Underwriting Agreement (2006)Full Document 

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PS Business Parks, Inc.

800,000 Depositary Shares

Each Representing 1/1,000 of a Share of

7.375% Cumulative Preferred Stock, Series O

Liquidation Preference Equivalent to

$25.00 Per Depositary Share

Underwriting Agreement

Charlotte, North Carolina

August 11, 2006

Wachovia Capital Markets, LLC

301 South College Street

Charlotte, North Carolina 28288

Ladies and Gentlemen:

PS Business Parks, Inc., a real estate investment trust (“REIT”) and a California corporation (the “Company”), proposes to sell to Wachovia Capital Markets, LLC (the “Underwriter”), an aggregate of 800,000 shares (the “Shares”) of its Depositary Shares (the “Depositary Shares”) each representing 1/1,000th of a share of 7.375% Cumulative Preferred Stock, Series O, stated value $25,000 per share (the “Preferred Stock”).

The shares of Preferred Stock represented by the Shares (the “Preferred Shares”) will, when issued, be deposited by the Company against delivery of Depositary Receipts (the “Depositary Receipts”) to be issued by American Stock Transfer & Trust Company, as Depositary (the “Depositary”), under a Deposit Agreement (the “Deposit Agreement”) among the Company, the Depositary and the holders from time to time of the Depositary Receipts issued thereunder. Each Depositary Receipt will represent one or more Depositary Shares.

The Company wishes to confirm as follows its agreement with you in connection with the purchase of the Shares by you.

The terms which follow, when used in this Agreement, shall have the meanings indicated:

“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

“amend,” “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement, or the issue date of any Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference.

“Commission” shall mean the United States Securities and Exchange Commission.

“Effective Date” shall mean each date that the Registration Statement and any post-effective amendment or amendments thereto became or become effective.


“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

“Preliminary Prospectus” shall mean any preliminary prospectus or preliminary prospectus supplement relating to the Shares and the Preferred Shares, in each case filed pursuant to Rule 424(b).

“Prospectus” shall mean the final prospectus in the form first furnished to the Underwriter for use in connection with the offering of Shares and any Preliminary Prospectus that forms a part thereof and any Prospectus Supplement relating to the Shares that is first filed pursuant to Rule 424(b) after the Execution Time.

“Registration Statement” shall mean the Registration Statement referred to in Section 4(a), including exhibits and financial statements thereto, as amended at the Execution Time and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date, shall also mean such registration statement as so amended.

“Rule 424” refers to such rule under the Act.

Any reference herein to the Registration Statement, a Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein either pursuant to the terms of the Registration Statement or pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of such Preliminary Prospectus or the Prospectus, as the case may be (collectively, the “Incorporated Documents”).

1. Agreements to Sell and Purchase.

On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, the Company agrees to sell to the Underwriter and the Underwriter agrees to purchase from the Company, at a purchase price of $24.5025 per share (the “purchase price per share”), except for the Shares sold by the Underwriter to institutional investors as agreed by the Company and the Underwriter for which the purchase price shall be $24.79 per share. The purchase price per share includes a portion of the accrued and unpaid dividends on such shares from and including June 16, 2006 to and including August 16, 2006 of $0.29.

2. Terms of Public Offering.

The Company has been advised by you that you propose to make a public offering of the Shares as soon after this Agreement has been entered into and the Registration Statement (as defined herein), and, if necessary, any post-effective amendment to the Registration Statement, has become effective as in your judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus.

 

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3. Delivery of the Shares and Payment Therefor.

Delivery to the Underwriter of and payment for the Shares shall be made at the office of Wachovia Capital Markets, LLC, 301 South College Street, Charlotte, NC 28288, at 10:00 A.M., New York City time, on August 16, 2006 (the “Closing Date”). The place of closing for the Shares and the Closing Date may be varied by agreement between you and the Company.

Certificates for the Shares shall be registered in such names and in such denominations as you shall request prior to 1:00 P.M., New York City time, on the second business day preceding the Closing Date. Such certificates shall be made available to you in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day immediately preceding the Closing Date. The certificates evidencing the Shares to be purchased hereunder shall be delivered to you on the Closing Date against payment of the purchase price therefor by wire transfer of immediately available funds to the order of the Company.

4. Representations, Warranties and Agreements of the Primary Entities.

The Company and PS Business Parks, L.P., a limited partnership under the laws of the state of California (the “Operating Partnership,” and together with the Company, the “Primary Entities”), jointly and severally, represent and warrant to and agree with the Underwriter that:

(a) The Company has filed with the Commission a registration statement, file number 333-112969, on Form S-3, including the related prospectus included in the Registration Statement, for the registration under the Act, of the offering and sale of, inter alia, the Shares. The Company may have filed one or more amendments thereto, including each related prospectus, and one or more prospectus supplements thereto, each of which has previously been furnished to the Underwriter. The Company has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the “Prospectus Supplement”) specifically relating to the Shares pursuant to Rules 415 and 424 under the Act. The Company has included or will include in such Registration Statement, as amended at the Execution Time, and in the Prospectus Supplement all information required by the Act and the rules thereunder to be included therein with respect to the Shares and the offering thereof. As filed, such Registration Statement, as so amended, and form of final prospectus contained in the Registration Statement and Prospectus Supplement, contains or will contain all required information with respect to the Shares and the offering thereof and, except to the extent the Underwriter shall agree in writing to a modification, shall be in all substantive respects in the form furnished to the Underwriter prior to the date hereof or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes as the Company has advised the Underwriter, prior to the Execution Time, will be included or made therein.

(b) At the respective times the Registration Statement and each amendment thereto became effective, and on the Closing Date, the Registration Statement complied and will comply in all material respects with the requirements of the Act and the rules thereunder and did not contain and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, the Prospectus and any amendments or

 

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supplements thereto, at the time the Prospectus or any such amendment or supplement was issued and on the Closing Date, complied and will comply in all material respects with the requirements of the Act and the rules thereunder and did not and will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Underwriter specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto).

(c) As of the Applicable Time (as defined below), the Issuer General Use Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time and the Statutory Prospectus (as defined below) all considered together (collectively, the “General Disclosure Package”), did not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the General Disclosure Package in reliance upon and in conformity with information furnished in writing to the Company by the Underwriter specifically for inclusion therein. As used in this subsection and elsewhere in this Agreement:

“Applicable Time” means 4:30 pm (Eastern time) on August 11, 2006 or such other time as agreed by the Company and the Underwriter.

“Statutory Prospectus” means the prospectus relating to the Shares contained in the Registration Statement at the Effective Date, including any document incorporated by reference therein and any Preliminary Prospectus.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Act, relating to the Shares that (i) is required to be filed with the Commission by the Company, (ii) is a “roadshow that is a written communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Shares or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained by the Company’s records pursuant to Rule 433(g) of the Act.

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule I hereto.

Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Shares or until any earlier date that the Company notified or notifies the Underwriter, did not, does not and will not include any information that conflicted, conflicts or will conflict with any information

 

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contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.

(d) The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Prospectus and the General Disclosure Package, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder and, when read together with the other information in the General Disclosure Package, at the Applicable Time, and with the Prospectus, at the date of the Prospectus and on the Closing Date, did not and will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances, under which they were made, not misleading.

(e) Ernst & Young LLP, an accounting firm that audited certain financial statements and supporting schedules included in, or incorporated by reference into, the Registration Statement and the Prospectus, are, and during the periods covered by such reports were, independent public accountants as required by the Act, and are registered as a public accounting firm with the Public Company Accounting Oversight Board. PricewaterhouseCoopers LLP, an accounting firm that also audited certain financial statements and supporting schedules included in, or incorporated by reference into, the Registration Statement and the Prospectus, are, and during the periods covered by such reports were, independent public accountants as required by the Act.

(f) The financial statements (including the notes and schedules thereto) included in, or incorporated by reference into, the Registration Statement, the General Disclosure Package and the Prospectus present fairly the financial position of the respective entity or entities or group presented therein at the respective dates indicated and the results of their operations for the respective periods specified; except as otherwise stated in the Registration Statement, the General Disclosure Package and Prospectus, said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis; the supporting schedules included or incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus present fairly the information included or incorporated therein and have been prepared on a basis consistent, except as may be noted therein, with that of the financial statements included in, or incorporated by reference into, the Registration Statement, the General Disclosure Package and the Prospectus and the books and records of the respective entities presented therein. The summary and selected financial data included in, or incorporated by reference into, the Prospectus present fairly the information shown therein as at the respective dates and for the respective periods specified, and the summary and selected financial data have been presented on a basis consistent with the financial statements so set forth in the Prospectus and other financial information. Pro forma financial information included in or incorporated by reference into the Registration Statement, the General Disclosure Package and the Prospectus has been prepared in accordance with the applicable requirements of the Act and guidelines of the American Institute of Certified Public Accountants (the “AICPA”) with respect to pro forma financial information and includes all adjustments necessary to present fairly

 

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the pro forma financial position of the Company at the respective dates indicated and the results of operations for the respective periods specified. All financial statements that are required under the Act or the Exchange Act to be included in, or incorporated by reference into, the Registration Statement, the General Disclosure Package and the Prospectus are included in, or incorporated by reference into, the Registration Statement, the General Disclosure Package and the Prospectus.

(g) No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Primary Entities, threatened by the Commission or by the state securities authority of any jurisdiction. No order preventing or suspending the use of the Prospectus has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Primary Entities, threatened by the Commission or by the state securities authority of any jurisdiction.

(h) Since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package and the Prospectus, except as otherwise stated therein, (A) there has been no adverse change in the condition (financial or otherwise), or in the earnings, assets, business affairs or business prospects of the Primary Entities or any subsidiary of the Company (the Primary Entities, such subsidiaries or any entity through which the Primary Entities own a joint venture interest in any property being sometimes hereinafter collectively referred to as the “Transaction Entities” and individually as a “Transaction Entity”), or any property in which any Transaction Entity directly or indirectly owns an interest (a “Facility”), whether or not arising in the ordinary course of business, which would be material to the Transaction Entities, considered as one enterprise (any such adverse change being hereinafter referred to as a “Material Adverse Change”); (B) no material casualty loss or condemnation or other adverse event with respect to any of the Facilities has occurred; (C) there have been no material transactions or acquisitions entered into by the Transaction Entities, other than those in the ordinary course of business; (D) none of the Transaction Entities has incurred any material obligation or liability, direct, contingent or otherwise; (E) there has been no material change in the short-term debt or long-term debt of the Transaction Entities; (F) except for regular quarterly distributions in amounts per share described in the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company, on any class of its capital shares; and (G) since June 30, 2006, and with the exception of the Company’s grant of options to purchase, in the aggregate, 10,000 shares of common stock of the Company, par value $.01 per share (“Common Stock”), there has been no change in the capital shares of the Company or partnership interests in the Operating Partnership (the “Units”).

(i) The Company has been duly organized and is validly existing as a corporation in good standing under and by virtue of the laws of the State of California, with power and authority to own, lease and operate its properties and to conduct the business in which it is engaged or proposes to engage, as described in the Registration Statement, the General Disclosure Package and the Prospectus, and to enter into and perform its obligations under this Agreement and the other Company Documents (as hereinafter defined) to which it is a party; and the Company is duly qualified or registered to transact business and is in good standing in each jurisdiction in which such

 

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qualification or registration is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or register would not result in a Material Adverse Change. Other than the Operating Partnership and PSBP Industrial, LLC, a Delaware limited liability company, none of the subsidiaries of the Company is a “significant subsidiary” as such term is defined in Rule 405 under the Act. The Company owns no direct or indirect equity interest in any entity other than the Transaction Entities and in PSCC, Inc.

(j) The Operating Partnership has been duly organized and is validly existing as a limited partnership in good standing under and by virtue of the laws of the State of California, with partnership power and authority to own, lease and operate its properties, to conduct the business in which it is engaged and proposes to engage, in each case as described in the Registration Statement, the General Disclosure Package and the Prospectus, and to enter into and perform its obligations under this Agreement and the other Company Documents to which it is a party. The Operating Partnership is duly qualified or registered as a foreign partnership and is in good standing in each jurisdiction in which such qualification or registration is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or register would not result in a Material Adverse Change. The Company is the sole general partner of the Operating Partnership. The Agreement of Limited Partnership of the Operating Partnership (the “Operating Partnership Agreement”) is in full force and effect in the form in which it was incorporated by reference as an exhibit in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and as of the date hereof, the aggregate percentage interests of the Company (in its capacity as both a general partner and a limited partner) and the limited partners other than the Company in the Operating Partnership’s common units are 74.4% and 25.6%, respectively.

(k) Each of the Transaction Entities has been duly organized and is validly existing as a corporation, limited partnership or other legal entity, as the case may be, in good standing under and by virtue of the laws of its state of organization with the requisite power and authority to own, lease and operate its properties, to conduct the business in which it is engaged or proposes to engage, and to enter into and perform its obligations under the Company Documents to which it is a party, if any. Each of the Transaction Entities is duly qualified or registered as a foreign corporation, limited partnership or other legal entity, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification or registration is required, whether by reason of the ownership or leasing of a property or the conduct of business, except where the failure to so qualify or register would not result in a Material Adverse Change. All of the issued and outstanding capital stock, units of limited partnership or other equity interest, as the case may be, of each of the Transaction Entities is duly authorized, validly issued, fully paid and, in the case of capital stock, nonassessable, and has been offered and sold in compliance with all applicable laws (including, without limitation, federal and state securities laws) and, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the capital stock, units of limited partnership or other equity interest, as the case may be, are owned by the Company, directly or indirectly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim, restriction or equities. No shares of capital stock, units of

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