SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
UCP, LLC
EFFECTIVE AS OF JULY 23, 2013

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Table Of Contents
 
 
Page
Article I
DEFINITIONS
4
          Section 1.1
          Definitions
4
          Section 1.2
          Usage Generally; Interpretation
11
Article II
ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP
12
          Section 2.1
          Formation; Admission
12
          Section 2.2
          Name
12
          Section 2.3
          Business Purpose/Operation
12
          Section 2.4
          Offices
12
          Section 2.5
          Term
12
          Section 2.6
          Members
12
          Section 2.7
          Fiduciary Duties; Outside Activities of the Members
12
          Section 2.8
          Place of Members' Meetings
13
          Section 2.9
          Meetings
14
          Section 2.10
          Telephonic Meetings
14
          Section 2.11
          Notice of Meetings
14
          Section 2.12
          Waivers
14
Article III
MANAGING MEMBER; POWERS
15
          Section 3.1
          Managing Member
15
          Section 3.2
          Compensation
16
Article IV
OFFICERS
17
          Section 4.1
          Officers
17
Article V
FINANCE AND CAPITAL
18
          Section 5.1
          Capital Contributions
18
          Section 5.2
          Additional Capital Contributions
18
          Section 5.3
          Members' Capital Accounts
18
          Section 5.4
          Allocations
19
          Section 5.5
          Banking; Investments
20
          Section 5.6
          Distributions
20
          Section 5.7
          Return of Contribution
21
Article VI
ACCOUNTING; TAX MATTERS
23
          Section 6.1
          Books; Fiscal Year
23
          Section 6.2
          Reports
23
          Section 6.3
          Company Information
23
          Section 6.4
          Records
23
          Section 6.5
          Tax Characterization
23
          Section 6.6
          Tax Returns
24
          Section 6.7
          Tax Matters Partner
24
          Section 6.8
          Tax Elections
25
          Section 6.9
          Withholding
25
Article VII
TRANSFERS
26
          Section 7.1
          Transfers of Membership Units
26
          Section 7.2
          Admission as a Member
26
          Section 7.3
          Prohibited Transfers
26
          Section 7.4
          Effect of Transfer Not in Compliance with this Article
26

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Table Of Contents
Article VIII
LIMITED LIABILITY; INDEMNIFICATION
27
          Section 8.1
          Limited Liability
27
          Section 8.2
          Indemnification
27
          Section 8.3
          Exculpation
28
Article IX
DISSOLUTION and LIQUIDATION
29
          Section 9.1
          Dissolution
29
          Section 9.2
          Withdrawal Of Members
29
          Section 9.3
          Distribution Upon Dissolution
29
          Section 9.4
          Time for Liquidation
30
          Section 9.5
          Winding Up and Filing Articles of Cancellation
30
Article X
MEMBERSHIP UNITS; CERTIFICATES
31
          Section 10.1
          Certificates
31
          Section 10.2
          Lost of Destroyed Certificates
31
          Section 10.3
          Transfer of Membership Units
31
          Section 10.4
          Splits And Reclassifications
31
          Section 10.5
          Incentive Plans; Registered and Private Offerings
32
          Section 10.6
          Regulations
32
          Section 10.7
          Registered Members
32
Article XI
MISCELLANEOUS
33
          Section 11.1
          Severability
33
          Section 11.2
          Notices
33
          Section 11.3
          Captions
33
          Section 11.4
          Entire Agreement
33
          Section 11.5
          Counterparts
33
          Section 11.6
          Amendments; Waiver
33
          Section 11.7
          Further Assurances
34
          Section 11.8
          Governing Law
34
          Section 11.9
          Third Party Beneficiary
34
          Section 11.10
          Assignment
34
          Section 11.11
          Successors and Assigns
34
          Section 11.12
          Relationships
34
          Section 11.13
          Consent to Jurisdiction
34
          Section 11.14
          Equitable Remedies
35
          Section 11.15
          Fees and Expenses
35
          Section 11.16
          Waiver of Jury Trial
35
          Section 11.17
          Confidentiality
35

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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
UCP, LLC

THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
(this “Agreement”) of UCP, LLC, a Delaware limited liability company (the
“Company”), is made and entered into, effective as of July 23, 2013, by and
between PICO Holdings, Inc., a corporation organized and existing under the laws
of California, with its principal place of business at 7979 Ivanhoe Avenue,
Suite 300, La Jolla, CA 92037 (“PICO”), and UCP, Inc., a corporation organized
and existing under the laws of Delaware, with its principal place of business at
6489 Camden Avenue, Suite 204, San Jose, CA 95120 (“UCP, Inc.”).
WHEREAS, the Company was formed as a limited liability company pursuant to the
Delaware Limited Liability Company Act (6 Del. C. Section 18-101, et seq., as it
may be amended from time to time, or any successor statute (the “LLCA”)) by the
filing of a Certificate of Formation with the Office of the Secretary of State
of the State of Delaware on October 26, 2007, as amended on January 10, 2008.
WHEREAS, the Company and the initial sole member, PICO, entered into an Amended
and Restated Operating Agreement as of July, 21, 2008 (the “Old Agreement”).
WHEREAS, the parties hereto desire to amend and restate the Old Agreement to
reflect the addition of UCP, Inc. as a member and the Managing Member of the
Company pursuant to the terms and subject to the conditions hereof.
NOW, THEREFORE, in consideration of the conditions and provisions contained
herein, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1    Definitions. The following terms shall, for the purposes of this
Agreement and the Schedules hereto, have the following meanings (terms defined
in the singular or the plural include the plural or the singular, as the case
may be):

“Additional Members” shall have the meaning ascribed thereto in Section 2.6.

“Adjusted Capital Account Deficit” means with respect to any Capital Account as
of the end of any Tax Year, the amount by which the balance in such Capital
Account is less than zero. For this purpose, such Member's Capital Account
balance shall be (a) reduced for any items described in Treasury Regulation
Sections 1.704‑1(b)(2)(ii)(d)(5) (relating to adjustments that, as of the end of
that Tax Year, reasonably are expected to be made to such Member's Capital
Account for allocations of loss or deduction), and 1.704‑1(b)(2)(ii)(d)(6)
(relating to adjustments that, as of the end of that Tax Year, reasonably are
expected to be made to such Member's Capital Account for certain distributions),
and (b) increased for any amount such Member is obligated to contribute or is
treated as being obligated

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to contribute to the Company pursuant to Treasury Regulation Section
1.704‑1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or
1.704‑2(g)(1) and 1.704-2(i) (relating to Minimum Gain).

“Affiliate” of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, “control” (including, with its
correlative meanings, the terms “controlled by” and “under common control
with”), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.

“Agreement” shall have the meaning given to that term in the first paragraph of
this Agreement.

“Back-to-Back Debt” shall have the meaning ascribed thereto in Section 10.5(c)
hereof.

“Business” shall mean the acquisition, development and entitlement of real
estate for residential construction and sale, and the construction and sale of
residential housing. Without limiting the foregoing, the Company shall (a) serve
as a member, manager, partner or stockholder, as the case may be, of its
subsidiaries and, in connection therewith, exercise all the rights and powers
conferred upon the Company as a member, manager, partner or stockholder, as the
case may be, of such entities, (b) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that any subsidiaries
are permitted to engage in or that their subsidiaries are permitted to engage in
by their organizational documents or agreements and, in connection therewith,
exercise all of the rights and powers conferred upon the Company pursuant to the
agreements relating to such business activity, (c) engage directly in, or enter
into or form any corporation, partnership, joint venture, limited liability
company or other arrangement to engage indirectly in, any business activity that
is approved by the Managing Member and that lawfully may be conducted by a
limited liability company organized pursuant to the LLCA and, in connection
therewith, exercise all of the rights and powers conferred upon the Company
pursuant to the agreements relating to such business activity; and (d) do
anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to any subsidiary or any corporation,
partnership, joint venture, limited liability company or other arrangement
entered into or formed, as contemplated by (b) or (c) above.

“Business Day” shall mean any day, other than a Saturday or Sunday, on which
federally chartered banks in the United States are open for business.

“Bylaws” shall mean the Bylaws of UCP, Inc. as in effect from time to time.

“Capital Account” shall have the meaning ascribed thereto in Section 5.3.

“Certificate of Formation” shall mean the Certificate of Formation of the
Company filed on October 26, 2007, as amended on January 10, 2008, with the
Secretary of State of the State of Delaware pursuant to the LLCA.

“Certificate of Incorporation” shall mean the Certificate of Incorporation of
UCP, Inc. dated May 7, 2013, and as hereafter amended from time to time, as
filed with the Secretary of State of the State of Delaware pursuant to the
Delaware General Corporation Law.

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“Closing Events” shall mean the following events, which to the extent they have
not heretofore occurred, shall occur on the date hereof: (i) the Offering; and
(ii) the contribution of the proceeds of the Offering by UCP, Inc. to the
Company.

“Code” shall mean the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of succeeding law.

“Company” shall have the meaning given to that term in the first paragraph of
this Agreement.

“Common Stock” shall mean the Class A shares of common stock, par value $0.01
per share, of UCP, Inc.

“Contingencies” shall have the meaning ascribed thereto in Section 9.3(a)
hereof.

“Convertible Debt” shall have the meaning ascribed thereto in Section 10.5(c)
hereof.

“Depreciation” shall mean for any fiscal year or portion thereof of the Company,
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such period for federal income
tax purposes, except that with respect to any asset the Gross Asset Value of
which differs from its adjusted tax basis for federal income tax purposes at the
beginning of such period, Depreciation shall (1) be computed by reference to the
Gross Asset Value, and (2) be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for federal income tax purposes bears to such beginning
adjusted tax basis; provided, however, that if the adjusted tax basis for
federal income tax purposes of an asset at the beginning of such period is zero
but the Gross Asset Value of the asset is not, Depreciation shall be determined
with reference to such Gross Asset Value using any reasonable method selected by
the Managing Member.

“Dissolution Event” shall have the meaning ascribed thereto in Section 9.1.

“Distributable Cash” shall mean cash available for distribution to the Members
(after taking into account (1) the Company's working capital needs, anticipated
capital expenditures, debt service requirements and other reserves, including
with respect to contingencies or commitments, and (2) any restrictions on
distributions under applicable law or any loan agreement, indenture, security
agreement, mortgage debt instrument or other agreement or other obligation to
which the Company is a party or by which it is bound or its assets are subject),
as determined by the Managing Member.

“Encumbrance” shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer (other than those imposed by law), voting
agreement, adverse claim or encumbrance or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
similar law of any jurisdiction.

“Exchange Agreement” shall mean the Exchange Agreement, dated as of the date
hereof, between UCP, Inc. and PICO relating to PICO's right to exchange, at any
time and from time to time, any or all of its Membership Units for shares of
Common Stock.

“Fiscal Year” of the Company shall mean each twelve (12) month period ending on
December 31st.

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“GAAP” shall mean generally accepted accounting principles as in effect from
time to time, consistently applied, with respect to the jurisdiction to which it
refers.

“Governmental Body” shall mean any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other entity
directly or indirectly owned by or subject to the control of any of the
foregoing.

“Gross Asset Value” shall mean, with respect to any Company asset, such asset's
adjusted basis for federal income tax purposes, except as follows:

(i)The initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset as reasonably
determined by the Managing Member.

(ii)The Gross Asset Value of the Company's assets shall be adjusted to equal
their respective gross fair market values (taking Code Section 7701(g) into
account), as determined by the Managing Member, as of the following times: (a)
the acquisition of additional Membership Units by any new or existing Member
(other than by transfer of existing Units, provided that, for the avoidance of
doubt, the exchange by PICO of Membership Units for Common Stock shall be
treated as a transfer of such Membership Units to UCP, Inc.); (b) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for the purchase or redemption by the Company
of any Membership Units; and (c) the liquidation of the Company, provided, that
(i) in the case of an adjustment pursuant to clause (a) by virtue of the
issuance of additional Units to UCP, Inc. on account of the contribution by UCP,
Inc. of the proceeds of an offering (including a private placement) of Common
Stock, the determination of the gross fair market value of the Company's assets
shall reflect the price at which the Common Stock is sold in such offering; and
(ii) in the case of an issuance of additional Units to UCP, Inc. pursuant to
Section 10.5(a), the determination of the gross fair market value of the
Company's assets shall reflect the closing sale price of the Common Stock
reported on the principal exchange on which the Common Stock is traded on the
day of such issuance.

(iii)The Gross Asset Value of any Company asset distributed to any Member shall
be adjusted to equal the gross fair market value (taking Code Section 7701(g)
into account) of such asset on the date of distribution as determined by the
Managing Member; and

(iv)The Gross Asset Values of Company assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(m), provided, however, that Gross
Asset Values shall not be adjusted pursuant to this paragraph (iv) to the extent
the Managing Member determines that an adjustment pursuant to paragraph (ii)
above is necessary or appropriate in connection with a transaction or event that
would otherwise result in an adjustment pursuant to this paragraph (iv).

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If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraphs (i), (ii) or (iv) above, such Gross Asset Value thereafter shall be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Net Profits and Net Losses.

“Incentive Plan” shall mean the 2013 Long-Term Incentive Plan of UCP, Inc. or
any other incentive plan adopted by UCP, Inc.

“Liquidation Agent” shall have the meaning ascribed thereto in Section 9.3(a).

“LLCA” shall have the meaning set forth in the above preamble.

“Managing Member” shall mean UCP, Inc. or any successor thereto pursuant to this
Agreement.

“Member” shall mean, at any time, UCP, Inc. and PICO if, at such time, they own
Membership Units in the Company and any other Person who at such time owns
Membership Units in the Company.

“Member-Funded Debt” shall mean any non-recourse debt of the Company which is
loaned or guaranteed by any Member and/or is treated as “partner non-recourse
debt” under Section 1.704-2(b)(4) of the Treasury Regulations.

“Members' Meeting” shall have the meaning ascribed thereto in Section 2.8.

“Membership Unit” or “Units” shall mean the units representing a Member's
interest in the Company, including such Member's (i) ownership interest in the
Company, and (ii) right to share in any Net Profits, Net Losses and any
distributions of the Company. Units shall be designated as Series A Units or
Series B Units. Series A Units shall be issued to PICO and Series B Units shall
be issued to UCP, Inc. The Series A Units and Series B Units rank pari passu
with each other, and have all the same rights (including the rights to share in
Net Profits and Net Losses) and obligations, except that UCP, Inc. as the
Managing Member and holder of the Series B Units shall have the exclusive
authority to manage the business, property and affairs of the Company in
accordance with the terms and provisions of this Agreement.

“Minimum Gain” shall mean an amount equal to the excess of the principal amount
of debt, for which no Member is liable (“non-recourse debt”), secured by any
property of the Company over the adjusted basis of such Property, which
represents the minimum taxable gain which would be recognized by the Company if
the non-recourse debt were foreclosed upon and the property were transferred to
the creditor in satisfaction thereof, and which is referred to as “minimum gain”
in Section 1.704-2(b)(2) of the Treasury Regulations. A Member's share of
Minimum Gain shall be determined pursuant to the above-cited Treasury
Regulations.

“Net Profits” and “Net Losses” shall mean the net income or net loss of the
Company (including capital gains and losses) as determined in accordance with
the accounting methods followed by the Company for federal income tax purposes
including income exempt from tax and described in Code Section 705(a)(1)(B) and
treating as deductions items of expenditure described in, or under Code Section
705(a)(2)(B). For purposes of computing Net Profits and Net Losses, gain or loss
resulting from the disposition of property, which gain or loss is recognized for
federal income tax purposes, shall be computed by reference to the Gross Asset
Value of such property rather than its adjusted tax basis. In lieu of the
depreciation, amortization and other cost recovery deductions taken into account
in computing taxable income or loss for federal income tax purposes, there shall
be taken into account Depreciation.

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In addition: (i) subject to Section 10.5(c), in the event the Gross Asset Value
of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the
definition of Gross Asset Value, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the Gross Asset Value of the
asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the asset) from the disposition of such asset and shall be taken into account
for purposes of computing Net Profit or Net Losses; and (ii) notwithstanding any
other provision of this definition, any items which are specially allocated
pursuant to sections 5.4(f) (g), (h), (i), and (j) hereof shall not be taken
into account for purposes of computing Net Profits or Net Losses. The amounts of
the items of Company income, gain, loss or deduction available to be specially
allocated pursuant to sections 5.4(g), (h), (i), and (j) hereof shall be
determined by applying rules analogous to those set forth in this definition of
“Net Profits” and “Net Losses.”

“Non-Recourse Deductions” shall have the meaning set forth in Section
1.704-2(b)(1) of the Treasury Regulations.

“Notice” shall have the meaning ascribed thereto under Section 11.2.

“Offering” shall mean the initial public offering by UCP, Inc. of its Common
Stock, the closing of which is occurring on the date hereof.

“Offering Expenses” shall mean all of the costs and expenses of the Offering
incurred by UCP, Inc., including but not limited to the underwriting discount
and the expenses listed in Item 13 of UCP, Inc.'s registration statement on Form
S-1, as filed with the Securities and Exchange Commission on April 4, 2013, as
subsequently amended, and declared effective by the Commission.

“Officers” shall have the meaning ascribed thereto under Section 4.1.

“Old Agreement” shall have the meaning set forth in the above preamble.

“Percentage Interest” shall mean a Member's aggregate economic percentage
interest in the Company as determined by dividing the number of Membership Units
owned by such Member by the number of Membership Units then owned by all
Members, each as set forth on Schedule I, as such schedule may be amended from
time to time.

“Person” shall mean an individual, sole proprietorship, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.

“PICO” shall have the meaning given such term in the first paragraph of this
Agreement.
“Regulatory Allocations” shall have the meaning ascribed thereto in Section
5.4(j).

“Required Allocation” shall have the meaning ascribed thereto in Section 5.4.

“Section 754 Election” shall have the meaning ascribed thereto under Section
6.8(b).
 
“Securities Act” shall have the meaning ascribed thereto in Section 10.1.

“Shortfall Interest Rate” shall mean LIBOR plus 300 basis points.

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“Tax Amount” means, with respect to any Member for any Tax Year, an amount for
such Tax Year that is attributable to the taxable income of the Company
allocated to such Member, calculated based on the tax returns filed by the
Company for such Tax Year, and applying the methodology and assumptions set
forth in the definition of “Tax Liability.”

“Tax Distributions” shall have the meaning ascribed thereto in Section 5.6(b)
hereof.

“Tax Liability” of a Member shall mean the aggregate federal, state and local
tax liabilities, including estimated taxes, payable by such Member that are
attributable to the taxable income of the Company, calculated by assuming a
combined federal, state and local tax rate of 41% or such other rate determined
by the Managing Member to be the highest marginal effective rate of federal,
state and local income tax applicable to corporations doing business in
California (or such other jurisdictions in which the Company is doing business)
and assuming such Member has no income or losses other than its share of the
Company's income or losses. For purposes of such calculation, (i) the effect of
any adjustments pursuant to Section 743(b) of the Code shall not be taken into
account, and (ii) items of income, gain, deduction or loss which are computed
separately by a Member shall be taken into account in determining the taxable
income of the Company allocated to such Member. For the avoidance of doubt, the
assumed tax rate used to calculate Tax Liability shall be the same for all
Members. “Tax Return” shall have the meaning ascribed thereto in Section 6.6(b)
hereof.

“Tax Receivable Agreement” means the Tax Receivable Agreement among UCP, Inc.,
the Company and PICO dated as of the date hereof.

“Tax Year” shall mean the twelve (12) month period ending on December 31.

“Transfer” shall mean, whether directly or indirectly, by merger, operation of
law or otherwise, any sale, assignment, conveyance, transfer, donation,
distribution or other disposition of, or pledge, hypothecation, encumbrance, the
creation of a security interest or other similar limitation in any manner
whatsoever, of any interest in the Company (including, without limitation, of
Membership Units, allocations, distributions or voting, consent or approval
rights).

“Treasury Regulations” means the regulations promulgated by the U.S. Department
of the Treasury under the Code.

“True-Up Amount” means, in respect of a Member for a particular Tax Year, an
amount, which may be positive or negative, equal to (1) the aggregate quarterly
distributions actually made to such Member in respect of such Tax Year under
Section 5.6(b)(ii), without taking into account any adjustments to such
distributions made with respect to any other Tax Year (including any adjustment
to take into account a True-Up Amount for the immediately preceding Tax Year)
minus (2) the Tax Amount of such Member in respect of such Tax Year; provided,
however, that if there is an audit or other adjustment with respect to a return
filed by the Company (including a filing of any amended return), upon a final
determination or resolution of such audit or other adjustment, the True-Up
Amount shall be redetermined for the relevant Tax Year, and the difference
(positive or negative, as the case may be) shall be treated as an additional
True-Up Amount which shall be applied as provided in Section 5.6(b)(ii).

“UCP, Inc.” shall have the meaning given to that term in the first paragraph of
this Agreement.

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“Waiver” shall have the meaning ascribed thereto in Section 12.6.

Section 1.2    Usage Generally; Interpretation. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. All references herein to Articles, Sections and Schedules shall be deemed
to be references to Articles, Sections and Schedules of this Agreement unless
the context otherwise requires. The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”. The words
“hereof”, “herein” and “hereunder” and words of similar import when used in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise expressly provided herein, any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
Except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to sections of the Code or Treasury
Regulations or is expressly prohibited or ineffective under the LLCA, this
Agreement shall govern, even when inconsistent with, or different from, the
provisions of the LLCA or any other law or rule. To the extent any provision of
this Agreement is prohibited or ineffective under the LLCA, this Agreement shall
be deemed to be amended to the least extent necessary in order to make this
Agreement effective under the LLCA. In the event the LLCA is subsequently
amended or interpreted in such a way to make any provision of this Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.

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ARTICLE II
ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP

Section 2.1    Formation; Admission. The Company was formed as a limited
liability company under the provisions of the LLCA by the filing on October 26,
2007, of the Certificate of Formation with the Secretary of State of the State
of Delaware. The Certificate of Formation was amended on January 10, 2008, to
change the name of the Company. Each of the Persons listed on Schedule I, by
virtue of the execution of this Agreement, is a Member of the Company. The
rights and liabilities of the Members shall be as provided in the LLCA, except
as is otherwise expressly provided herein. This Agreement hereby amends and
restates the Old Agreement in its entirety.

Section 2.2    Name. The name of the Company shall be, and the business of the
Company shall be conducted under the name of, UCP, LLC. The Company's business
may be conducted under any other name or names as may be determined by the
Managing Member. The words “Limited Liability Company,” “LLC” or similar words
or letters shall be included in the Company's name where necessary for the
purpose of complying with the laws of any jurisdiction that so requires. The
Managing Member may change the name of the Company at any time and from time to
time and shall notify the Members of such change.

Section 2.3    Business Purpose/Operation. The purposes of the Company are to
engage in (i) the Business, and (ii) such other activities, investments or
businesses permitted under the LLCA as determined from time to time by the
Managing Member.

Section 2.4    Offices. Unless and until changed by the Managing Member, the
registered office in the State of Delaware shall be Corporation Service Company,
2711 Centerville Road, Wilmington, Delaware 19808 and the registered agent for
service of process on the Company in the State of Delaware at such registered
office shall be Corporation Service Company. The Company's principal office
shall be located at 6489 Camden Avenue, Suite 204, San Jose, CA 95120. The
Company may have other offices at such other places within or without the State
of Delaware as the Managing Member from time to time may select.

Section 2.5    Term. The Company commenced on the date of the filing of the
Certificate of Formation and the term of the Company shall be perpetual, unless
and until the dissolution of the Company in accordance with the provisions of
Article IX or as otherwise provided by law.

Section 2.6    Members. The Members of the Company, the initial capital accounts
of each Member and the number of Membership Units owned by and Percentage
Interest of each Member are listed on Schedule I. Units held by PICO which are
issued and outstanding prior to the date hereof are hereby reclassified into the
number of Series A Units listed on Schedule I. One or more persons may be
admitted to the Company from time to time as additional members (“Additional
Members”), as may be determined by the unanimous consent of the Members (except
as provided with respect to Transfers of Membership Units in accordance with
Article VII); provided, however, that (except as provided in Article VII) each
such new Member shall execute an appropriate agreement or supplement to this
Agreement pursuant to which the new Member agrees to be bound by the terms and
conditions of this Agreement, as it may be amended from time to time. Admission
of a new Member shall not be cause for the dissolution of the Company. Upon
admission of a new Member, the Managing Member shall issue one or more
Certificates in the name of such Member evidencing the number of Units being
issued and amend Schedule I to provide for such admission, including, without
limitation to state the number of Units issued and the initial Capital Account.

Section 2.7    Fiduciary Duties; Outside Activities of the Members.

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(a)To the greatest extent permitted by law, no Member or any Affiliate of a
Member and none of their respective officers, directors, partners, employees or
agents shall owe any fiduciary duty to, nor shall any such Person be liable for
breach of duty, including breach of duty of loyalty, if any, to the Company, any
subsidiary thereof or any holder of Membership Units or Affiliate of such holder
(or any of their respective stockholders, partners or members). In taking any
action, making any decision or exercising any discretion with respect to the
Company or any of its subsidiaries, each Member and each Affiliate of a Member
and their respective officers, directors, partners, employees or agents shall be
entitled to consider such interests and factors as it desires, including the
interests of such Member or Affiliate of a Member and those of other Affiliates
of such Member, and shall have no duty or obligation (1) to give any
consideration to the interests of or factors affecting the Company or any
Affiliate thereof or (2) to abstain from participating in any vote or action of
the Company, any Affiliate thereof, including the Managing Member, or of any
board of directors (or committee) or similar body of any of the foregoing. No
Member, affiliate of a Member (or any officer, director, partner, employee or
agent thereof) shall violate a duty or obligation to the Company, any Affiliate,
or any holder of Membership Units (or any of their respective stockholders,
partners or members) merely because such Person's conduct furthers such Person's
own interests. Such Persons may lend money to and transact other business with
the Company and any of its subsidiaries. The rights and obligations of any such
Person who lends money to, contracts with, borrows from or transacts business
with the Company or any subsidiary thereof shall be the same as those of a
Person not involved with the Company. No transaction with the Company or any of
its subsidiaries shall be void or voidable because any such Person has a direct
or indirect interest in the transaction.

(b)Except as provided in this Agreement (1) any Member shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company, including business interests and activities in
direct competition therewith or in the same or similar activities or lines of
business as the Company, including interests and activities arising or acquired
after the date hereof and (2) no Member shall have any duty to refrain from any
such interests or activities or from doing business with any client, customer or
vendor of the Company or any of its Affiliates. Neither the Company nor any of
the other Members shall have any rights by virtue of this Agreement or otherwise
in any business interests or activities of any Member, whether existing as of
the date hereof or arising or acquired after the date hereof. If a Member, any
of its Affiliates or any officer, director, partner, employee or agent thereof
acquires knowledge of any potential transaction or matter that may be in the
same or similar activities or lines of business as or otherwise appropriate for
the Company or any of its Affiliates, the Company and the other Members shall
have no interest therein or expectation that such opportunity be offered to the
Company, any such interest or expectancy being hereby renounced and any claim
that such opportunity should have been presented to the Company being hereby
waived.

(c)Any Person purchasing or otherwise acquiring any Membership Unit or any
Common Stock shall be deemed to have notice of and to have consented to the
provisions of this Section.

(d)Neither the alteration, amendment, termination, expiration or repeal of this
Section, the adoption of any provision of this Agreement inconsistent with this
Section nor any amendment to the LLCA shall eliminate or reduce the effect of
this Section in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Section would accrue or arise, prior to such
alteration, amendment, termination, expiration, repeal or adoption.

Section 2.8    Place of Members' Meetings. Meetings of the Members (each, a
“Members' Meeting”) shall be held at the principal office of the Company, or at
such other place as the Members shall mutually agree.

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Section 2.9    Meetings. A Members' Meeting may be called by any Member for any
matter which is appropriate for consideration thereat. Members' Meetings shall
be chaired by the Chairman of the Board of Directors of the Managing Member, or
in the absence of the Chairman, the Managing Member's President, and the
Secretary of the Meeting shall be appointed by the Chairman or, in the absence
of the Chairman, the Managing Member's President.

Section 2.10    Telephonic Meetings. Members' Meetings may be held through the
use of conference telephone or similar communications equipment so long as all
Persons participating in such Members' Meetings can hear one another at the time
of such Members' Meeting. Participation in a Members' Meeting by conference
telephone or similar communications equipment in accordance with the preceding
sentence constitutes presence in person at the Members' Meeting.

Section 2.11    Notice of Meetings. Written notice of each Members' Meeting
shall state the place, date and hour of such Members' Meeting, and the general
nature of the business to be transacted. Notice shall be given in the manner
prescribed in Section 11.2 not fewer than ten (10) days nor more than sixty (60)
days before the date thereof.

Section 2.12    Waivers. Notice of a Members' Meeting need not be given to any
Member who signs a waiver of notice, in person or by proxy, whether before or
after the Members' Meeting. The attendance of any Member at a Members' Meeting,
in person or by proxy, without protesting prior to the conclusion of such
Members' Meeting the lack of notice of such Members' Meeting, shall constitute a
waiver of notice by such Member, provided that such Member has been given an
adequate opportunity at the meeting to protest such lack of notice.

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ARTICLE III
MANAGING MEMBER; POWERS

Section 3.1    Managing Member.

(a)The business, property and affairs of the Company shall be managed under the
sole, absolute and exclusive direction of the Managing Member. Without limiting
the foregoing, the Managing Member shall have the sole power to manage or cause
the management of the Company, including, without limitation, the power and
authority to effectuate the sale, lease, transfer, exchange or other disposition
of any, all or substantially all of the assets of the Company (including, but
not limited to, the exercise or grant of any conversion, option, privilege or
subscription right or any other right available in connection with any assets at
any time held by the Company) or the merger, consolidation, reorganization or
other combination of the Company with or into another entity.

(b)Except as otherwise expressly set forth in this Agreement, the Managing
Member shall have the general power to manage or cause the management of the
Company within the scope of the business purpose set forth in Section 2.3,
including the following powers which may, subject to any limitations set forth
in this Agreement, be delegated to the officers or other authorized
representatives (which may include employees or agents) of the Managing Member:

(i)to have developed and prepared a business plan each year which will set forth
the operating goals and plans for the Company;

(ii)to execute and deliver or to authorize the execution and delivery of
contracts, deeds, leases, licenses, instruments of transfer and other documents,
instruments or agreements in the ordinary course of business on behalf of the
Company;

(iii)to employ, retain, consult with and dismiss such personnel, agents or
representatives as may be required for accomplishment of the business purpose
set forth in Section 2.3;

(iv)to establish and enforce limits of authority and internal controls with
respect to all personnel and functions;

(v)to engage attorneys, consultants and accountants for the Company;

(vi)to develop or cause to be developed, accounting procedures for the
maintenance of the Company's books of account;

(vii)to appoint auditors; (except if there is an audit committee of the Managing
Member, in which case such audit committee shall appoint the auditors of the
Company);

(viii)to make any expenditures, lend or borrow money, assume or guarantee, or
otherwise contract for indebtedness and other liabilities, issue evidences of
indebtedness in the name of the Company and incur other obligations;

(ix)to acquire, dispose of, mortgage, pledge, encumber, buy or exchange assets
of the Company;

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(x)to use the assets of the Company (including cash on hand) for any purpose
consistent with the terms of this Agreement, including the financing of the
conduct of the operations of the Company and its subsidiaries, lending funds to
other Persons, repaying of obligations of the Company and its subsidiaries and
capital contributions to any subsidiary;

(xi)to distribute Distributable Cash;

(xii)to maintain insurance, including for the benefit of the Managing Member,
Members and their respective directors, officers, partners, employees and
agents;

(xiii)to form or acquire an interest in, and contribute property and make loans
to, any limited or general partnerships, joint ventures, corporations or limited
liability companies;

(xiv)to control any matters affecting the rights and obligations of the Company,
including the bringing and defending of actions at law or in equity and
otherwise engaging in the conduct of litigation, arbitration or remediation
proceedings, and the incurring of legal expenses and the settlement of claims
and litigation or arbitrations;

(xv)to indemnify any Person against liabilities and contingencies to the extent
permitted by law and this Agreement: and

(xvi)to do all such other acts as shall not be prohibited by or in violation of
this Agreement.

Section 3.2    Compensation. The Managing Member shall not be entitled to
compensation for services rendered to the Company in its capacity as Managing
Member; provided, however, that nothing contained herein shall prohibit or
restrict the payment of compensation to UCP, Inc. for services rendered to the
Company.

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ARTICLE IV
OFFICERS

Section 4.1    Officers. The officers of the Company (the “Officers”) shall at
all times be identical to the then officers of the Managing Member. Any changes
in the officers of the Managing Member, whether by election, resignation,
removal, death or otherwise, shall automatically and concurrently take effect
with respect to the Officers of the Company. No Officer of the Company may
resign unless such Officer concurrently resigns as an officer of the Managing
Member. Any resignation by an Officer of the Managing Member shall constitute
such Officer's concurrent resignation from the Company.

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ARTICLE V
FINANCE AND CAPITAL

Section 5.1    Capital Contributions. On or prior to the date hereof, the
Members have made capital contributions and have acquired the number of
Membership Units specified opposite their respective names on Schedule I.

Section 5.2    Additional Capital Contributions. Except as set forth in Section
10.5, no Member shall be required or permitted to make additional capital
contributions to the Company without the consent of all of the Members.

Section 5.3    Members' Capital Accounts. No Member shall have any right to
withdraw any portion of its Capital Account, except as otherwise provided
herein. For purposes hereof, “Capital Account” shall mean the separate capital
account maintained for each Member in accordance with the principles of Section
1.704-1(b) of the Treasury Regulations, as of any particular date, except as
provided herein. Immediately following the Closing Events, the Capital Account
balance of each Member shall be the product of (i) such Member's Percentage
Interest and (ii) the net equity value of the Company, which shall be determined
as (x) the product of the price to public of the shares of Common Stock sold in
the Offering and the number of Units outstanding immediately after the closing
of the Offering, less (y) the Offering Expenses.

The Members agree that the amount of each Member's initial Capital Account, as
so determined, is as set forth on Schedule I. Thereafter, such Capital Accounts
shall be adjusted as follows:

(a)The Capital Account of each Member shall be increased by:

i)The amount of any Net Profits (and any items of income or gain), allocated on
or after the date hereof to such Member;

ii)The amount, if any, of any Company liabilities assumed by such Member or
taken subject to or in connection with the distribution of property to such
Member by the Company on or after the date hereof;

iii)The amount of any cash contributed by such Member to the Company; and

iv)The fair market value of property (which shall include any Persons)
contributed to the Company by such Member on or after the date hereof.

(b)The Capital Account of each Member shall be decreased by:

i)The amount of cash distributed to such Member by the Company on or after the
date hereof;

ii)The amount of any Net Losses (and, without duplication, any items of
deduction or loss) allocated to such Member on or after the date hereof;

iii)The fair market value of any property distributed to such Member by the
Company on or after the date hereof; and

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iv)The amount of any liabilities of such Member assumed by the Company or taken
subject to or in connection with the contribution of property by such Member to
the Company on or after the date hereof.

(c)The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Treasury
Regulations under Section 704(b) of the Code and, to the extent not inconsistent
with the provisions of this Agreement, shall be interpreted and applied in a
manner consistent with such Treasury Regulations.

(d)No interest shall be paid by the Company on capital contributions, balances
in Member's Capital Accounts or any other funds contributed to the Company or
distributed or distributable by the Company under this Agreement.

(e)No adjustment shall be made to any Member's Capital Account pursuant to
Subsections (a) or (b) of this Section 5.3 on account of any of the Closing
Events.

Section 5.4    Allocations.

(a)Net Profits. Net Profits shall be allocated among the Members in proportion
to their respective Percentage Interests.

(b)Net Losses. Net Losses shall be allocated among the Members in proportion to
their respective Percentage Interests.

(c)Whenever a proportionate part of the Net Profits or Net Losses is allocated
to a Member, every item of income, gain, loss, deduction or credit entering into
the computation of such Net Profits or Net Losses or arising from the
transactions with respect to which such Net Profits or Net Losses were realized,
shall be credited or charged, as the case may be, to such Member in the same
proportion; provided, however, that “recapture income,” if any, shall be
allocated to the Members who were allocated the corresponding Depreciation
deductions.

(d)When the Gross Asset Value of a Company asset differs from its basis for
federal income tax purposes, solely for tax purposes and not for purposes of
computing Capital Account balances, income, gain, loss, deduction and credit
with respect to such asset shall be allocated among the Members in accordance
with the principles of Section 704(c) of the Code and the Treasury Regulations
thereunder. For purposes of this Section 5.4(d), Code Section 704(c) (or the
principles of Code Section 704(c)) shall be applied using the traditional method
unless the Managing Member shall determine to use another method that is
permissible under Treasury Regulations; provided, however, that so long as PICO
and its Affiliates collectively hold a ten percent (10%) or greater Percentage
Interest in the Company, such determination shall be with the prior written
consent of PICO.

(e)All matters concerning the allocation of Net Profits and Net Losses (and
items of income, gain, loss and deduction) among the Members and accounting
procedures not expressly and specifically provided by the terms of this
Agreement, shall be determined in good faith by the Managing Member on a basis
which is in conformity with the requirements imposed under Code Section 704 and
the Treasury Regulations thereunder as equitably applied among the Members.

(f)Notwithstanding any provision of Section 5.4, if there is a net decrease in
Minimum Gain during a taxable year of the Company (including any Minimum Gain
attributable to Member-Funded Debt),

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each Member at the end of such year shall be allocated, before any other
allocations of Net Profits or Net Losses for such year, items of income and gain
for such year (and, if necessary, subsequent years) in the amount and in the
proportions described in Section 1.704-2(f) (or Section 1.704-2(i)(4)) of the
Treasury Regulations.

(g)If any Member unexpectedly receives any adjustment, allocation or
distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the
Treasury Regulations, the Members shall be allocated items of income and gain in
an amount and manner to eliminate any Adjusted Capital Account Deficit
attributable to such adjustment, allocation or distribution as quickly as
possible.

(h)Notwithstanding the allocations provided for in Section 5.4(a), (b), (d), (i)
or (j), if there is a net increase in Minimum Gain during a taxable year of the
Company that is attributable to Member-Funded Debt then, first depreciation, to
the extent the increase in such Minimum Gain is allocable to depreciable
property, and then a proportionate part of other deductions and expenditures
described in Section 705(a)(2)(B) of the Code, shall be allocated to the lending
or guaranteeing Members, provided that, the total amount of deductions so
allocated for any year shall not exceed the increase in Minimum Gain
attributable to such Member-Funded Debt in such year.

(i)Non-Recourse Deductions shall be allocated among the Members in proportion to
their Percentage Interests.

(j)The allocations set forth in Sections 5.4(f), (g), (h) and (i) (the
“Regulatory Allocations”) are intended to comply with certain requirements of
Section 1.704-1(b) of the Treasury Regulations. The Regulatory Allocations shall
be taken into account in allocating other Net Profits and Net Losses and items
of income, gain, loss and deduction so that, to the extent possible, the net
amount of such other allocations and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to such Member
if the Regulatory Allocations had not been made.

(k)If any Member Transfers all or any portion of its Membership Units during any
Fiscal Year, Net Profits and Net Losses attributable to such transferred
Membership Units for such Fiscal Year shall be apportioned between the
transferor and the transferee or computed as to such Members on the basis of an
interim closing of the books and records of the Company deeming a Transfer to
have occurred (i) at the beginning of the first day of the month in which the
Transfer occurred, if the Transfer actually occurred prior to the 16th day of
such month, or (ii) at the end of the last day of such month if the transfer
actually occurred on or after the 16th day of such month, unless the Managing
Member shall reasonably determine to use another method that is permissible
under the Code and applicable regulations thereunder.

Section 5.5    Banking; Investments. All funds of the Company shall be deposited
in such bank account or accounts, or invested, and withdrawals from any such
bank account shall be made upon such signature or signatures, as shall be
established and designated by the Managing Member.

Section 5.6    Distributions.

(a)Except as otherwise required by law or as provided in this Agreement, no
Member shall have any right to withdraw any portion of its Capital Account or
receive any distributions from the Company, except as expressly provided herein.

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(b)The Company shall distribute Distributable Cash, subject to any restrictive
covenants or similar provisions under agreements by which the Company is bound,
to each Member in accordance with the following:

(i)To the Members pro rata in proportion to their respective Percentage
Interests at the time or times determined by the Managing Member; provided,
however, that the Managing Member shall have the obligation to make
distributions as set forth in Sections 5.6(b)(ii) and 9.3(a). In furtherance of
the foregoing, it is intended that the Managing Member shall, to the extent
permitted by applicable law and hereunder, have the right in its sole discretion
to make distributions to the Members pro rata in proportion to their respective
Percentage Interests pursuant to this Section 5.6(b)(i) in such amounts as shall
enable UCP, Inc. to meet its obligations pursuant to the Tax Receivable
Agreement.

(ii)The Company shall make a distribution to each Member of cash in an amount
equal to such Member's Tax Liabilities (“Tax Distributions”) as reasonably
determined by the Managing Member. Tax Distributions shall be made at such times
so as to allow the Members to make payments of their estimated or income tax (as
applicable) and shall be made at least 10 days, but no earlier than 20 days,
prior to the due date (without extensions) for each such payment that would
apply to the Company if it were a Delaware corporation. Within thirty 30 days
after (i) the filing by the Company of its annual federal tax return, and (ii)
final resolution of any audit or other adjustment to any federal, state, local
or other tax returns filed by the Company, the Company shall determine each
Member's True-Up Amount, based on the Company's federal income tax returns. If a
Member's True-Up Amount is negative, the Company shall make an additional Tax
Distribution to such Member in an amount equal to the True-Up Amount. If a
Member's True-Up Amount is positive, such amount shall be applied to reduce
future Tax Distributions under this Section 5.6(b)(ii) until such True-Up Amount
is entirely applied. Except as provided in the following sentence, to the extent
that at the time of any Tax Distribution, a Member would otherwise be entitled
to receive less than its Percentage Interest of the aggregate Tax Distributions
to be paid on such date, the Tax Distributions to such Member shall be increased
to ensure that all distributions to be made pursuant to this Section 5.6(b)(ii)
as of any such date shall be made on a pro rata basis in accordance with the
Members' respective Percentage Interests (any such increased amount of a
Member's Tax Distributions, a “Shortfall Amount”). If at the time of any Tax
Distribution there is not sufficient Distributable Cash on hand to distribute to
each Member the full amount of such Member's Tax Liability and such Member's
Shortfall Amount, (i) distributions at such time shall be made to the extent of
the available Distributable Cash (a) first, to the Members in proportion to each
Member's aggregate unpaid Tax Liability, until the full amount of the Members'
aggregate Tax Liabilities are paid and (b) second, to the Members in proportion
to each Member's aggregate unpaid Shortfall Amount, until the full amount of the
Members' aggregate Shortfall Amounts are paid; and (ii) the Company shall make
future distributions as soon as funds become available (a) first, to the Members
in proportion to each Member's aggregate unpaid Tax Liability, until the full
amount of the Members' aggregate Tax Liabilities are paid and (b) second, to the
Members in proportion to each Member's aggregate unpaid Shortfall Amount,
together with interest on such unpaid Shortfall Amount at the Shortfall Interest
Rate, until the full amount of the Members' aggregate Shortfall Amounts and any
interest thereon are paid.

Section 5.7    Return of Contribution. Except as required by the LLCA, no Member
shall be personally liable for the return of any capital contribution, or any
portion thereof, or the return of any additions to the Capital Accounts of the
other Members, or any portion thereof, it being agreed that any return of
capital as may be made at any time, or from time to time, shall be made solely
from the assets of the Company, and only in accordance with the terms hereof.

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ARTICLE VI
ACCOUNTING; TAX MATTERS

Section 6.1    Books; Fiscal Year. The Company shall maintain complete and
accurate books of account of the Company's affairs at the Company's principal
place of business. Such books shall be kept in accordance with U.S. GAAP. The
Company's accounting period for tax purposes shall be the Fiscal Year. The
Company's accounting year for all other purposes shall be the Fiscal Year.

Section 6.2    Reports. The Company shall close the books of account after the
close of each quarter in each Fiscal Year. The Company shall prepare and
distribute to each Member a quarterly statement of such Member's distributive
share of income and expense for federal income tax reporting purposes, as well
as a quarterly report on sales, income, expenses and other reports as are
normally prepared for PICO and UCP, Inc. and in sufficient detail to permit each
of PICO and UCP, Inc. to report its respective share of income, expense, and
such other GAAP items as each of PICO and UCP, Inc. may reasonably request from
time to time. Such information shall be made available to each such Member no
later than twenty five (25) days after the end of each calendar quarter and no
later than sixty (60) days after the end of each Fiscal Year in respect of the
prior Fiscal Year. As soon as practicable after the end of each Fiscal Year, the
Company shall send to each Member a report indicating such information with
respect to the Member as is necessary for purposes of reporting such amounts for
federal, state and local income tax purposes. For the avoidance of doubt, any
information under this Section 6.2 shall be subject to the provisions of Section
11.17.

Section 6.3    Company Information. Upon reasonable request, the Company shall
supply to PICO and its Affiliates, so long as they collectively hold at least a
ten percent (10%) Percentage Interest in the Company information regarding the
Company, its sales, receipts, payments, all accounting information and records
as well as all activities of the Company. PICO, UCP, Inc. and their respective
Affiliates and representatives shall have free access during normal business
hours to discuss the operations and business of the Company with employees or
agents of the Company, and to inspect, audit or make copies of all books,
records and other information relative to the operations and business of the
Company at their own expense, provided, however, that each such Member shall
preserve the confidentiality of such information. For the avoidance of doubt,
information provided under this Section 6.3 shall be subject to the provisions
of Section 11.17.

Section 6.4    Records. The Company shall keep or cause to be kept appropriate
books and records in accordance with the LLCA with respect to the Company's
business, which books and records shall at all times be kept at the principal
office of the Company. Without limiting the foregoing, the Company shall keep at
its principal office the following:

(a)a current list of the full name and the last known street address of each
Member;

(b)a copy of the Certificate of Formation and this Agreement and all amendments
thereto;

(c)copies of the Company's federal, state and local income tax returns and
reports, if any, for the six most recent Fiscal Years;

(d)copies of any financial statements of the Company for the six most recent
Fiscal Years; and

(e)such other documents with respect to the Company's business as may reasonably
be required from time to time by the Managing Member.

Section 6.5    Tax Characterization. It is intended that the Company be
characterized and treated

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as a partnership for, and solely for, U.S. federal, state and local income tax
purposes, and neither the Company nor any Member shall take any action
inconsistent with such characterization. For such purpose, (i) the Company shall
be subject to all the provisions of Subchapter K of Chapter 1 of Subtitle A of
the Code, and (ii) all references to a “Partner,” to “Partners” and to the
“Partnership” in the provisions of the Code and Treasury Regulations cited in
this Agreement shall be deemed to refer to a Member, Members and the Company,
respectively.

Section 6.6    Tax Returns.

(a)Subject to the provisions of Section 6.6(b), the Managing Member shall file,
or cause to be filed, the Company's tax returns and statements. The Managing
Member may request reasonable extensions to file any tax return or statement
without the written consent of the other Members but shall provide written
notice to the Members of any such request for extension not later than ten (10)
days before the date on which any tax return or statement for which an extension
is requested is required to be filed. The Managing Member shall use commercially
reasonable efforts to prepare and furnish, or cause to be prepared and
furnished, to the Members within sixty (60) calendar days after the close of
each Tax Year, the Schedule K-1s to the Company's Federal partnership income tax
return for the Tax Year.

(b)For each Tax Year, (i) the Managing Member shall provide PICO, UCP, Inc. and
their respective Affiliates with a copy of their draft Schedule K-1s at least
thirty (30) calendar days prior to the date such Schedule K-1s are required to
be furnished to such Members, and (ii) the Managing Member shall provide each
such Member with a copy of the Company's draft Tax Return at least thirty (30)
calendar days prior to the earlier of (x) the date of filing of the Company's
Federal partnership income tax return for the Tax Year (“Tax Return”), or (y)
the date by which the Tax Return is required to be filed (taking into account
extensions as permitted under Section 6.6(a)). So long as PICO and its
Affiliates collectively hold at least a ten percent (10%) Percentage Interest in
the Company, the Tax Return shall not be filed (or caused to be filed) and final
Schedule K-1s shall not be furnished to the Members pursuant to Section 6.6(a)
without PICO's prior consent, which consent shall not unreasonably be withheld
or delayed. For the avoidance of doubt, any information provided under this
Section 6.6(b) shall be subject to this provisions of Section 11.17.

Section 6.7    Tax Matters Partner. For purposes of Code Section 6231(a)(7)(A),
the Managing Member shall be the “Tax Matters Partner” of the Company for all
purposes of the Code and any corresponding state or local statute. Each Member
consents to such designation and agrees to take such further action as may be
required, by regulation or otherwise, or as may be requested by any Member, to
effectuate such designation. The Tax Matters Partner shall cooperate with the
other Members and shall promptly provide the other Members with copies of
notices or other materials from, and inform the other Members of discussions
engaged in with, any taxing authority and shall provide the other Members with
notice of all scheduled administrative proceedings, including meetings with
agents, technical advice conferences and appellate hearings, as soon as possible
after receiving notice of the scheduling of such proceedings. The Tax Matters
Partner will schedule such proceedings only after consulting the other Members
with a view to accommodating the reasonable convenience of both the Tax Matters
Partner and the other Members. As long as PICO and its Affiliates collectively
hold at least a ten percent (10%) Percentage Interest in the Company, the Tax
Matters Partner shall not agree to extend the period of limitations for
assessments; file a petition or complaint in any court; file a request for an
administrative adjustment of partnership items after any return has been filed;
or enter into any settlement agreement with respect to Company items of income,
gain, loss or deduction without the prior consent of PICO, which consent shall
not unreasonably be withheld or delayed.

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Section 6.8    Tax Elections.

(a)The Managing Member shall, subject to the terms of this Agreement, determine
whether to make any available tax election; provided, however, that so long as
PICO and its Affiliates collectively hold at least a ten percent (10%)
Percentage Interest in the Company, such determination shall be subject to the
prior consent of PICO, which consent shall not unreasonably be withheld or
delayed.

(b)Effective for its first taxable year ending after the date hereof (or, if
such election is not permitted for such taxable year, for its first taxable year
for which it is permitted), the Company shall file with its tax return a written
statement (the “Section 754 Election”), signed by the Managing Member, setting
forth (i) the name and address of the Company, (ii) a declaration that the
Company elects under Code Section 754 to apply the provisions of Code Sections
734(b) and 743(b) and (iii) such other information as may be required under
Treas. Reg. Section 1.754-1. The Company shall allocate such special basis
adjustments under Code Sections 734(b) and 743(b) pursuant to Code Section 755.

(c)The Company shall pay all costs incurred by the Company in connection with
any special basis adjustments arising from any Transfers or distributions,
including reasonable attorneys' and accountants' fees. In addition, both the
transferor and the transferees of an ownership interest Transfer (or the
transferee of any Company distribution) permitted hereunder shall (within sixty
(60) days of such permitted Transfer or distribution) provide the Company with
complete and accurate information regarding such Transfer (or distribution) to
enable the Company to make special basis adjustments and other computations in
connection therewith.

Section 6.9    Withholding. Each Member hereby authorizes the Company to
withhold from or pay on behalf of or with respect to such Member any amount of
federal, state, local or foreign taxes that the Managing Member determines that
the Company is required to withhold or pay with respect to any amount
distributable or allocable to such Member pursuant to this Agreement, including
any taxes required to be withheld by the Company pursuant to Sections 1441,
1442, 1445 or 1446 of the Code. Any amounts so withheld shall be treated as
having been distributed to such Member.

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ARTICLE VII
TRANSFERS

Section 7.1    Transfers of Membership Units. No Member nor any transferee of
Membership Units initially held by such Member may Transfer its Membership Units
to any Person without the prior written consent of the Managing Member in its
sole discretion; provided, however, the following Transfers shall not require
the consent of the Managing Member: (i) Transfers pursuant to PICO's exercise of
exchange rights pursuant to the Exchange Agreement and any such Transfers
pursuant to the Exchange Agreement shall be deemed a Transfer hereunder, and
(ii) Transfers by PICO or UCP, Inc., to any of their respective Affiliates
provided, however, that if any such Affiliate subsequently ceases to be an
Affiliate of such Member, the Membership Units so transferred must first be
Transferred back to the original Member. Any Transfers of Membership Units under
this Section 7.1 shall comply with applicable federal and state securities laws.

Section 7.2    Admission as a Member. A transferee pursuant to Section 7.1 shall
become a Member, and shall be listed as a Member on Schedule I hereto, and shall
be deemed to receive the Membership Units being Transferred at such time as such
transferee executes and delivers to the Company an agreement or supplement to
this Agreement in which the transferee agrees (or, with respect to any Transfer
by PICO that is a distribution or dividend by PICO to holders of its securities
or the exchange by PICO of Membership Units for any of its securities, as a
stated condition to any such Transfer, is deemed to agree, without executing and
delivering to the Company an agreement or supplement to this Agreement) to be
admitted as a Member and bound by the terms and conditions of this Agreement as
it may be amended from time to time; provided, however that for purposes of this
Section 7.2, the Encumbrance of Membership Units shall not be deemed a Transfer.

Section 7.3    Prohibited Transfers. Notwithstanding any contrary provision in
this Agreement, no Transfer shall be permitted (and if attempted shall be void
ab initio) if, in the reasonable determination of the Managing Member, such
Transfer would pose a material risk that the Company would be treated as a
“publicly traded partnership” within the meaning of Section 7704 of the Code and
the regulations promulgated thereunder.

Section 7.4    Effect of Transfer Not in Compliance with this Article. Any
purported Transfer of Membership Units that is not in compliance with this
Article VII shall be void and of no effect.

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ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION

Section 8.1    Limited Liability. Except as otherwise provided under the LLCA,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company and neither any Member nor the Managing Member shall
be obligated or liable for any such debt, obligation or liability of the
Company. Except as otherwise provided by the laws of the State of Delaware, the
debts, obligations and liabilities of any Member, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liability of such
Member and neither any Member, the Managing Member (in its capacity as such) nor
the Company shall be obligated or liable for any such debt, obligation or
liability of such Member.

Section 8.2    Indemnification.

(a)The Company shall indemnify, defend and hold harmless any Member, the
Managing Member (and any of their respective officers, directors, managers,
employees and agents) and any officer, director, manager, employee or agent of
the Company, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he, she or it is or was a
Member, the Managing Member, or an officer, director, manager, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, manager, employee, agent or tax matters partner of another
corporation, partnership, joint venture, trust or other enterprise (each an
“Indemnitee”), from and against expenses (including attorneys' fees and
expenses), judgments, damages, penalties, interest, liabilities, fines and
amounts paid in settlement actually and reasonably incurred by such Person in
connection with such claim, action, suit or proceeding if such Person acted in
good faith and in a manner such Person reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
sanction or proceeding, had no reasonable cause to believe that his, her or its
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner which he, she or it reasonably believed to
be in, or not opposed to, the best interests of the Company, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his,
her or its conduct was unlawful.

(b)Expenses (including attorneys' fees and expenses) incurred in defending a
civil or criminal action, suit or proceeding shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding and in
advance of any final determination that such Indemnitee is not entitled to be
indemnified, upon receipt of an undertaking by or on behalf of any Indemnitee to
repay such amount if it shall be ultimately determined by a court of competent
jurisdiction from which no further appeal may be taken or the time for appeal
has lapsed that such Person is not entitled to be indemnified by the Company
pursuant to the terms and conditions of this Section 8.2.

(c)The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 8.2 shall continue as to a Person who has ceased to be
a Member, the Managing Member, or any officer, director, manager, employee or
agent of the Company, the Managing Member or any Member, and shall inure to the
benefit of the heirs, executors, administrators and other legal successors of
such Person.

(d)The indemnification provided by this Section 8.2 shall not be deemed
exclusive of any other rights to indemnification to which those seeking
indemnification may be entitled under any agreement, determination of Members or
otherwise.

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(e)Any indemnification hereunder shall be satisfied only out of the assets of
the Company (including insurance and any agreements pursuant to which the
Company and indemnified Persons are entitled to indemnification), and the
Members shall not be subject to personal liability by reason of these
indemnification provisions and shall have no obligation to contribute or loan
any monies or property to the Company to enable it to effectuate such
indemnification.

(f)No Person shall be denied indemnification in whole or in part under this
Section 8.2 because such Person had an interest in the transaction with respect
to which the indemnification applies if the transaction was otherwise permitted
by the terms of this Agreement.

(g)The indemnification, advancement of expenses and other provisions of this
Article VIII are for the benefit of the Indemnitees, their heirs, successors,
assigns and administrators and shall not be deemed to create any rights for the
benefit of any other Persons.

(h)Except to the extent otherwise provided in this Article VIII, the right to be
indemnified and to receive advancement of expenses in this Article VIII shall be
a contract right. No amendment, modification or repeal of this Article VIII or
any provision hereof shall in any manner terminate, reduce or impair the right
of any past, present or future Indemnitee to be indemnified by the Company, nor
the obligations of the Company to indemnify any such Indemnitee under and in
accordance with the provisions of Article VIII as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

(i)If any provision or provisions of this Section 8.2 shall be held invalid,
illegal or enforceable for any reason whatsoever: (1) the validity, legality and
enforceability of the remaining provisions of this Section 8.2 (including,
without limitation, each portion, if any, of this Section 8.2 containing any
such provisions held to be invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this Section 8.2 (including, without limitation, each such portion
of any subsection of this Section 8.2 containing any such provision held to be
invalid, illegal or unenforceable) shall be construed as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable

Section 8.3    Exculpation. A Member shall not be personally liable to the
Company or its Members for monetary damages for breach of fiduciary duty, except
to the extent such exemption from liability or limitation is not permitted under
the LLCA as the same exists or may hereafter be amended. Any repeal or
modification of the immediately preceding sentence or any amendment to the LLCA
shall not adversely affect the right or protection of any Member existing
hereunder with respect to any act or omission occurring prior to such repeal,
modification or amendment.

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ARTICLE IX
DISSOLUTION and LIQUIDATION

Section 9.1    Dissolution. The Company shall be dissolved and its affairs wound
up, upon the first to occur of any of the following events (each of which shall
constitute a “Dissolution Event”):

(a)The election of the Managing Member with the consent of PICO if PICO and its
Affiliates collectively hold a ten percent (10%) or greater Percentage Interest
in the Company;

(b)The sale, disposition or transfer of all or substantially all of the assets
of the Company; or

(c)The entry of a decree of judicial dissolution under Section 802 of the LLCA
with respect to the Company.

Section 9.2    Withdrawal Of Members. No Member shall have the right to
voluntarily withdraw as a Member of the Company other than following the
Transfer or, with respect to PICO, the exchange of all Membership Units owned by
such Member, which Transfer shall be in accordance with Article VII. No Member
shall seek a decree of judicial dissolution with respect to the Company.

Section 9.3    Distribution Upon Dissolution.

(a)Upon dissolution, the Company shall not be terminated and shall continue
until the winding up of the affairs of the Company is completed and a
certificate of cancellation has been issued by the Secretary of State of
Delaware. Upon the winding up of the Company, the Managing Member, or any other
Person designated by the Managing Member (the “Liquidation Agent”), shall take
full account of the assets and liabilities of the Company and shall, unless the
Members agree otherwise, liquidate the assets of the Company as promptly as is
consistent with obtaining the fair value thereof. The proceeds of any
liquidation shall be applied and distributed in the following order:

(i)First, to the payment of indebtedness and liabilities of the Company
(including payment of all indebtedness and liabilities to Members and/or their
Affiliates) and the expenses of liquidation;

(ii)Second, to the establishment of any reserve which the Liquidation Agent
shall deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company (“Contingencies”). Such reserve may be paid over by
the Liquidation Agent to any attorney-at-law, or acceptable party, as escrow
agent, to be held for disbursement in payment of any Contingencies and, at the
expiration of such period as shall be deemed advisable by the Liquidation Agent
for distribution of the balance in the manner hereinafter provided in this
Section 9.3;

(iii)Third, to the Members in proportion to the amounts required to be made to
such Members pursuant to the last sentence of Section 5.6(b)(ii); and

(iv)Thereafter, to the Members in accordance with their respective Percentage
Interests.

(b)It is the intent of the Members that the allocations provided in Section 5.4
hereof result in the distributions required pursuant to Section 9.3 being in
accordance with positive capital accounts as provided for in the Treasury
Regulations under Section 704(b) of the Code. However, if after giving
hypothetical effect to the allocations required by Section 5.4, the Capital
Accounts of the Members are in such ratios or balances that distributions
pursuant to Section 9.3 would not be in accordance with the positive capital

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accounts of the Members as required by Treasury Regulations under Section 704(b)
of the Code, such failure shall not affect or alter the distributions required
by Section 9.3. Rather, the Managing Member will have the authority to make
other allocations of Net Profits or Net Losses, or items of income, gain, loss
or deduction among the Members which, to the extent possible, will result in the
capital accounts of each Member having a balance prior to the distribution equal
to the amount of the distributions to be received by each Member pursuant to
Section 9.3; provided, however, that so long as PICO and its Affiliates
collectively hold at least a 10 percent (10%) Percentage Interest in the
Company, such other allocations shall be made with the prior consent of PICO not
to be unreasonably withheld or delayed.

Section 9.4    Time for Liquidation. A reasonable amount of time shall be
allowed for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors so as to enable the Liquidation Agent to
minimize the losses attendant upon such liquidation.

Section 9.5    Winding Up and Filing Articles of Cancellation. Upon the
commencement of the winding up of the Company, articles of cancellation shall be
delivered by the Company to the Secretary of State of Delaware for filing. The
articles of cancellation shall set forth the information required by the LLCA.
The winding up of the Company shall be completed when all debts, liabilities,
and obligations of the Company have been paid and discharged or reasonably
adequate provision therefor has been made and all the remaining assets of the
Company have been distributed to the Members.

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ARTICLE X
MEMBERSHIP UNITS; CERTIFICATES

Section 10.1    Certificates. At the request of PICO or UCP, Inc., Membership
Units shall be represented by a certificate or certificates, setting forth upon
the face thereof that the Company is a limited liability company formed under
the laws of the State of Delaware, the name of the Member to which it is issued
and the number of Membership Units which such certificate represents. Such
certificates shall be entered in the books of the Company as they are issued,
and shall be signed by the Chairman or the Chief Executive Officer of the
Company and may be sealed with the Company's seal or a facsimile thereof. Upon
any Transfer permitted under this Agreement, the transferring Member shall
surrender to the Company the Certificates representing Membership Units owned by
such Member and the Company shall issue to the transferring Member certificates
representing the remaining Membership Units, if any, held by such transferring
Member after taking into account such Transfer. All certificates representing
Membership Units (unless registered under the Securities Act of 1933, as amended
(the “Securities Act”)), shall bear the following legend:
THE MEMBERSHIP UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED,
PLEDGED, ENCUMBERED, TRANSFERRED, GRANTED AN OPTION WITH RESPECT TO OR OTHERWISE
DISPOSED OF, (I) UNLESS AND UNTIL THEY HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OR SUCH SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE, TRANSFER, OPTION GRANT OR
OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND (II)
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF THE COMPANY, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY

Section 10.2    Lost or Destroyed Certificates. The Company may issue a new
certificate for Membership Units in place of any certificate or certificates
theretofore issued by it, alleged to have been lost or destroyed, upon the
making of an affidavit of that fact, and providing an indemnity in form and
substance reasonably satisfactory to the Managing Member, by the Person claiming
the certificate to be lost or destroyed.

Section 10.3    Transfer of Membership Units. Except for Transfers duly made in
accordance with Article VII, no Transfer of Membership Units shall be valid as
against the Company. Upon any such Transfer, the Member Transferring Membership
Units shall surrender certificate therefor, accompanied by an instrument of
assignment or transfer by the Member duly executed with signature guarantees,
and otherwise complying with such requirements as the Managing Member may
impose.

Section 10.4    Splits And Reclassifications. The Company shall not in any
manner subdivide (by any unit split, unit distribution, reclassification,
recapitalization or otherwise) or combine (by reverse unit split,
reclassification, recapitalization or otherwise) the outstanding Membership
Units unless an identical event is occurring with respect to the Common Stock,
in which event the Membership Units shall be combined or subdivided concurrently
with and in the same manner as the Common Stock so that the Series A Units shall
at all times be exchangeable pursuant to the Exchange Agreement into shares of
Class A Common Stock on a one-for-one basis.

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Section 10.5    Incentive Plans; Registered and Private Offerings.

(a)At any time UCP, Inc. issues a share of Common Stock pursuant to an Incentive
Plan (whether pursuant to the exercise of a stock option or otherwise), the
following shall occur: (1) UCP, Inc. shall be deemed to contribute to the
capital of the Company an amount of cash equal to the current per share market
price of a share of Common Stock on the date such share is issued (or, if
earlier, the date the related option is exercised); (2) the net proceeds
(including the amount of any payments made on a loan with respect to a stock
purchase award) received by UCP, Inc. with respect to such share, if any, shall
be concurrently transferred to the Company (and such net proceeds so transferred
shall not constitute a capital contribution); and (3) the Company shall issue to
UCP, Inc. one (1) Series B Unit registered in the name of UCP, Inc.

(b)At any time UCP, Inc. issues a share of Common Stock pursuant to a primary
public offering registered under the Securities Act, or in a private placement
or other transaction exempt from registration under the Securities Act, the net
proceeds received by UCP, Inc. with respect to such share, if any, shall be
concurrently transferred to the Company and the Company shall issue to UCP, Inc.
one (1) Series B Unit registered in the name of UCP, Inc. for each share of
Common Stock issued.

(c)If at any time UCP, Inc. issues debt securities which are convertible into
Common Stock (“Convertible Debt”), the proceeds received from the issuance of
such Convertible Debt shall be used by UCP, Inc. to purchase a debt security of
the Company, with the same principal amount and substantially equivalent terms
to the Convertible Debt (the “Back-to-Back Debt”). Upon conversion into Common
Stock of any portion of the principal amount of Convertible Debt by any holder
thereof the same principal amount of the Back-to-Back Debt automatically shall
be converted into a number of Membership Units equal to the number of shares of
Common Stock into which such portion of the Convertible Debt has been converted.
In such event, the Gross Asset Value of the Company assets shall be adjusted
pursuant to clause (ii)(q) of the definition of Gross Asset Value.

(d)If UCP, Inc. acquires any assets or Person for which the consideration, in
whole or in part, consists of Common Stock, (i) the legal structure of such
acquisition shall be agreed upon by UCP, Inc. and PICO, (ii) the assets or
Person shall be contributed by UCP, Inc., directly or indirectly, to the Company
or a subsidiary thereof in a manner to be agreed upon by UCP, Inc. and PICO, and
(iii) appropriate adjustments, in accordance with the principles of this
Agreement and as agreed upon by UCP, Inc. and PICO, shall be made to the number
of Units, Gross Asset Value of Company assets and the Capital Accounts of each
of the Members.

Section 10.6    Regulations. The Managing Member may make such additional rules
and regulations, not inconsistent with this Agreement, as it may deem expedient
with respect to the issue and Transfer of Membership Units and issuance of
certificates for the Membership Units.

Section 10.7    Registered Members. The Company shall be entitled to recognize
the exclusive right of a Person registered on its records as the owner of the
Membership Units to receive distributions and shall not be bound to recognize
any equitable or other claim to or interest in such Membership Units on the part
of any other Person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the LLCA.

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ARTICLE XI
MISCELLANEOUS

Section 11.1    Severability. The terms, conditions, and provisions of this
Agreement are fully severable, and the decision or judgment of any court of
competent jurisdiction rendering void or unenforceable any one or more of such
terms, conditions or provisions shall not render void or unenforceable any of
the other terms, conditions or provisions hereof and such void or unenforceable
term shall be replaced with a valid and enforceable term which would to the
greatest degree possible reflect the original intentions of the parties
hereunder.

Section 11.2    Notices. All notices, requests, consents and other
communications hereunder (each, a “Notice”) to any party shall be in writing and
shall be delivered in person or sent by facsimile (provided a copy is thereafter
promptly delivered as provided in this Section 11.2) or nationally recognized
overnight courier, addressed to such party at the address or facsimile number
set forth below, or such other address or facsimile number as may hereafter be
designated in writing by such party to the other parties:
If to the Company or UCP, Inc., to:

6489 Camden Avenue, Suite 204
San Jose, CA 95120
Attention: President
Fax: 408-323-1114
If to PICO, to:
7979 Ivanhoe Avenue, Suite 300
La Jolla, CA 92037
Attention: President
Fax: 858-456-6480

Each Notice shall be deemed received on the date sent to the recipient thereof
in accordance with this Section 11.2, if sent prior to 5:00 p.m. in the place of
receipt and such day is a Business Day; otherwise, such Notice shall be deemed
not to have been received until the next succeeding Business Day.

Section 11.3    Captions. The captions at the heading of each Article or Section
of this Agreement are for convenience of reference only, and are not to be
deemed a part of this Agreement itself.

Section 11.4    Entire Agreement. This Agreement, including the Schedules hereto
and the other agreements and documents referenced herein or contemplated hereby,
constitutes the entire agreement and understanding of the parties hereto with
respect to the matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement are merged
herein and are superseded and canceled by this Agreement.

Section 11.5    Counterparts. This Agreement may be executed and delivered in
one or more counterparts, each of which shall be deemed an original, and all of
which shall be deemed to constitute one and the same agreement.

Section 11.6    Amendments; Waiver. Amendments to this Agreement may be made
from time to time, provided, however, that no amendment, modification or waiver
of this Agreement or any provision hereof shall be valid or effective unless in
writing and approved by both the Managing Member and PICO. No consent to,
waiver, discharge or release (each, a “Waiver”) of, any provision of, or breach
under this Agreement shall be valid or effective unless in writing and signed by
the party giving such Waiver, and no specific Waiver shall constitute a Waiver
with respect to any other provision or breach, whether or not of similar nature.
Failure on the part of any party hereto to insist in any instance upon

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strict, complete and timely performance by another party hereto of any provision
of or obligation under this Agreement shall not constitute a Waiver by such
party of any of its rights under this Agreement or otherwise.

Section 11.7    Further Assurances. Each party shall perform all other acts and
execute and deliver all other documents as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.

Section 11.8    Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
without regard to conflicts of law principles thereof.

Section 11.9    Third Party Beneficiary. Except as set forth in Article VIII,
nothing set forth in this Agreement shall be construed to confer any benefit to
any third party who is not a party to this Agreement. The holders of securities
of each of UCP, Inc. and PICO specifically shall not be deemed third party
beneficiaries and shall not have or be construed to have any legal or equitable
right, remedy or claim in respect of or by virtue of this Agreement or any
provision herein contained.

Section 11.10    Assignment. This Agreement is personal to the parties hereto
and neither party may (except as set forth in Article VII) assign or Transfer
the rights accruing hereunder nor may performance of any duties by either party
hereunder be delegated or assumed by any other Person or legal entity without
the prior written consent of the other parties hereto.

Section 11.11    Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns of
each party hereto; provided, however, that no party hereto may Transfer any of
such party's Membership Units (or any portion thereof or any beneficial interest
therein) or this Agreement or such party's rights, interests or obligations
hereunder, except in accordance with the terms of this Agreement, and for the
avoidance of doubt, provided, further, that in case of any Transfer of
Membership Units by PICO (other than any Transfer pursuant to the Exchange
Agreement or a Transfer to an Affiliate of PICO), none of the special
information and/or consent rights of PICO under Section 5.4(d), Section 6.2,
Section 6.3, Section 6.6(b), Section 6.7, Section 6.8(a), and/or Section 9.3(b),
as the case may be, shall, in whole or in part, be transferred or deemed to be
transferred to such transferee (and PICO may not claim such rights for the
benefit of any such transferee).

Section 11.12    Relationship. This Agreement does not constitute any Member,
Managing Member, or any employee or agent of the Company as the agent or legal
manager of any Member for any purpose whatsoever and no Member, Managing Member,
or any employee or agent of the Company is granted hereby any right or authority
to assume or to create any obligation or responsibility, express or implied, on
behalf of or in the name of any Member or to bind any Member in any manner or
thing whatsoever.

Section 11.13    Consent to Jurisdiction. The parties hereto agree that any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought and maintained exclusively in the United
States District Court for the Northern District of California or the Superior
Court of the State of California located in the County of Santa Clara. Each of
the parties irrevocably consents to submit to the personal jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding. Process in any such suit, action or proceeding in such
courts may be served, and shall be effective, on any party anywhere in the
world, whether within or without the jurisdiction of any such court, by any of
the methods specified for the giving of Notices pursuant to Section 11.2. Each
of the parties irrevocably waives, to the fullest extent permitted by law, any
objection or defense that it may now or hereafter have based on venue,
inconvenience of forum, the lack of personal jurisdiction and the adequacy of
service of process (as long as the party was provided Notice in accordance with
the methods

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specified in Section 11.2) in any suit, action or proceeding brought in such
courts.

Section 11.14    Equitable Remedies. Each party acknowledges that no adequate
remedy of law would be available for a breach of Articles VII and VIII of this
Agreement, and that a breach of any of such Articles of this Agreement by one
party would irreparably injure the other and accordingly agrees that in the
event of a breach of any of such Articles of this Agreement, the respective
rights and obligations of the parties hereunder shall be enforceable by specific
performance, injunction or other equitable remedy (without bond or security
being required), and each party waives the defense in any action and/or
proceeding brought to enforce this Agreement that there exists an adequate
remedy or that the other party is not irreparably injured. Nothing in this
Section 11.14 is intended to exclude the possibility of equitable remedies with
respect to breaches of other Sections or Articles of this Agreement.

Section 11.15    Fees and Expenses. Except as specifically set forth herein,
each party shall be responsible for any legal and other fees and expenses
incurred by such party in connection with the negotiation and preparation of
this Agreement and the transactions contemplated hereby.

Section 11.16    Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

Section 11.17    Confidentiality. Each Member acknowledges and agrees that the
information of the Company and of its Affiliates is confidential and, except in
the course of performing any duties as necessary for the Company and its
Affiliates, as required by law or legal process or to enforce the terms of this
Agreement, such person shall keep and retain in the strictest confidence and not
disclose to any Person any confidential matters, acquired pursuant to this
Agreement, of the Company and its Affiliates and successors, concerning the
Company and its Affiliates and successors. This Section 11.17 shall not apply to
(i) any information that has been made publicly available by the Company or any
of its Affiliates, becomes public knowledge (except as a result of an act of
violation of this Agreement) or is generally known to the business community and
(ii) the disclosure of information to the extent necessary for a Member to
prepare and file its Tax Returns, to respond to any inquiries regarding the sale
from any taxing authority or to prosecute or defend any action, proceeding or
audit by any taxing authority with respect to such Tax Returns.

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IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated Limited Liability Company Operating Agreement of UCP, LLC to be duly
executed as of the date first above written.

COMPANY:

UCP, LLC

By: /s/ John R. Hart                             

Name: John R. Hart
Title: Chairman

MEMBERS:

UCP, Inc.

By: /s/ Dustin L. Bogue                             
Name: Dustin L. Bogue
Title: CEO

PICO Holdings, Inc.

By: /s/ Maxim C. W. Webb                    
    
Name: Maxim C. W. Webb
Title: Chief Financial Officer

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SCHEDULE I
MEMBERS; MEMBERSHIP UNITS;
PERCENTAGE INTERESTS; CAPITAL ACCOUNTS
Member
Membership
Units
Percentage
Interest
Capital Account
UCP, Inc.
7,750,000 Series B Units
42.3%
$105,624,000
 
 
 
 
PICO Holdings, Inc.
10,593,000 Series A Units
57.7%
$144,078,128
 
_____________________
________________________
_______________
 
18,343,000
100%
$249,702,128