701 Western Avenue

Glendale, California 91201-2349

March 22, 2019

Dear PS Business Parks, Inc. Shareholder:

On behalf of the Board of Directors of PS Business Parks, Inc., I am pleased to invite you to our 2019 Annual Meeting of Shareholders on Tuesday, April 23, 2019, at 9:00 a.m., Eastern Daylight Time, at The Biltmore Hotel, Coral Gables, Florida, 33134.

This letter includes the official notice of meeting, proxy statement, and form of proxy. The proxy statement describes in detail the matters listed in the notice of meeting.

Your vote is important. Whether or not you plan to attend the annual meeting, we hope you vote as soon as possible. You may vote your shares over the Internet, by telephone, or, if you elect to receive printed proxy materials, by mail by following the instructions on the proxy card or the voting instruction card. Of course, even if you vote your shares ahead of time, you may still attend the meeting.

Thank you for your continued support of PS Business Parks, Inc. We look forward to seeing you at our 2019 Annual Meeting.

Sincerely,

Maria R. Hawthorne

President and Chief Executive Officer

Executive Summary

In evaluating potential candidates for service on the Board, the Nominating/Corporate Governance Committee of our Board (the Nominating/Corporate Governance Committee) and the Board have and exercise broad discretion to select director candidates who will best serve the Board and PS Business Parks in the current and anticipated business environment. The goal in the vetting and nomination process is to achieve an appropriate balance of knowledge, experience, diversity, and capability on the Board. The Board, through the Nominating/Corporate Governance Committee, considers the following experience, qualifications, attributes, and skills of both potential director nominees and existing members of the Board:

Our director nominees have qualifications, skills, and experience relevant to our business. Each director has experience, mainly at senior executive levels, in other organizations, and a majority of the directors hold or have held directorships at other U.S. public companies. Most of our directors have served as chief executive officers and all have demonstrated superb leadership, intellectual, and analytical skills gained from deep experience in management, finance, and corporate governance.

About the Director Nominees

The Nominating/Corporate Governance Committee recommended, and the Board has nominated, each of our incumbent directors for re-election to the Board (except for Sara Grootwassink Lewis, who is retiring from the Board effective April 23, 2019). The eight incumbent nominees are present directors of PS Business Parks and were previously elected by our shareholders. Five of the eight nominees are independent. If elected, each of the eight nominees will serve for the one-year term beginning with our 2019 Annual Meeting, or until their successors, if any, are elected or appointed. Each nominee has agreed to serve if elected.

Ronald L. Havner, Jr., 61

Director since 1998

Chairman of the Board of Public Storage

DIRECTOR QUALIFICATION HIGHLIGHTS:

●   Extensive leadership experience

●   Extensive Company and industry knowledge

Mr. Havner has been Chairman of the Board of PS Business Parks since March 1998 and previously served as the Company’s Chief Executive Officer. Mr. Havner has been Chairman of the Board of Public Storage (NYSE: PSA), a PS Business Parks affiliate, since August 2011 and was Chief Executive Officer from November 2002 until his retirement effective January 1, 2019. Mr. Havner serves as Chairman of the Board of another PS Business Parks affiliate, Shurgard (EURONEXT: SHUR) since completion of its initial public offering in October 2018. Mr. Havner also serves as a director of AvalonBay Communities, Inc. (NYSE: AVB) and served as director of California Resources Corp. (NYSE: CRC) from December 2014 to May 2018. Mr. Havner was the 2014 Chairman of the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. (NAREIT).

In considering the nomination of Mr. Havner for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Havner’s extensive leadership experience, his knowledge of the Company and the industry from his service as Chairman since 1998 and as the Company’s previous Chief Executive Officer, and his public company board experience.

Maria R. Hawthorne, 59

Director since 2016

President and Chief Executive Officer of

    PS Business Parks

DIRECTOR QUALIFICATION HIGHLIGHTS:

●   Extensive Company knowledge

●   Extensive operational and leadership experience

Ms. Hawthorne has served as Chief Executive Officer and President of the Company since July 2016 and August 2015, respectively. In addition, Ms. Hawthorne also served as the Company’s acting Chief Financial Officer (CFO) from September 2017 to September 2018. Ms. Hawthorne was also elected as a member of our Board in July 2016. Ms. Hawthorne previously served as Executive Vice President, Chief Administrative Officer of the Company from July 2013 to August 2015. Prior to that, Ms. Hawthorne served as the Company’s Executive Vice President, East Coast, from February 2011 to July 2013. Ms. Hawthorne served as the Company’s Senior Vice President from March 2004 to February 2011, with responsibility for property operations on the East Coast, including Northern Virginia, Maryland, and South Florida. From June 2001 through March 2004, Ms. Hawthorne was a Vice President of the Company, responsible for property operations in Virginia. From July 1994 to June 2001, Ms. Hawthorne was a Regional Manager of the Company in Virginia. From August 1988 to July 1994, Ms. Hawthorne was a General Manager, Leasing Director, and Property Manager for American Office Park Properties. Ms. Hawthorne also serves as director on the Executive Board of the National Association of Real Estate Investment Trusts, Inc. (NAREIT). Ms. Hawthorne earned a Bachelor of Arts Degree in International Relations from Pomona College.

In considering the nomination of Ms. Hawthorne for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Ms. Hawthorne’s leadership experience and Company knowledge. As the only director who is also a member of the PS Business Parks executive management team, Ms. Hawthorne provides management’s perspective in Board discussions about the operations and strategic direction of the Company.

Jennifer Holden Dunbar, 56

Director since 2009

Audit Committee, Capital Committee, Compensation

Committee (Chair)

Co-Founder and Managing Director of Dunbar Partners,

LLC

DIRECTOR QUALIFICATION HIGHLIGHTS:

Ms. Dunbar has been a director of PS Business Parks since February 2009. From 1994 to 1998, Ms. Dunbar was a partner with Leonard Green and Partners, L.P., a private equity firm she first joined in 1989. Ms. Dunbar has served as Co-Founder and Managing Director of Dunbar Partners, LLC, an investment and advisory services firm, since March 2005. Ms. Dunbar is also a director of Big 5 Sporting Goods Corporation (NASDAQ: BGFV), where she serves on the audit and compensation committees and chairs the nominating and corporate governance committee. Ms. Dunbar has served on the board of trustees of various funds in the PIMCO Funds complex since April 2015 (overseeing 130 fixed income funds as of year-end 2018) and February 2016 (21 equity funds as of year-end 2018), respectively, where she is the chair of the investment performance committee and a member of the audit, governance, and valuation oversight committee of each board. Ms. Dunbar is also the chair of the governance committee and co-chair of the valuation oversight committee of the board that oversees the PIMCO equity trusts. Each of the PIMCO entities is a registered investment company under the Investment Company Act of 1940, as amended.

In considering the nomination of Ms. Dunbar for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Ms. Dunbar’s financial expertise, experience in private equity, and experience with investments and mergers and acquisitions. She also has valuable experience as a member of several public company boards.

James H. Kropp, 70

Director since 1998

Compensation Committee, Nominating/Corporate

Governance Committee

Chief Investment Officer at SLKW Investments LLC and

Retired Chief Financial Officer of Microproperties LLC

DIRECTOR QUALIFICATION HIGHLIGHTS:

Mr. Kropp has been a director of PS Business Parks since March 1998. Mr. Kropp has served as Chief Investment Officer at SLKW Investments LLC since 2009 and was Chief Financial Officer of Microproperties LLC, an owner and asset manager of net leased restaurant properties, from August 2012 until March 2019. Mr. Kropp served as interim Chief Financial Officer of TaxEase LLC from 2009 to February 2013 and is currently a Board Leadership Fellow for the National Association of Corporate Directors. Mr. Kropp also currently serves as a director of American Homes 4 Rent LLC (NYSE: AMH), a leader in the home rental market, and on the board of FS KKR Capital Corp (NYSE: FSK) following its acquisition of Corporate Capital Trust, Inc., where he served on the board from 2011 until 2018. Mr. Kropp is a member of board of directors of Corporate Capital Trust II, a registered investment company, as well as FS Investment Corporation II, FS Investment Corporation III, and FS Investment Corporation IV and serves on the audit committee and the valuation committees.

In considering the nomination of Mr. Kropp for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Kropp’s knowledge of investment banking and capital markets with a specialization in real estate securities, and his extensive experience with real estate businesses, including other REITs. He also has valuable experience as a member of several public company boards.

Gary E. Pruitt, 69

Director since 2012

Audit Committee

Retired Chairman and Chief Executive Officer of Univar

N.V.

DIRECTOR QUALIFICATION HIGHLIGHTS:

Mr. Pruitt has served as a director of PS Business Parks since February 2012. He served as Chairman and Chief Executive Officer of Univar N.V. (Univar) from 2002 until his retirement as Chief Executive Officer in 2010 and as Chairman in 2011. Univar is a chemical distribution company based in Bellevue, Washington, with distribution centers in the United States, Canada, and Europe. Mr. Pruitt is also a trustee of Public Storage, a director of Itron, Inc. (NASDAQ: ITRI), and a former director of Esterline Technologies Corp. (NYSE: ESL).

In considering the nomination of Mr. Pruitt for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Pruitt’s leadership and financial experience as Chairman and Chief Executive Officer at Univar and his public company board experience, including his membership on the board of trustees of Public Storage.

Robert S. Rollo, 71

Director since 2013

Nominating/Corporate Governance Committee (Chair)

Compensation Committee

Retired Senior Partner of Heidrick and Struggles

DIRECTOR QUALIFICATION HIGHLIGHTS:

Mr. Rollo has served as a director of PS Business Parks since October 2013. Mr. Rollo most recently served as a Senior Partner at Heidrick and Struggles (Heidrick) in Los Angeles from 2006 until his retirement in 2012. Heidrick is a leading international leadership advisory and executive search firm. Mr. Rollo is a past trustee of the University of Southern California and is Chairman Emeritus of the Southern California Chapter of the National Association of Corporate Directors.

In considering the nomination of Mr. Rollo for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Rollo’s extensive knowledge of and expertise in executive recruitment, compensation, and development and talent management, along with his experience in corporate governance.

Joseph D. Russell, Jr., 59

Director since 2003

Capital Committee

Chief Executive Officer and President of Public Storage

DIRECTOR QUALIFICATION HIGHLIGHTS:

Mr. Russell has been a director of PS Business Parks since August 2003. Mr. Russell has been President and Chief Executive Officer of Public Storage since July 2016 and January 2019, respectively. Mr. Russell also joined the Public Storage board in January 2019. Previously, Mr. Russell was Chief Executive Officer of PS Business Parks from August 2003 until July 2016, and President of PS Business Parks from September 2002 to August 2015. Before joining PS Business Parks, Mr. Russell was employed by Spieker Properties (Spieker), an owner and operator of office and industrial properties in Northern California, and its predecessor, for more than ten years, becoming an officer of Spieker when it became a publicly held REIT in 1993.

In considering the nomination of Mr. Russell for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Russell’s leadership experience; Company and industry knowledge, including his more than 20-year involvement with publicly held REITs; and extensive experience with office and industrial real estate.

Peter Schultz, 71

Director since 2012

Capital Committee (Chair), Audit Committee (Chair)

Retired Chief Executive Officer and Director of The Beacon Group, Inc.

DIRECTOR QUALIFICATION HIGHLIGHTS:

Mr. Schultz has been a director of PS Business Parks since February 2012. He served as President, Chief Executive Officer, and a director of The Beacon Group, Inc. (Beacon) and its affiliates for more than 25 years until his retirement in 2010. Beacon, based in Southern California, and its affiliates, were engaged in the development and management of more than three million square feet of retail, industrial, hospitality, and residential projects. Prior to working at Beacon, Mr. Schultz was employed by Arthur Andersen for four years as a certified public accountant in its tax department.

Mr. Schultz is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.

In considering the nomination of Mr. Schultz for re-election to the Board, the Nominating/Corporate Governance Committee and the Board considered Mr. Schultz’s leadership and extensive real estate experience as President, Chief Executive Officer, and director of Beacon and its affiliates and his extensive financial expertise gained from his almost forty years of experience in finance.

Corporate Governance and Board Matters

Corporate Governance Framework

The Board has adopted the following corporate governance documents, which, along with our charter and bylaws, establish the framework for our corporate governance and outline the general practice of our Board with respect to board structure, function, and conduct, and board and committee organization:

Our current Corporate Governance Guidelines, Business Conduct Standards, Code of Ethics, and Committee Charters are available online in the “Investor Relations” section of our website, psbusinessparks.com/investor-relations/corporate-governance, or in writing from the Company’s Investor Services Department, 701 Western Avenue, Glendale, California 91201-2349.

The Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines at least annually and makes recommendations for any changes to the Board. We will disclose any amendments or waivers to the Code of Ethics on our website or in accordance with the SEC and New York Stock Exchange (NYSE) requirements.

Commitment to Diversity

The Board and its Nominating/Corporate Governance Committee are committed to ensuring that a diversity of experiences and viewpoints are represented on the Board as well as the Company’s senior management. As a reflection of this commitment, 25% of our current Board is female, and our President and CEO is female and Hispanic.

Board Leadership

We have separate individuals serving as Chairman of the Board and as CEO. Ronald L. Havner, Jr., has served as Chairman of the Board since March 1998. He is also Chairman of Public Storage. Mr. Havner has been involved with the Company since its founding and has extensive knowledge of the Company, the markets in which it operates, and the real estate industry. Joseph D. Russell, Jr. is a member of our Board and was our CEO from August 2003 to June 2016. Mr. Russell was also our President until August 2015 and currently serves as President, Chief Executive Officer, and Trustee of Public Storage. Maria R. Hawthorne serves as our President and was appointed as CEO in July 2016. She is the only management director and brings in-depth knowledge of the issues, opportunities, and risks facing the Company and our industry. She is also deeply familiar with our day-to-day operations and management and has the leadership skills to continue to drive profitable growth of PS Business Parks.

We do not have a policy against one individual holding the positions of Chairman and CEO. Rather, the Board evaluates the desirability of having a combined or separate Chairman and CEO from time to time and adopts a structure based on what it believes to be in the best interests of PS Business Parks and its shareholders. Currently, the Board believes that having separate Chairman and CEO roles serves the interests of the Company and its shareholders well.

Majority Vote Requirements for Directors

The Corporate Governance Guidelines provide that in an uncontested election of directors, each director nominee who does not receive at least a majority of the votes cast with respect to that director, must submit his or her resignation to the Board. For the purpose of the Corporate Governance Guidelines, a majority means the number of votes cast “for” a director must exceed 50% of the votes cast with respect to the director. The Nominating/Corporate Governance Committee will then make a recommendation to the Board about whether to accept or reject the resignation or take other action. The Board will act on any such recommendation and publicly disclose its decision within 90 days from the date the election results were certified by the inspector of Elections. If a director’s resignation is accepted by the Board, the Board may fill the resulting vacancy or decrease the size of the Board in accordance with the bylaws.

Presiding Independent Director

The Board has established a position of Presiding Independent Director to provide an independent director with a leadership role on the Board. The Presiding Independent Director presides at meetings of all independent directors or all non-management directors in executive sessions without the presence of management. These meetings are held on a regular basis in connection with each regularly scheduled board meeting and at the request of any independent or non-management director. In addition, the independent directors meet separately at least once annually. These sessions are designed to encourage open discussion of any matter of interest without the CEO or any other members of management present. The position of Presiding Independent Director generally rotates annually among the chairs of the standing committees of the Board. Peter Schultz, Chair of the Capital Committee, was the Presiding Independent Director for 2018. James Kropp is the Presiding Independent Director for 2019, effective February 20, 2019.

Board Responsibilities and Oversight of Risk Management

The Board is responsible for overseeing our Company’s approach to major risks and our policies for assessing and managing these risks. In connection with its oversight function, the Board regularly receives presentations from management on areas of risk facing our business. The Board and management actively engage in discussions about these potential and perceived risks to the business.

In addition, the Board is assisted in its oversight responsibilities by the four standing Board committees (as described below), which have assigned areas of oversight responsibility for various matters, as described in the Committee Charters and as provided in the NYSE rules.

The Audit Committee of our Board (the Audit Committee) assists the Board in overseeing the integrity of our financial statements, the qualifications, independence, and performance of our independent registered public accounting firm, and the performance of our internal audit function. Pursuant to its charter, the Audit Committee also regularly evaluates Company practice and policies with respect to risk assessment, risk management, and financial risk.

The Compensation Committee oversees the compensation of our CEO and other executive officers and evaluates compensation incentives to ensure they will motivate senior management to grow long-term shareholder return without taking undue risk.

The Nominating/Corporate Governance Committee focuses on risks associated with director and management succession planning, corporate governance, and overall Board effectiveness.

The Capital Committee oversees the optimization of the Company’s capital expenditures. The Committee’s goal is to place the Company in the best position to maximize the long-term benefit of its capital expenditures, while at the same time ensuring those assets are well maintained and positioned to meet the needs of the Company’s customer base.

The Board committees also hear reports from members of management to enable each committee to identify, discuss, understand and manage risk. The chair of each of the Board’s standing committees reports on interim individual committee discussions to the full Board at each Board meeting. All directors have access to management in the event a director wishes to follow up on items discussed outside the Board meeting.

Board Orientation and Education

Each new director participates in an orientation program and receives materials and briefings concerning our business, industry, management, and corporate governance policies and practices. Continuing education is provided for all directors through board materials and presentations, discussions with management, and the opportunity to attend external board education programs.

Board Retirement Policy

The Corporate Governance Guidelines provide that no person will be nominated for election to the Board for any term unless he or she is 73 years of age or younger on the first day of the term. The Board has discretion to make exceptions to the policy to provide for a transition period of service.

Director Independence

The Board evaluates the independence of each director annually based on information supplied by the directors and the Company, and on the recommendations of the Nominating/Corporate Governance Committee. The Corporate Governance Guidelines require that a majority of the directors be independent in accordance with the requirements of the NYSE. A director qualifies as independent unless the Board determines, in accordance with NYSE rules, that the director has a material relationship with PS Business Parks, based on all relevant facts and circumstances. Material relationships may include commercial, industrial, consulting, legal, accounting, charitable, family, and other business, professional, and personal relationships. The Board also considers the director’s relationships with Public Storage, our largest shareholder.

Following its annual review of each director’s independence, in February 2019, the Nominating/ Corporate Governance Committee recommended to the Board, and the Board determined, that (i) each of Jennifer Holden Dunbar, James H. Kropp, Gary E. Pruitt, Robert S. Rollo, and Peter Schultz is independent pursuant to the rules of the NYSE, and (ii)  each Audit Committee member and each Compensation Committee member meets the additional independence requirements of the rules of the SEC.

Committees of the Board of Directors

Our Board has four standing committees: the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee, and the Capital Committee. Each of the standing committees operates pursuant to a written charter, which can be viewed at our website at
psbusinessparks.com/investor-relations/corporate-governance. Any shareholder may obtain a print copy by writing to the Company’s Secretary at PS Business Parks, Inc., 701 Western Avenue, Glendale, CA 91201-2349.

Our four standing committees are described below.

Audit Committee

The primary functions of the Audit Committee, as set forth in its charter, are to assist the Board in fulfilling its responsibilities for oversight of:

Among other things, the Audit Committee appoints, evaluates, and determines the compensation of the independent registered public accounting firm; reviews and approves the scope of the annual audit, the audit fee, and the financial statements; approves all other services and fees performed by the independent registered public accounting firm; prepares the Audit Committee Report for inclusion in the annual proxy statement; and annually reviews its charter and performance. Additionally, the Audit Committee reviews and discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment policies.

Each member of the Audit Committee: (1) meets the financial literacy and independence standards of the NYSE; (2) qualifies as an audit committee financial expert pursuant to the rules of the SEC; and (3) qualifies as independent pursuant to the rules of the SEC and NYSE.

Compensation Committee

The primary functions of the Compensation Committee, as set forth in its charter, are to:

The Compensation Committee has not delegated any of its responsibilities to individual members of the Committee or to a subcommittee of the Committee, although it has the discretion to do so. As required by its charter, the Compensation Committee and, in some instances, the Compensation Committee and all other independent members of the Board, made final compensation decisions for executive officers in 2018, including the NEOs set forth in the Summary Compensation Table on page 46 below. The Compensation Committee has the sole authority to retain outside compensation consultants for advice, but historically and for 2018 has not done so, relying instead on surveys of publicly available information about senior executive compensation at similar companies. For a discussion of the Compensation Committee’s use of survey information in 2018, as well as the role of Ms. Hawthorne, our President and CEO, in determining or recommending the amount of compensation paid to our NEOs in 2018, see the CD&A beginning on page 30.

Each member of the Compensation Committee qualifies as independent pursuant to the rules of the SEC and NYSE.

Compensation Committee Interlocks and Insider Participation. No executive officer of PS Business Parks served on the compensation committee or board of directors of any other entity that has an executive officer who also served on our Compensation Committee or Board at any time during 2018, and no member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of SEC Regulation S-K.

Messrs. Havner and Russell and Ms. Hawthorne are present or former officers of the Company and are members of the Board. They do not serve on the Compensation Committee.

Oversight of Compensation Risks. With respect to consideration of risks related to compensation, the Compensation Committee annually considers a report from our senior management team concerning potential risks related to compensation policies and practices applicable to all of the Company’s employees.

In early 2019, the Compensation Committee considered management’s review of the target metrics for all of our employee incentive compensation plans and management’s conclusion that the Company’s incentive compensation plans, practices, and policies (1) properly incentivized employees to achieve short- and long-term Company goals, (2) did not create any significant motivation or opportunity for employees to take undue risks to achieve an incentive compensation award, and (3) are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee, following discussion, reached a similar conclusion. The Compensation Committee expects to further review compensation risks from time to time.

Nominating/Corporate Governance Committee

The primary functions of the Nominating/Corporate Governance Committee, as set forth in its charter, are to:

Our Board has delegated to the Nominating/ Corporate Governance Committee responsibility for recommending nominees for election to the Board. Other duties and responsibilities of the Nominating/Corporate Governance Committee include periodically reviewing the structure, size, composition, and operation of the Board and each Board committee; recommending assignments of directors to Board committees; conducting a preliminary review of director independence; overseeing director orientation; and annually reviewing and evaluating its charter and performance. The Nominating/Corporate Governance Committee is further guided by the principles set forth in its charter.

Director Qualifications. We believe that members of the Board should have high professional and personal ethics and values. They should have broad experience at the policy-making level in business or other relevant experience. They should be committed to enhancing shareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform all director duties responsibly. Each director must represent the interests of all shareholders. In general, the Board seeks to add directors who meet the independence requirements of the NYSE rules. In addition, director candidates must annually submit a completed director questionnaire concerning matters related to independence determination, the determination of whether a candidate qualifies as an audit committee financial expert, and must satisfactorily complete a background investigation by a third-party firm.

Director Diversity. Although the Nominating/Corporate Governance Committee does not have, and does not believe there is a need for, a formal policy concerning diversity, it seeks to ensure that a diversity of different experiences and viewpoints are represented on the Board. As a reflection of this commitment, 25% of our proposed Board composition is female, satisfying recently enacted California law requiring PS Business Parks to have at least one female on the Board by no later than December 31, 2019.

Identifying and Evaluating Nominees for Directors. The Nominating/Corporate Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director.

The Nominating/Corporate Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Nominating/Corporate Governance Committee considers various potential candidates for director.

Candidates may come to the attention of the Nominating/Corporate Governance Committee through current Board members, professional search firms, shareholders, or other persons. These candidates are evaluated at meetings of the Nominating/Corporate Governance Committee and may be considered at any point during the year.

The Nominating/Corporate Governance Committee considers properly submitted shareholder nominations of candidates for the Board in the same manner as other candidates. Following verification of the shareholder status of persons proposing candidates, recommendations will be aggregated and considered by the Nominating/Corporate Governance Committee prior to the issuance of the proxy statement for the annual meeting. If any materials are provided by a shareholder in connection with the recommendation of a director candidate, such materials are forwarded to the Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee may also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a shareholder. In evaluating such nominations, the Nominating/Corporate Governance Committee seeks to achieve a balance of knowledge, experience, and capability on the Board.

We do not have any other policies or guidelines that limit the selection of director candidates by the Nominating/Corporate Governance Committee, and the Nominating/Corporate Governance Committee and the Board have and continue to exercise broad discretion to select director candidates who will best serve the Board and the Company in the current and anticipated business environment.

Capital Committee

The Capital Committee focuses on assessing, monitoring, and optimizing the Company’s capital expenditures, including development and redevelopment opportunities as well as the Company’s annual recurring capital expenditures, which include maintenance capital, tenant improvements, and leasing commissions. The goal is to place the Company in the best position to maximize the long-term benefits of its capital expenditures while ensuring its assets are well maintained and positioned in the marketplace to meet the needs of the Company’s customer base. The Capital Committee operates pursuant to a formal charter adopted by the members of the committee in July 2016.

Communications with the Board of Directors

The Company provides a process by which shareholders and interested parties may communicate with the Board. Communication to the Board should be addressed to: Board of Directors, c/o Jeffrey D. Hedges, Executive Vice President, Chief Financial Officer, and Secretary, PS Business Parks, Inc., 701 Western Avenue, Glendale, California 91201-2349. Communications intended for a specified individual director or group of directors should be addressed to the director(s) c/o Secretary at the above address, and all such communications received will be forwarded to the designated director(s).

Board and Committee Meetings and Attendance

The Board meets at regularly scheduled intervals and may hold additional special meetings as necessary or desirable in furtherance of its oversight responsibilities. As described above, the non-management directors generally meet in executive session without the presence of management in connection with each regularly scheduled Board meeting.

In 2018, the Board held four in-person meetings and two special telephonic meetings. Each director who served as a director at the time attended at least 83% of the Board meetings held and, if a member of a committee of the Board, at least 81% of the meetings held by both the Board and all committees of the Board on which the director served. We do not have a policy regarding directors’ attendance at the annual meeting of shareholders, but directors are encouraged to attend. All of the Board’s nine directors attended the 2018 annual meeting of shareholders.

The following table summarizes the membership of the Board’s standing committees and the number of meetings held by each committee in 2018:

Compensation of Directors

The Compensation Committee periodically reviews the Company’s non-employee director compensation and recommends any changes to the Board. The Board makes the final determination as to director compensation. The Board has approved the mix of cash and equity compensation described below.

Retainers and Meeting Fees. Retainers are paid in cash quarterly and are prorated when a director joins the Board other than at the beginning of a calendar year. During 2018, each non-employee director (except for current executives of a PS Business Parks affiliate, including Public Storage and Shurgard) was entitled to receive the following retainers and meeting fees for Board and Board committee service:

The following is the retainer and meeting fee schedule for Board and Board committee service, effective April 1, 2019.

Equity Awards. Each new non-employee director who is determined by the Board to be independent, upon the date of his or her initial election by the Board or the shareholders to serve as a non-employee director, is automatically granted an option to purchase 10,000 shares of Common Stock, which vests in five equal annual installments beginning one year from the date of grant or the annual shareholders meeting date in that year, whichever is earlier, subject to continued service. Directors who previously served as Company executives are not eligible to receive this award.

Annually, each non-employee director receives a non-qualified stock option to purchase 2,000 shares of Common Stock, which vests in five equal annual installments beginning one year from the date of grant based on continued service. The annual grants are made immediately following the annual meeting of shareholders at the closing price for the Common Stock on the NYSE on such date.

Upon the retirement of a director from the Board because the director is not nominated for re-election due to the Board’s Mandatory Retirement Policy, all outstanding options held by the director vest effective as of the date of his or her retirement and the director has one year to exercise all vested options.

Retirement Stock Grants. Under our Retirement Plan for Non-Employee Directors, each non-employee director of the Company receives, upon retirement as a director of the Company, 1,000 shares of fully-vested Common Stock for each full year of service as a non-employee director of the Company, up to a maximum of 8,000 shares. The awards are intended to retain and reward long-term service on the Board and to provide equity compensation to Board members. Directors receive any dividends paid on unvested shares.    Directors who previously served as Company executives are not eligible to receive this grant until their participation in the Company’s equity incentive plans have ended.

At December 31, 2018, Messrs. Havner and Kropp and Ms. Dunbar and Ms. Lewis were each entitled to receive 8,000 fully-vested shares of Common Stock upon retirement; Messrs. Pruitt and Schultz were each entitled to 6,000 shares; and Mr. Rollo was entitled to receive 5,000 shares.

As of December 31, 2018, the value of each award of 8,000 shares was $1,048,000; the value of 6,000 shares was $786,000; and the value of 5,000 shares was $655,000, each based on the closing price of $131.00 of our common stock as of December 31, 2018.

Director Stock Ownership Guidelines. Pursuant to the Corporate Governance Guidelines, each non-management director is encouraged to have a

significant stock ownership in the Company. All directors are expected, within three years of election, to own at least $100,000 of common stock of the Company, as determined using the per- share value on the date of acquisition. All of our directors meet this stock ownership requirement.

Director Compensation in Fiscal 2018. The following table presents the compensation provided by the Company to our directors for the fiscal year ended December 31, 2018:

We provide shareholders an annual advisory vote to approve the compensation of our NEOs, also known as a “Say-on-Pay” proposal.

More than 94% of the votes cast at our 2018 Annual Meeting were in favor of our executive compensation package. This approval, along with direct input received from shareholders regarding their votes, signaled strong shareholder support of the elements and amounts of compensation paid for both 2017 performance and the compensation opportunities established to reward long-term growth and performance. As a result, the Compensation Committee did not make any significant changes to the Company’s executive compensation program for 2018.

We believe our strong performance in 2018 was driven, in part, by motivated NEOs incentivized by our strategic compensation program. Annual cash incentive bonus payments, which represent a significant portion of our regular annual compensation, were tied to achieving at least a (i) 5.0% increase in Adjusted FAD¹ and (ii) 2.0% increase in Same Park Net Operating Income (Same Park NOI).²

¹Adjusted FAD is a non-GAAP measure. Please refer to “2018 Annual Cash Incentive Thresholds and Targets” in the CD&A section of the proxy statement.

² Refer to page 26 of our Form 10-K filed on February 26, 2019, for information regarding our calculation of Same Park NOI.

We believe these compensation targets fueled impressive 2018 performance that rewarded shareholders with a 7.9% TSR—compared to the 2018 NAREIT Equity Index, which had a negative return of 4.1%. Our TSR also beat the NAREIT Equity Index and the S&P 500 index for the 5-year and 15-year periods ending December 31, 2018, averaging 11.4% in total annual return since 2003.

The Board recommends that shareholders approve the compensation of the Company’s NEOs disclosed in the following CD&A and compensation tables.

Although the shareholder vote on our executive compensation program is advisory and nonbinding on the Company, the Compensation Committee, which is responsible for designing and administering the compensation program, values the opinions expressed by shareholders. The Compensation Committee will consider and weigh heavily the outcome of the vote when making future compensation decisions.

The Board recommends a vote FOR approval of our executive compensation as described in this proxy statement.

Compensation Discussion

and Analysis (CD&A)

The following section summarizes our philosophy and objectives regarding the compensation of our NEOs, including how we determine the elements and amounts of executive compensation. This section should be read in conjunction with both its tabular compensation disclosures for NEOs for the year ended December 31, 2018, and the Compensation Committee Report, which can be found on page 45 of this proxy statement.

Executive Summary

The Compensation Committee’s goal for our executive compensation program is to hire, retain, and motivate our senior management to achieve solid financial results and create long-term shareholder value. Our NEOs are paid based on what the Compensation Committee considers appropriate in view of individual and corporate performance; market and peer compensation practices from surveys and other sources; and our objective of aligning our NEOs’ interests with those of our shareholders to maximize shareholder value over the long term. We believe that our compensation programs have been effective in helping the Company move towards its financial and operational goals.

In general:

In fiscal year 2018, senior management successfully grew occupancy and average rental rates and continued to commit to a conservative balance sheet by minimizing the use of debt. Their efforts were directly responsible for the following results:

Based on these achievements and considerations, the Compensation Committee made the following compensation decisions for 2018:

In keeping with our conservative compensation philosophy and practices:

We believe our compensation program for NEOs drove 2018 performance and will continue to drive improved Company performance. Accordingly, the Board recommends that shareholders approve the compensation of the Company’s NEOs, as disclosed pursuant to the SEC’s compensation rules, including the CD&A, the compensation tables, and the narrative disclosures that accompany the compensation tables in this proxy statement.

Our Executive Officers

The following are biographical summaries of the current executive officers of the Company who are not also serving as directors:

Jeffrey D. Hedges, age 36, joined the Company as Executive Vice President, Chief Financial Officer, Secretary, and principal financial officer on September 17, 2018. Prior to joining the Company, Mr. Hedges served as Senior Vice President, Accounting and Reporting from 2015 at Invitation Homes (NYSE:INVH) (formerly known as Starwood Waypoint Homes and prior to that Colony Starwood Homes), a publicly traded single-family residential real estate investment trust that owns and operates single-family rental homes in the United States. Mr. Hedges was a Senior Manager in the Transaction Advisory Services and Assurance (Audit) groups at Ernst & Young from 2006 to 2015. Mr. Hedges is a certified public accountant and holds a Bachelor of Science from the W.P. Carey School of Business, Arizona State University, and a

Master of Business Administration from the Wharton School, University of Pennsylvania.

John W. Petersen, age 55, has been Executive Vice President and Chief Operating Officer since he joined the Company in December 2004. Prior to joining the Company, Mr. Petersen was Senior Vice President, San Jose Region, for Equity Office Properties (EOP) from July 2001 to December 2004, responsible for 11.3 million square feet of multi-tenant office, industrial and R&D space in Silicon Valley. Prior to working for EOP, Mr. Petersen was Senior Vice President with Spieker Properties from 1995 to 2001, overseeing the growth of that company’s portfolio in San Jose, through acquisition and development of nearly three million square feet. Mr. Petersen is a graduate of The Colorado College in Colorado Springs, Colorado, and was recently the President of the National Association of Industrial and Office Parks, Silicon Valley Chapter.

Trenton Groves, age 46, has served as the Company’s Senior Vice President, Chief Accounting Officer, Assistant Secretary, and principal accounting officer since September 2018. Mr. Groves joined the Company as Corporate Controller in 2004 and has served as Vice President, Finance, and Corporate Controller since 2007. Prior to joining the Company, Mr. Groves was in public accounting, serving as a Manager in the Assurance (Audit) group at Ernst & Young from 2002 to 2004 and as Manager at Arthur Anderson from 1998 to 2002. Mr. Groves is a certified public accountant and holds a Bachelor of Science in accounting from California State University, Northridge.

Executive Officer Diversity

Although we do not have and do not believe there is a need for a formal policy concerning diversity of executive officers, the Board seeks to ensure that a diversity of different experiences, backgrounds, and viewpoints are represented in our management. Currently, our CEO is female and Hispanic, and the Board and management continue to be focused and committed to increasing diversity in ongoing succession planning discussions.

Compensation Objectives and Process

Our compensation goals are to hire, retain, and motivate our senior management to create long-term shareholder value. We generally pay our NEOs compensation that we consider appropriate in view of individual and corporate performance, competitive levels, and our objective of aligning our NEOs’ interests with those of our shareholders to maximize shareholder value over the long term.

In general, our compensation program for NEOs has comprised: (1) a base salary; (2) short-term incentives generally in the form of annual cash bonuses; and (3) periodic equity awards subject to long-term vesting, which may be restricted stock units (RSUs) or stock options.

Our incentive compensation for NEOs is designed to reward achievement of Company-wide performance goals by tying awards to objectives that the Compensation Committee believes are key drivers of long-term, sustainable performance.

Because each component of our compensation program is designed to accomplish or reward different objectives, historically and in 2018, the Compensation Committee determined the award of each component separately. Historically and in 2018, the Compensation Committee did not retain or rely on information provided by any third-party compensation consultant in setting compensation levels and awards for our NEOs.

The Compensation Committee generally considers corporate, business unit, and individual performance and other relevant factors, and will solicit the views of the CEO (with respect to compensation of the other NEOs) and the Chairman and the Board (with respect to compensation of the CEO).

Focus on Pay for Performance

The guiding principle of our executive compensation philosophy is to pay for performance and incentivize our executive officers to create long-term shareholder value. The Compensation Committee believes that NEO compensation should significantly vary based on the Company’s achievement of financial and operational goals and on each executive’s contributions to such achievement. This link between incentive payouts and achievement of goals has helped drive our strong and consistent performance year after year.

Assessment of Individual Contributions

to Overall Performance

The Compensation Committee’s evaluation of each NEO places strong emphasis on his or her contributions to the Company’s overall performance rather than focusing only on his or her individual business or functional area. The Compensation Committee believes that the NEOs share responsibility to support the goals and performance of the Company as a whole.

Long-Term Financial Performance

The Company has delivered strong financial performance over a sustained period of time, increasing adjusted FAD and Same Park NOI in each of the last five years. The Compensation Committee believes that our compensation program, structured on the philosophy and objectives outlined above, is a key driver of the Company’s strong performance over the long term.

The Compensation Committee made all final compensation decisions for NEOs in 2018, which were ratified by the Board thereafter. For more information on the Compensation Committee and its responsibilities, see “Corporate Governance and Board Matters—Committees of the Board of Directors—Compensation Committee” on page 23.

Sound Governance Practices

In designing our executive compensation around the philosophy and objectives outlined above, the Compensation Committee believes that our program encourages the highest performance standards and aligns the interests of our NEOs with the long-term interests of our shareholders by:

At the same time, the following features of our program discourage inappropriate risk taking:

Equity Grant Practices

Equity grants to all of our executive officers, including the NEOs, must be approved by the Compensation Committee, which consists entirely of independent directors, and:

In 2016, the Compensation Committee approved a pool of 5,000 RSUs to be granted under authority of Ms. Hawthorne, the Company’s President and CEO, to new employees or employees promoted by the Company who are not executive officers of the Company. These awards are typically granted on the first trading day of the month following the hire or promotion date, and vest in equal annual installments over five years.

Equity grants to other non-executive officers may be made at other times during the year, but are not timed in coordination with the release of material non-public information. These awards typically vest in equal annual installments over five years.

Executive Officer Stock Ownership Guidelines

The Board implemented stock ownership guidelines for NEOs effective April 28, 2015. Each NEO is expected to beneficially own Common Stock equal in market value to a specified multiple of his or her annual base salary. The guideline for the CEO is five times his or her base salary and for the other NEOs is three times his or her base salary. All of our NEOs who have been with the Company at least five years exceed his/her stock ownership requirement.

Only shares of Common Stock (1) owned by the executive, (2) owned jointly by him/her and his/her spouse, (3) owned by his/her spouse, (4) held by him/her in the 401(k) Plan, and (5) held in custodial accounts or trust for him/her or for his/her spouse and/or children are counted for determining compliance with these guidelines. Unvested time-based RSUs and in-the-money value of vested options are NOT counted for determining compliance with these guidelines.

2018 Executive Compensation

2018 Company Performance

Execution on Strategy. During 2018, management successfully executed on the Company’s strategy of improving occupancy and rental rates. Optimized occupancy gives us the ability to adjust rents and transaction costs aggressively in response to changing conditions, thereby accelerating company financial performance and operating metrics. In addition, we continued to commit to a conservative balance sheet by minimizing the use of debt. Management’s successful execution on these strategies enabled the Company to deliver solid results on several fronts during the year, including the following:

Key Financial Metrics

Strong Dividend Growth and Financial Discipline

This section presents the ratio of annual total compensation of our President and CEO, Maria R. Hawthorne (as disclosed in the Summary Compensation Table at page 46 below), to the annual total compensation (Form W-2 wages) of our median employee (excluding Ms. Hawthorne). The ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the Exchange Act).

We selected the median employee based on the Company’s 155 employees (excluding Ms. Hawthorne) as of December 31, 2018. In identifying our median employee, we calculated the annual total compensation of each employee as of December 31, 2018, based on Form W-2 information. We did not apply any cost-of-living adjustments as part of the calculation.

The 2018 annual total compensation for our CEO, as disclosed in the Summary Compensation Table below, and as determined under Item 402 of Regulation S-K, was $3,773,551. The 2018 annual total compensation for our median employee, as determined under Item 402 of Regulation S-K, was $83,264. The ratio of our CEO’s annual total compensation to our median employee’s total compensation for fiscal year 2018 is 45 to 1.

Factors Considered by the Compensation Committee in its Compensation Decisions for 2018

2018 Advisory Vote to Approve Executive Compensation. We believe our executive compensation program is appropriately structured to achieve our objective of driving growth in long-term shareholder value.

Role of Management and Compensation Committee Meetings. In general, our CEO attends all meetings of the Compensation Committee at which (i) compensation of the other NEOs or other employees is discussed and/or (ii) Company-wide compensation matters, such as the consideration of new equity plans, are discussed.

Our CEO does not vote on items before the Compensation Committee. As discussed in more detail below, the Compensation Committee solicits our CEO’s views on the performance of the executive officers reporting to her, including each of the other NEOs. In general, the Compensation Committee sets the compensation for the other NEOs after consideration of our CEO’s recommendations with respect to appropriate amounts to reward and incentivize each NEO.    

The Compensation Committee met four times during 2018. Ms. Hawthorne attended a portion of all of the meetings but did not participate in the deliberations of the Compensation Committee with respect to setting her own compensation.

2018 Compensation Targets

The Compensation Committee designed its incentive compensation programs for 2018 to focus management on growing our business.

2018 Annual Cash Incentive Thresholds and Targets. In March 2018, the Compensation Committee met to determine the appropriate performance thresholds and target amounts for 2018 annual incentive bonuses in order to properly incentivize senior management with respect to 2018 performance. The thresholds represent the minimum performance levels that must be achieved in order for senior management to be qualified for awards of 2018 annual incentive bonuses at the target amounts.

After consideration of the Company’s strategic goals and input from Ms. Hawthorne and other Board members, including the Chairman of the Board, the Compensation Committee established the following as the performance thresholds for payment of senior executive bonuses: (i) at least 5.0% growth in 2018 Adjusted FAD from 2017 Adjusted FAD and (ii) at least 2.0% growth in 2018 Same Park NOI from 2017 Same Park NOI. These financial metrics were selected by the Compensation Committee because of their importance to both the PS Business Parks senior executive team and to investors. And consistent with our long history of setting annual incentive award targets at around one time base salary (although this does not preclude the Compensation Committee from approving higher or lower annual incentives awards), 2018 bonus target amounts were established at 100% of base salary for each executive officer.

For purposes of determining performance metrics, Adjusted FAD is calculated after FAD is computed. FAD is computed by adjusting consolidated Funds From Operations (FFO) to (a) deduct capital improvements that maintain the real estate value, tenant improvements and lease commissions, (b) eliminate certain non-cash income or expenses such as straight-line rent and non-cash stock compensation expense and (c) eliminate the impact of EITF Topic D-42. FFO represents GAAP net income before real estate depreciation and amortization expense, gains or losses from sales of operating properties and impairment charges on operating properties and real estate equity investments.

For purposes of calculating the FAD bonus target amounts, 2018 FAD was adjusted by a number of factors, including adjustments made to neutralize the impact of: (i) maintenance capital expenditures; (ii) income, capital, and expenses incurred in connection with asset dispositions in 2018; and (iii) cash paid for taxes in lieu of shares.

In determining whether the bonus paid is to be at, above or below the target bonus amount, the Compensation Committee will solicit the views of the CEO (with respect to the other NEOs) and the Chairman and the Board (with respect to the CEO), taking into account the performance of each NEO, including achievement of individual performance goals and other factors deemed relevant by the Compensation Committee.

2018 Compensation Decisions

In February 2019, the Compensation Committee considered, among other factors, that (i) Adjusted 2018 FAD was $193.2 million, a 10.0% increase over 2017 and (ii) 2018 Same Park NOI was $7.1 million, a 2.6% increase over 2017. As a result, the Compensation Committee made the following decisions with respect to 2018 compensation:

In evaluating management’s performance, the Compensation Committee placed significant weight on management’s strategic decisions that correctly anticipated changing economic conditions, their successful execution on that strategy, and their unwavering financial discipline. Our management team, led by Ms. Hawthorne, successfully oversaw and navigated the Company through these challenges. And Ms. Hawthorne did so while serving in a dual capacity as interim Chief Financial Officer from September 1, 2017, through September 16, 2018.

In evaluating the overall compensation of our NEOs, and in keeping with its compensation philosophy of emphasizing and rewarding long-term performance, the Compensation Committee avoided placing inordinate emphasis on strict year-over-year comparisons in any specific financial metric, such as rental income or net income, as they are in part skewed by one-time and non-recurring events and do not reflect management’s long-term strategic focus. As such, the Compensation Committee believes that the Company’s 2018 executive compensation is fully aligned with performance.

In addition to the compensation awarded for 2018 service, the Compensation Committee approved the following special equity awards in 2018: a one-time award of 25,000 RSUs was awarded to Ms. Hawthorne in light of retention considerations and for serving a dual capacity role as Chief Financial Officer; 10,000 RSUs were awarded to Mr. Hedges in connection with his appointment as part of an onboarding package; and 2,000 RSUs were awarded to Mr. Groves in light of retention considerations and additional responsibilities he assumed prior to the hiring of Mr. Hedges.

2019 Compensation Outlook

The Compensation Committee believes the Company is well-positioned as a result of management’s focus and successful execution over the last several years. Given these expectations, the Compensation Committee met in February and March 2019 and made the following decisions for 2019 NEO compensation:

Tax Deductibility of Executive Compensation

The Compensation Committee considers the tax deductibility of compensation as one factor when considering executive compensation program alternatives. Due to its tax status as a REIT, the Company must generally distribute its taxable income to shareholders. To the extent that compensation is not deductible, taxable income will be higher and so, distributions to shareholders may be higher than they would be otherwise.

The Compensation Committee has in the past approved and has reserved the right in the future to approve compensation that does not qualify for deductibility in circumstances it deems in the Company’s best interests.

Prior to January 1, 2018, Section 162(m) imposed a $1,000,000 per person limit on the annual tax deduction for compensation paid to the Company’s current chief executive officer and certain other executive officers. Certain “performance-based” compensation exceeding $1,000,000 annually paid to the executives was excluded from Section 162(m)’s limitation and was deductible if certain requirements were met. The Company generally designed awards of stock options, certain restricted share units, and cash incentives to qualify as deductible “performance-based” compensation.

Under tax reform legislation signed into law on December 22, 2017 (the “Tax Cuts and Jobs Act”), the deductibility of executive compensation was limited further, effective January 1, 2018. Section 162(m) still imposes a $1,000,000 per person limit on the annual tax deduction for compensation paid to the Company’s current chief executive officer and certain other executive officers. But, the exclusion for “performance-based” compensation was repealed, and the group of employees subject to the limitation was expanded to include the chief financial officer and certain former executive officers.    

Compensation awarded before November 3, 2017, which otherwise qualified as “performance based,” may continue to be deductible in the future as the cash compensation is paid, the restricted share units vest, and the stock options are exercised, under certain interim relief provisions of the Tax Cuts and Jobs Act. However, due to ambiguities and uncertainties about how the revised Section 162(m) should apply, it is uncertain whether previous awards that the Compensation Committee believed to be “performance based” compensation will be deductible going forward.

Compensation Committee Report

The Compensation Committee of the Board of PS Business Parks, Inc. has reviewed and discussed the foregoing CD&A with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

This report is provided by the following independent directors who comprise the Compensation Committee:

THE COMPENSATION COMMITTEE

Jennifer Holden Dunbar, Chair

James H. Kropp

Robert S. Rollo

V. Potential Payments Upon Termination or Change of Control

Payments Upon Termination. We do not have a formal severance or retirement program for payments on termination of employment through voluntary or involuntary termination, other than as specifically set forth in the 2012 Plan, the 2003 Stock Option and Incentive Plan (the 2003 Plan), the 401(k) Plan or as required by law. These include:

Payments Upon Death or Disability. In the event of the death or permanent and total disability of an NEO while employed by the Company, the executive officer will receive 401(k) Plan contributions noted above and accrued unused vacation pay, in addition to the following:

Payments Upon a Change of Control. The Company’s 2003 Plan and 2012 Plan provide that upon the occurrence of a change of control of the Company:

Under the 2012 Plan, the Compensation Committee may elect, in its sole discretion, to cancel any outstanding awards of options, RSUs, dividend equivalent rights and/or stock appreciation rights and pay or deliver to the holder an amount in cash or securities having a value (as determined by the Compensation Committee acting in good faith), in the case of restricted stock, RSUs and dividend equivalent rights, equal to the formula or fixed price per share paid to holders of shares of stock pursuant to such “change in control” and, in the case of options or stock appreciation rights, equal to the product of the number of shares of stock subject to such options or stock appreciation rights (the “Award Stock”) multiplied by the amount, if any, by which (x) the formula or fixed price per share paid to holders of shares of stock pursuant to such transaction exceeds (y) the option price or stock appreciation right price applicable to such Award Stock. No performance-based awards under the 2012 Plan will vest, partially or fully, in connection with a “change in control” unless the performance conditions for such award has been satisfied. All other equity-based awards will be governed by the terms of their agreement.

A “change of control” (in the 2003 Plan) and a “change in control” (in the 2012 Plan) are defined to include: