall be deemed to have lapsed immediately prior to the occurrence
of such Change of Control, and (ii) fifteen days prior to the scheduled consummation of a
Change of Control, all Options outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen days. Any exercise of an 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, the Plan and all outstanding but
unexercised Options shall terminate. The Committee shall send written notice of an event
that will result in such a termination to all individuals who hold Options not later than
the time at which the Company gives notice thereof to its shareholders. For purposes of
this Section 17.3, a "Change of Control" shall be deemed to occur upon (i)
the dissolution or liquidation of the Company or upon a merger, consolidation, or
reorganization of the Company with one or more other entities in which the Company is not
the surviving entity, (ii) a sale of substantially all of the assets of the Company to
another entity, or (iii) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving corporation) which results in any
person or entity (other than B. Wayne Hughes and members of his family and their
affiliates) owning 50% or more of the combined voting power of all classes of stock of the
Company. This Section 17.3 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
continuation of the Plan or the assumption of the Options, Restricted Stock and Restricted
Stock Units theretofore granted, or for the substitution for such Options, Restricted
Stock and Restricted Stock Units of new options, restricted stock and restricted stock
units 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 Plan and Options, Restricted Stock and Restricted Stock Units
theretofore granted 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 17.3.
17.4
Adjustments
. Adjustments under this Section 17 related to shares of Stock or
securities of the Company shall be made by the Committee, whose determination in that
respect shall be final, binding and conclusive. No fractional shares or other securities
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.
17.5
No Limitations on Company
. The making of Grants pursuant to the Plan shall not
affect or limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business structure or to
merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its
business or assets.
18.
DISCLAIMER OF RIGHTS
No
provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or any
affiliate, or to interfere in any way with any contractual or other right or authority of
the Company or any Service Provider either to increase or decrease the compensation or
other payments to any individual at any time, or to terminate any employment or other
relationship between any individual and the Company or a Service Provider. No provision in
the Plan or in any Grant awarded or Award Agreement entered into pursuant to the Plan
shall be construed to confer upon any individual the right to remain in the service of the
Company as a director (including as an Outside Director), or shall interfere with or
restrict in any way the rights of the Company's shareholders to remove any director
pursuant to the provisions of the California General Corporation Law, as from time to time
amended. In addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Award Agreement, no Grant awarded under the Plan
shall be affected by any change of duties or position of the Optionee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee continues
to be a director, officer, consultant, employee, or independent contractor (as the case
may be) of the Company or a Service Provider. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay
only those amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Company to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any participant or beneficiary under the terms of the Plan. No Grantee shall
have any of the rights of a shareholder with respect to the shares of Stock subject to an
Option except to the extent the certificates for such shares of Stock shall have been
issued upon the exercise of the Option.
19.
NONEXCLUSIVITY OF THE PLAN
Neither
the adoption of the Plan nor the submission of the Plan to the shareholders of the Company
for approval shall be construed as creating any limitations upon the right and authority
of the Board to adopt such other incentive compensation arrangements (which arrangements
may be applicable either generally to a class or classes of individuals or specifically to
a particular individual or particular individuals) as the Board in its discretion
determines desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
20.
WITHHOLDING TAXES
The
Company, a Subsidiary or a Service Provider, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state, or local
taxes of any kind required by law to be withheld with respect to the vesting of or other
lapse of restrictions applicable to Restricted Stock or Restricted Stock Units or upon the
issuance of any shares of Stock upon the exercise of an Option. At the time of such
vesting, lapse, or exercise, the Grantee shall pay to the Company, the Subsidiary or the
Service Provider, as the case may be, any amount that the Company, the Subsidiary or the
Service Provider may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company, the Subsidiary or the Service
Provider, which may be withheld by the Company, the Subsidiary or the Service Provider, as
the case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company, the Subsidiary or the
Service Provider to withhold shares of Stock otherwise issuable to the Grantee or
(ii) by delivering to the Company, the Subsidiary or the Service Provider shares of
Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall
have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market
Value of the shares of Stock used to satisfy such withholding obligation shall be
determined by the Company, the Subsidiary or the Service Provider 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 20 may satisfy his or her withholding obligation only with
shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting,
or other similar requirements.
21.
CAPTIONS
The
use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such Award
Agreement.
22.
OTHER PROVISIONS
Each
Grant awarded under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Committee, in its sole discretion.
23.
NUMBER AND GENDER
With
respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.
24.
SEVERABILITY
If
any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and
thereof shall be severable and enforceable in accordance with their terms, and all
provisions shall remain enforceable in any other jurisdiction.
25.
GOVERNING LAW
The
validity and construction of this Plan and the instruments evidencing the Grants awarded
hereunder shall be governed by the laws of the State of California.
The
Plan was duly adopted and approved by the Board of Directors of the Company as of the 27th
day of February, 2003.
/S/ JACK E. CORRIGAN
                                             Jack E. Corrigan
                                                              Secretary of the Company
The
Plan was duly approved by the shareholders of the Company on the ______ day of May, 2003.
Jack E. Corrigan
                                                              Secretary of the Company