Exhibit 10.1

Execution Copy

 

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EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made effective as of January 18,
2019 (the “Effective Date”) by and among William Lyon Homes, a Delaware
corporation (“Parent”), William Lyon Homes, Inc., a California corporation (the
“Company”), and Matthew R. Zaist, an individual (“Executive”) (collectively the
“Parties” and individually a “Party”), with respect to the following facts and
circumstances:

RECITALS

A.    Executive currently holds the position of President and Chief Executive
Officer of the Company and Parent, and is employed on the terms and conditions
of that certain Employment Agreement dated March 31, 2015 (the “Prior
Agreement”).

B.    The Company and Executive have agreed to enter into this Employment
Agreement, which supersedes and replaces the Prior Agreement, pursuant to which
Executive shall continue to serve as President and Chief Executive Officer of
the Company under the terms and conditions set forth in this Agreement.

C.    The Company is a wholly owned subsidiary of Parent.

NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the Parties agree as follows:

ARTICLE 1

EMPLOYMENT AND TERM

1.1    Employment. The Company agrees to continue to employ Executive in the
capacity as President and Chief Executive Officer of the Company and Parent,
pursuant to the terms and conditions set forth in this Agreement (which
supersedes and replaces the Prior Agreement), and Executive hereby accepts such
employment by the Company upon the terms and conditions herein.

1.2    Term. The term of Executive’s employment by the Company hereunder (the
“Term”) shall be for a period commencing January 1, 2019 through December 31,
2021. Immediately prior to the end of each then-applicable Term, the Term shall
automatically renew for a successive additional one (1) year period unless, no
later than ninety (90) days prior to the end of the otherwise applicable Term
either Party gives written notice of non-renewal (“Notice of Non-Renewal”) to
the other, in which case this Agreement will terminate at the end of the
then-applicable Term. Notwithstanding the foregoing, Executive’s employment
hereunder may be terminated earlier in accordance with the provisions of
Article 6.

 

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ARTICLE 2

DUTIES OF EXECUTIVE

2.1    Duties. During the Term, Executive shall serve as President and Chief
Executive Officer of the Company and Parent and shall report directly to
Parent’s Board of Directors (the “Board”). In such capacity, Executive shall
have the duties, functions, responsibilities, and authority customarily
appertaining to that position and shall have such other duties, functions,
responsibilities, and authority consistent with such position as are from time
to time delegated to him by the Board. Executive shall perform the services
contemplated herein faithfully, diligently, to the best of his ability and in
the best interests of the Company. Executive shall, in all material respects, at
all times perform such services in compliance with, and to the extent of his
authority, shall to the best of his ability cause the Company to be in
compliance with, any and all laws, rules and regulations applicable to the
Company of which Executive is, or reasonably should be, aware. Executive may
rely on any guidance provided to the Company by its counsel or advisors.
Executive shall, at all times during the Term, in all material respects adhere
to and obey any and all written internal rules and regulations governing the
conduct of the Company’s employees, as established or modified from time to time
and of which Executive is, or reasonably should be, aware; provided, however, in
the event of any conflict between the provisions of this Agreement and any such
rules or regulations, the provisions of this Agreement shall control.

2.2    Location of Services. Executive’s principal place of employment shall be
at 4695 MacArthur Court, Newport Beach, California or, subject to Section 6.3,
such location as shall be designated by the Board. Executive understands he will
be required to travel to the Company’s various operations in connection with his
duties and responsibilities under this Agreement, to the extent such travel is
reasonably requested by the Board from time to time.

2.3    Exclusive Service. Except as otherwise expressly provided herein,
Executive shall devote his entire business time, attention, energies, skills,
learning and best efforts to the business of the Company. Executive may
participate in social, civic, charitable, religious, business, educational or
professional associations so long as such participation does not materially
interfere with the duties and obligations of Executive hereunder. This
Section 2.3 shall not be construed to prevent Executive from making passive
outside investments so long as such investments do not require material time of
Executive or otherwise materially interfere with the performance of Executive’s
duties and obligations hereunder and Executive shall not make any investment in
an enterprise that competes with the Company without the prior written approval
of the Company after full disclosure of the facts and circumstances; provided,
however, that this sentence shall not preclude Executive from owning up to five
percent (5%) of the securities of a publicly traded entity (a “Permissible
Investment”).

 

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ARTICLE 3

COMPENSATION

3.1    Salary. In consideration for Executive’s services hereunder, the Company
shall pay Executive a salary at an annual rate of not less than $950,000 per
year during the Term, payable in accordance with the Company’s regular payroll
schedule from time to time, but in no event less frequently than monthly. The
annual salary shall be reviewed by the Compensation Committee of the Board (the
“Compensation Committee”) no less frequently than annually and may be increased
(but not decreased) at the discretion of the Compensation Committee during the
Term. If Executive’s annual salary is increased, the increased amount shall not
be reduced for the remainder of the Term.

3.2    Bonus. Executive shall be entitled to earn a cash bonus for the Company’s
2018 fiscal year with a target amount equal to 200% of Executive’s annual salary
for such fiscal year, as determined by the Compensation Committee, on terms
established prior to the Effective Date and that are no less favorable than
those applicable to other senior executives of the Company, under the Company’s
annual bonus plan. Executive shall be entitled to earn cash bonuses for each
future fiscal year during the Term under the senior executive bonus program
established by the Compensation Committee, and shall participate at a level
commensurate with his position with the Company, but in all events, on terms
that are no less favorable than those applicable to other senior executive
officers of the Company. The Compensation Committee shall set a target cash
bonus for Executive for each future fiscal year during the Term (together with
the target amount established for the Company’s 2018 fiscal year, a “Target Cash
Bonus”), provided that the Target Cash Bonus shall not be less than 200% of
Executive’s then-current annual salary. To the extent earned, the Company will
pay each annual cash bonus to Executive by March 15th of the year following the
year to which the applicable bonus relates.

3.3    Sign-On Equity Awards. Pursuant to the William Lyon Homes Amended and
Restated 2012 Equity Incentive Plan (as may be amended or superseded, the
“EIP”), on, or as soon as administratively practicable after, the Effective Date
(the actual date of grant, the “Grant Date”), the Company will grant Executive
134,650 shares of restricted Company common stock, all of which shall be subject
to a risk of forfeiture until the time at which the applicable vesting
conditions have been satisfied (the “Restricted Shares”), and 89,767 performance
stock units, all of which shall be subject to a risk of forfeiture until the
time at which the applicable vesting conditions have been satisfied (the
“PSUs”). Each PSU shall constitute the contingent right to receive up to 2
shares of Company common stock.

3.3.1    The Restricted Shares shall vest, and the risk of forfeiture thereon
lapse, on January 2, 2022, subject to Executive’s continuous service to the
Company through the applicable vesting date. The Restricted Shares will
otherwise be subject to Article 6 hereof, the terms of the EIP, and a restricted
stock award agreement in the form attached hereto as Exhibit A.

3.3.2    The PSUs shall be eligible to vest based on an achievement factor (the
“Achievement Factor”) determined using a pre-established formula tied to the
achievement of relative total shareholder return targets set by the Board for
the Company compared to a

 

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peer group of companies established by the Board, in each case, following a good
faith consultation with Executive (the “Relative TSR Targets”), measured over
two distinct but overlapping performance periods (each, a “Performance Period”).
Each Performance Period will commence on January 1, 2019, with the first
Performance Period ending on December 31, 2020 (the “2-Year Performance Period”)
and the second Performance Period ending on December 31, 2021 (the “3-Year
Performance Period”). As soon as administratively practicable following the
completion of a Performance Period (but in no event later than the first
regularly scheduled meeting of the Compensation Committee following the
completion of the Performance Period), the Board or the Compensation Committee
shall certify the Company’s performance against the Relative TSR Targets and the
Achievement Factor applicable to such Performance Period as the result of such
achievement. Within 10 days following the Board’s or the Compensation
Committee’s certification of the Achievement Factor for the 2-Year Performance
Period, the Company will issue to Executive a number of shares of Company common
stock determined by multiplying (a) 0.5 times (b) the Achievement Factor for the
2-Year Performance Period times (c) the total number of target-level PSUs.
Within 10 days following the Board’s certification of the Achievement Factor for
the 3-Year Performance Period, the Company will issue to Executive a number of
shares of Company common stock equal to the greater of (i) the difference
obtained by subtracting (A) the number of shares of Company common stock issued
in settlement of the PSUs for the 2-Year Performance Period from (B) the product
obtained by multiplying (1) the Achievement Factor for the 3-Year Performance
Period times (2) the total number of target-level PSUs or (ii) the product
obtained by multiplying (x) 0.5 times (y) the Achievement Factor for the 3-Year
Performance Period times (z) the total number of target-level PSUs. Except as
otherwise provided in this Agreement, Executive must remain employed by the
Company through the end of a Performance Period to be eligible for shares of
Company common stock issued in settlement of the PSUs for such Performance
Period. The PSUs will otherwise be subject to Article 6 hereof, the terms of the
EIP, and a performance stock unit award agreement in the form attached hereto as
Exhibit B.

3.3.3    If, prior to the Grant Date, (i) the Executive’s employment is
terminated by the Company without Cause or by the Executive for Good Reason,
(ii) the Executive dies or becomes Disabled, or (iii) a Change in Control
occurs, then Sections 3.3.1 and 3.3.2 shall become null and void, and the
Company shall pay to the Executive a lump sum cash amount equal to $2.5 million,
to be paid within 30 days following the date of the Change in Control or the
Termination Date, as applicable.

3.4    Long Term Incentive Plan. In addition to the grants of Restricted Shares
and PSUs, and any other equity awards previously granted to Executive, Executive
shall be eligible to participate in any Long Term Incentive Plan maintained or
adopted by the Company (including, without limitation, in respect of any
performance period during the Term), on the terms and conditions adopted by the
Board or the Compensation Committee.

 

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ARTICLE 4

EXECUTIVE BENEFITS

4.1    Vacation. Executive shall be entitled to vacation during the Term,
without reduction in compensation, in accordance with the general policies of
the Company applicable to other senior executives, as such policies may change
from time to time. Except as otherwise limited by the general policies of the
Company, as such policies may change from time to time, any accrued vacation
that is unused during the Term may be carried forward to and used in subsequent
years.

4.2    Company Executive Benefits. Executive shall receive all group insurance
and pension plan benefits and any other benefits on the same basis as they are
available generally to senior executive officers of the Company under the
Company personnel policies and employee retirement and welfare benefit plans as
in effect from time to time. Executive shall also be entitled to a monthly
automobile allowance commensurate with the monthly automobile allowance provided
to executives of the Company, as determined by the Compensation Committee, but
not less than $500, payable in accordance with the Company’s regular payroll
schedule from time to time, and Company-paid gasoline, in lieu of any mileage or
other reimbursement, for use of his personal vehicle for business purposes. All
reimbursements pursuant to this Section 4.2 shall be made in accordance with
Article 9 below.

4.3    Indemnification. Executive shall have the benefit of indemnification to
the fullest extent permitted by applicable law pursuant to the Company’s
indemnification policy, which indemnification shall continue after the
termination of this Agreement for such period as may be necessary to continue to
indemnify Executive for his acts during his employment and/or other service with
the Company. In addition, the Company shall cause Executive to be covered by the
current policies of directors’ and officers’ liability insurance covering
directors and officers of the Company, copies of which have been provided to
Executive, in accordance with their terms, to the maximum extent of the coverage
available for any director or officer of the Company. The Company shall use
commercially reasonable efforts to cause the current policies of directors’ and
officers’ liability insurance covering directors and officers of the Company to
be maintained throughout the Term and for such period thereafter as may be
necessary to continue to cover acts of Executive during his employment and/or
other service with the Company (provided that the Company may substitute
therefor, or allow to be substituted therefor, policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured in any material respect). In the
event of any merger or other acquisition of the Company, the Company shall no
later than immediately prior to consummation of such transaction purchase the
longest applicable “tail” coverage available under the directors’ and officers’
liability insurance in effect at the time of such merger or acquisition. For
purposes of this Section 4.3, all references to the Company shall be deemed to
include Parent and each of its other subsidiaries to the extent that Executive
has provided services to Parent or any such subsidiary, as applicable.

ARTICLE 5

REIMBURSEMENT FOR EXPENSES

5.1    Reimbursement. Executive shall be reimbursed by the Company for all
reasonable ordinary and necessary expenses incurred by Executive in the
performance of his

 

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duties or otherwise in furtherance of the business of the Company in accordance
with the policies of the Company in effect from time to time. Executive shall
keep accurate and complete records of all reimbursable expenses, including but
not limited to, proof of payment and purpose. Executive shall account fully for
all reimbursable expenses to the Company. All reimbursements pursuant to this
Section 5.1 shall be made in accordance with Article 9 below.

ARTICLE 6

TERMINATION

6.1    Termination for Cause. The Company shall have the right to terminate
Executive’s employment by giving written notice of such termination to
Executive, if Executive (i) is convicted of, or pleads guilty to, a crime
involving acts of moral turpitude that would make the continuance of his
employment by the Company materially detrimental to the Company, or a felony
(other than a felony that involves a motor vehicle and does not result in prison
time), (ii) commits an act of fraud, misrepresentation, embezzlement or other
acts of material or willful misconduct against the Company that would make the
continuance of his employment by the Company materially detrimental to the
Company, or (iii) is grossly negligent in the performance of his duties to the
Company and such negligent performance is not cured within thirty (30) days
after Executive’s receipt of written notice thereof by the Company, each such
event constituting termination for cause (“Cause”). For purposes of determining
whether “Cause” exists, no act, or failure to act, on Executive’s part shall be
considered “willful” or “negligent” unless done, or omitted to be done, by
Executive not in good faith and without Executive’s reasonable belief that
Executive’s action or omission was in the best interest of the Company.

Unless otherwise consented to in writing by Executive, notice of termination for
Cause must be given within one hundred twenty (120) days of Parent or the
Company first becoming aware of the event or events giving rise to Cause, and
must specify a termination date not later than one hundred twenty (120) days
after the date of such notice. Notwithstanding the foregoing, prior to any
termination of Executive’s employment for “Cause” becoming effective, Executive
and his counsel shall be given a reasonable opportunity to be heard before the
Board, with reasonable advance notice.

6.2    Termination Without Cause or by Executive Without Good Reason.
Notwithstanding anything to the contrary herein, (i) the Company shall have the
right to terminate Executive’s employment under this Agreement without Cause by
giving thirty (30) days prior written notice of such termination to Executive,
subject to the Company’s obligation to pay to Executive the amounts set forth in
Section 6.6.2 below, and (ii) Executive shall have the right to terminate
Executive’s employment under this Agreement without Good Reason (as defined
below) by giving thirty (30) days prior written notice of such termination to
the Company.

6.3    Termination by Executive for Good Reason. Executive may terminate his
employment under this Agreement on thirty (30) days prior written notice to the
Company for Good Reason. For purposes of this Agreement, “Good Reason” shall
mean and be limited to (a) a material breach of this Agreement by the Company
(including without

 

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limitation any material reduction in annual salary or reduction of the Target
Cash Bonus to less than 200% of Executive’s then-current annual salary) and the
failure of the Company to remedy such breach within thirty (30) days after the
Company’s receipt of written notice, (b) any material diminution in Executive’s
title, responsibilities, duties or authority, it being expressly acknowledged
that in the event Executive ceases to serve as the President and Chief Executive
Officer of the ultimate parent entity of a publicly traded company following a
Change in Control, Executive’s responsibilities, duties and authority shall be
deemed materially diminished, (c) any relocation of Executive’s or the Company’s
principal place of business more than fifty (50) miles from Newport Beach,
California (other than any relocation initiated at the Executive’s direction or
request or with the Executive’s prior written consent, it being understood that
Executive’s compliance with any travel obligations contemplated in Section 2.2
shall not be deemed to be consent with respect to the occurrence of Good Reason
under this subsection (c)), (d) the provision by the Company to Executive of a
Notice of Non-Renewal or (e) a requirement for Executive to directly report to
any person or body other than the Board. Notice of termination for Good Reason
must be given within sixty (60) days of Executive first becoming aware of the
event or events giving rise to Good Reason, and must specify a termination date
not later than sixty (60) days after the date of such notice. Executive’s
failure to exercise any right, power or remedy with respect to any of the
foregoing conditions shall not be deemed to operate as a waiver of any of
Executive’s rights or claims he may have with respect to such conditions,
including but not limited to any subsequent or similar conditions.

6.3.1    For purposes of this Agreement, “Change in Control” shall mean the
occurrence of any of the following events:

 

  (a)

the acquisition, directly or indirectly, by any Person or Group of Beneficial
Ownership of securities entitled to vote generally in the election of directors
(“voting securities”) of Parent or the Company that represent 50% or more of the
combined voting power of Parent’s or the Company’s, as applicable, then
outstanding voting securities, other than:

 

  (i)

an acquisition by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by Parent, the
Company or any Person controlled by Parent or the Company or by any employee
benefit plan (or related trust) sponsored or maintained by Parent or the Company
or any Person controlled by Parent or the Company, or

 

  (ii)

an acquisition of voting securities by Parent or a corporation owned, directly
or indirectly, by the stockholders of Parent in substantially the same
proportions as their ownership of the stock of Parent, or

 

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  (iii)

an acquisition of voting securities pursuant to a transaction described in
clause (c) below that would not be a Change in Control under clause (c);

 

  (b)

individuals who, as of the Effective Date, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to such
date whose election, or nomination for election by Parent’s shareholders, was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person (including, without limitation, by reason of any agreement intended to
avoid or settle any election contest or solicitation of proxies or consents)
other than the Board;

 

  (c)

the consummation by Parent or the Company (whether directly involving Parent or
the Company or indirectly involving Parent or the Company through one or more
intermediaries) of (x) a merger, consolidation, reorganization, or business
combination or (y) a sale or other disposition of all or substantially all of
Parent’s or the Company’s assets or (z) the acquisition of assets or stock of
another entity, in each case, other than a transaction

 

  (i)

which results in Parent’s or the Company’s, as applicable, voting securities
outstanding immediately before the transaction continuing to represent (either
by remaining outstanding or by being converted into voting securities of Parent
or the Company, as applicable, or the Person that, as a result of the
transaction, controls, directly or indirectly, Parent or the Company, as
applicable, or owns, directly or indirectly, all or substantially all of
Parent’s or the Company’s assets or otherwise succeeds to the business of Parent
or the Company (Parent, the Company, or such Person, the “Successor Entity”)),
directly or indirectly, at least 50% of the combined voting power of the
Successor Entity’s outstanding voting securities immediately after the
transaction, and

 

  (ii)

after which more than 50% of the members of the board of directors of the
Successor Entity were members of the Incumbent Board at the time of the Board’s
initial approval of the transaction (including, without limitation, approval of
the agreement providing for the transaction), and

 

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  (iii)

after which no Person or Group beneficially owns (individually or collectively)
voting securities representing 50% or more of the combined voting power of the
Successor Entity; provided, however, that no Person or Group shall be treated
for purposes of this clause (c) as beneficially owning 50% or more of combined
voting power of the Successor Entity solely as a result of the voting power held
in Parent prior to the consummation of the transaction; or

 

  (d)

a liquidation or dissolution of Parent or the Company.

For purposes of clause (a) above, the calculation of voting power shall be made
as if the date of the acquisition were a record date for a vote of Parent’s or
the Company’s shareholders, as applicable, and for purposes of clause (c) above,
the calculation of voting power shall be made as if the date of the consummation
of the transaction were a record date for a vote of Parent’s or the Company’s
shareholders, as applicable.

6.3.2    The terms “Person,” “Group,” “Beneficial Owner,” and “Beneficial
Ownership” shall have the meanings used in the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the regulations thereunder. Notwithstanding
the foregoing, (A) Persons shall not be considered to be acting as a Group
solely because they purchase or own stock of Parent or the Company at the same
time, or as a result of the same public offering, (B) however, Persons will be
considered to be acting as Group if they are owners of a corporation that enters
into a merger, consolidation, purchase or acquisition of stock, or similar
business transaction, with Parent or the Company, and (C) if a Person, including
an entity, owns stock both in Parent or the Company and in a corporation that
enters into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, with Parent or the Company, such shareholders shall be
considered to be acting as a Group with other shareholders only with respect to
the ownership in the corporation before the transaction.

6.4    Termination due to Death or Disability. Executive’s employment shall
terminate upon his death. The Company may terminate Executive’s employment due
to Executive becoming Disabled. For the purposes of this Agreement, Executive
shall be considered to be “Disabled” if Executive is physically or mentally
disabled (except due to substance or alcohol abuse) from the performance of a
major portion of his duties for a continuous period of 120 days or greater,
which determination shall be made in the reasonable exercise of the Board’s
judgment, provided, however, if Executive’s disability is the result of a
serious health condition as defined by the federal Family and Medical Leave Act
(“FMLA”), Executive’s employment shall not be terminated due to such disability
at any time during or after any period of FMLA-qualified leave except as
permitted by FMLA. If there should be a dispute between the Board and Executive
as to whether Executive is Disabled for purposes of this Agreement, the question
shall be settled by the opinion of an impartial reputable physician or
psychiatrist designated by Executive in his reasonable discretion.

 

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6.5    Effectiveness on Notice. Any termination under this Article 6 shall be
effective upon receipt of written notice by Executive or the Company, as the
case may be, of such termination or upon such other later date as may be
provided herein or specified by the Company or Executive in such written notice
(the “Termination Date”). In the event of Executive’s death, no written notice
shall be required and the Termination Date shall be the date of his death.

6.6    Effect of Termination.

6.6.1    Payment of Accrued Obligations. Except as provided in Sections 6.6.2,
6.6.3 or 6.6.4 if applicable, upon the termination of Executive’s employment by
the Company, by Executive or due to death, all benefits provided to Executive by
the Company hereunder shall thereupon cease and the Company shall pay or cause
to be paid to Executive on the Termination Date in the case of termination by
the Company or Executive, or as soon as practicable in the case of death, all
accrued but unpaid base salary and vacation benefits. In addition, promptly upon
submission by Executive of his unpaid expenses incurred prior to the Termination
Date and owing to Executive pursuant to Article 5, reimbursement for such
expenses shall be made in accordance with Article 9 below. Except where
Executive has been terminated by the Company for Cause, Executive shall also be
entitled to receive any earned but unpaid bonus payable in respect of the year
prior to the year in which the Termination Date occurs, payable as and when such
amounts would have otherwise been paid. Executive shall remain entitled to any
other earned or vested benefits under Parent’s, the Company’s or any of their
subsidiaries’ benefit plans or programs, or to which Executive is otherwise
entitled by law, in each case in accordance with the terms of such plan, program
or law, as applicable. If this Agreement is terminated for Cause or by Executive
other than for Good Reason, then Executive’s equity awards, including but not
limited to stock options, shall be treated in accordance with the agreement(s)
evidencing such awards (but in no event shall Executive receive less than thirty
(30) days following the Termination Date to exercise vested options) and
Executive shall not be entitled to receive any payments other than as specified
in this Section 6.6.1.

6.6.2    Termination Without Cause or for Good Reason. In addition to the
amounts payable and benefits provided under Section 6.6.1, if Executive’s
employment is terminated by the Company without Cause (other than due to
Executive’s termination upon becoming Disabled) or by Executive for Good Reason,
subject to Executive signing, within twenty-one (21) or forty-five (45) days, as
applicable, following the Termination Date, and not revoking, the severance
agreement and general release attached hereto as Exhibit C (“Severance
Agreement”), Executive shall be entitled to receive the following payments and
benefits described in Section 6.6.2(a) – (d) at the dates specified therein:

 

  (a)

On the date that is sixty (60) days after the date of the Separation from
Service (as defined below), the Company shall pay to Executive a lump-sum
payment equal to two (2) (or, if the Termination Date occurs during any
Protection

 

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  Period (as defined below), three (3)) multiplied by the sum of Executive’s
annual salary plus Target Cash Bonus (each as used or defined in Sections 3.1
and 3.2, respectively), based on the greatest annual salary and the greatest
Target Cash Bonus in effect during the Term. In addition, Executive shall be
entitled to receive a pro-rata portion, based on the number of days employed
during the fiscal year of termination, of the cash bonus for the fiscal year of
termination determined based upon actual performance consistent with, and paid
at the same time as, other senior executive officers of the Company; provided,
however, that there will be no exercise of any negative discretion or other
reduction authority with respect to such bonus amount (such amount, the
“Pro-Rated Bonus”). For purposes of this Agreement, “Protection Period” means
(x) the period within one year following a Change in Control and (y) any period
during which Parent or the Company is party to an agreement, the consummation of
the transactions contemplated by which would result in the occurrence of a
Change in Control.

 

  (b)

All of Executive’s unvested equity awards, including, without limitation, the
Restricted Shares, PSUs and all other restricted stock grants, restricted stock
units, performance stock units and stock options, shall immediately vest in full
on the Termination Date and any such stock options shall remain exercisable in
accordance with their terms (but in no event other than by expiration at the end
of the original term thereof shall Executive receive less than thirty (30) days
following the Termination Date to exercise vested options). With respect to each
award of unvested performance-based restricted stock, performance-based
restricted stock units and performance stock units, for purposes of this
Section 6.6.2(b), performance with respect to any performance period shall be
deemed achieved (i) at target level in the event the Termination Date occurs
prior to end of any current or future performance period for such award or
(ii) based on actual achievement in the event the Termination Date occurs on or
after the end of any performance period for such award.

 

  (c)

In the event Executive timely makes an election under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”), to continue to receive
health benefits coverage for Executive and/or his dependents under the same
plan(s) or arrangement(s) under which Executive was covered immediately before
his termination of employment, as such plan(s) or arrangement(s) provided by
Parent or any of its subsidiaries thereafter may change or be amended from time
to time, then, until the earlier of (i) the end of the twenty-four

 

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  (24) month period beginning on the first of the month following the month in
which the Termination Date occurs or (ii) the date Executive becomes covered
under any other group health plan not maintained by Parent or any of its
subsidiaries that provides equivalent benefits at comparable cost to Executive,
the Company shall reimburse Executive for all payments made by Executive for
such COBRA benefits; provided, however, that if such other group health plan
excludes any pre-existing condition that Executive or Executive’s dependents may
have when coverage under such group health plan would otherwise begin, the
Company shall continue to reimburse Executive for COBRA payments with respect to
such pre-existing condition until the earlier of (A) the date that such
exclusion under such other group health plan lapses or expires or (B) the period
described in clause (i) of this Section 6.6.2(c).

The general release of claims contained in the Severance Agreement may be
modified by the Company prior to Executive’s execution of the Severance
Agreement to the extent the Company reasonably believes necessary to give the
general release the full effect it had as of the date of execution of this
Agreement if that effect is limited by subsequent change(s) in law.
Notwithstanding anything herein to the contrary, the Company’s failure to
deliver to Executive an executed Severance Agreement in accordance with the
terms of this Agreement within five days following the Termination Date shall
absolve Executive from any obligation to execute or deliver any Severance
Agreement or other release of claims as a condition to Executive’s receipt of
any payments or benefits under this Agreement. The severance payment provided in
Section 6.6.2(a) shall be payable upon Executive’s “Separation from Service”
within the meaning of Section 409A of Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations and guidance promulgated thereunder
(collectively, “Code Section 409A”).

6.6.3    Termination for Death or Disability. In addition to the amounts payable
and benefits provided under Section 6.6.1, if Executive dies or the Company
terminates Executive’s employment due to Executive becoming Disabled during the
Term, Executive shall be entitled to receive the payments and benefits described
in Section 6.6.3(a) – (c) at the dates specified therein:

 

  (a)

On the date that is sixty (60) days after the date of the Separation from
Service, the Company shall pay to Executive a lump-sum payment equal to the
aggregate amount of annual salary payable to Executive from the Termination Date
through the expiration of the then-applicable Term (in the absence of the
applicable termination of employment). In addition, Executive shall be entitled
to receive the Pro-Rated Bonus, which amount shall be paid at the same time
annual bonuses for the applicable year would normally be paid to other senior
executive officers of the Company.

 

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  (b)

All of Executive’s unvested equity awards, including, without limitation, the
Restricted Shares, PSUs and all other restricted stock grants, restricted stock
units, performance stock units and stock options, shall immediately vest in full
on the Termination Date and any such stock options shall remain exercisable in
accordance with their terms (but in no event other than by expiration at the end
of the original term thereof shall Executive (or his estate or legal guardian,
as applicable) receive less than thirty (30) days following the Termination Date
to exercise vested options). With respect to each award of unvested
performance-based restricted stock, performance-based restricted stock units and
performance stock units, for purposes of this Section 6.6.3(b), performance with
respect to any performance period shall be deemed achieved (i) at target level
in the event the Termination Date occurs prior to end of any current or future
performance period for such award or (ii) based on actual achievement in the
event the Termination Date occurs on or after the end of any performance period
for such award.

 

  (c)

In the event Executive (or his estate or legal guardian, as applicable) timely
makes an election under COBRA to continue to receive health benefits coverage
for Executive and/or his dependents under the same plan(s) or arrangement(s)
under which Executive was covered immediately before his termination of
employment, as such plan(s) or arrangement(s) provided by Parent or any of its
subsidiaries thereafter may change or be amended from time to time, for the
period from the Termination Date until the earlier of (i) the later of (A) the
date that is six (6) months after the Termination Date or (B) the expiration of
the then-applicable Term (in the absence of the applicable termination of
employment), or (ii) the date Executive becomes covered under any other group
health plan not maintained by Parent or any of its subsidiaries that provides
equivalent benefits at comparable cost to Executive, the Company shall reimburse
Executive for all payments made by Executive for such COBRA benefits; provided,
however, that if such other group health plan excludes any pre-existing
condition that Executive or Executive’s dependents may have when coverage under
such group health plan would otherwise begin, the Company shall continue to
reimburse Executive for COBRA payments with respect to such pre-existing
condition until the earlier of (x) the date that such exclusion under such other
group health plan lapses or expires or (y) the period described in clause (i) of
this Section 6.6.3(c).

 

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6.6.4    Retirement. In addition to the amounts payable and benefits provided
under Section 6.6.1, if Executive voluntarily terminates his employment with the
Company without Good Reason after reaching the age of 55 and completing 25 years
of cumulative service with the Company, then Executive shall be entitled, at his
discretion, to the arrangements and benefits described in Section 6.6.4(a) –
(b):

 

  (a)

Concurrent with the termination of Executive’s employment with the Company, the
Company will enter into a consulting agreement (the “Consulting Agreement”) with
Executive with a two-year term (the “Consulting Term,” and the last day of the
Consulting Term, the “Final Consulting Date”), which will provide for annual
consulting fees equal to Executive’s annual salary as in effect on Executive’s
Termination Date, and require that Executive provide, or be available to
provide, services to the Company in Executive’s areas of expertise on an
exclusive basis within the Company’s industry during the Consulting Term. All
other terms and conditions of the Consulting Agreement shall be mutually agreed
between Executive and the Board.    In addition, Executive shall also be
entitled to receive the Pro-Rated Bonus, which amount shall be paid at the same
time annual bonuses for the applicable year would normally be paid to other
senior executive officers of the Company.

 

  (b)

If Executive provides services under the Consulting Agreement until the Final
Consulting Date, then, subject to Executive signing, within twenty-one (21) or
forty-five (45) days, as applicable, following the Final Consulting Date, and
not revoking, a general release of claims against the Company in a form
contained in the Severance Agreement, all of Executive’s unvested equity awards,
including, without limitation, any restricted stock grants, restricted stock
units, performance stock units and stock options, shall immediately vest in full
on the Final Consulting Date and any such stock options shall remain exercisable
in accordance with their terms (but in no event other than by expiration at the
end of the original term thereof shall Executive (or his estate or legal
guardian, as applicable) receive less than thirty (30) days following the Final
Consulting Date to exercise vested options). With respect to each award of
unvested performance-based restricted stock, performance-based restricted stock
units and performance stock units, for purposes of this Section 6.6.4(b),
performance with respect to any performance period shall be deemed achieved
(i) at target level in the event the Final Consulting Date occurs prior to end
of any current or future performance period for such award or (ii) based on
actual achievement in the event the Final Consulting Date occurs on or after the
end of any performance period for such award.

 

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6.7    Termination of Offices and Directorships. Upon termination of Executive’s
employment for any reason, unless otherwise specified in a written agreement
between Executive and Parent or the Company, Executive shall be deemed to have
resigned from all offices, directorships, and other employment positions then
held with the Company and its parents, subsidiaries and affiliates, if any, and
shall take all actions reasonably requested by the Company to effectuate the
foregoing (at the Company’s sole expense). Except as expressly provided in this
Agreement, the Company shall have no further obligations, and Executive shall
have no further rights or entitlements, in connection with or following
Executive’s termination of employment.

6.8    No-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Executive’s continuing or future participation in any plan, program,
policy or practice provided by Parent, the Company or their subsidiaries and for
which Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any other contract or agreement with
Parent, the Company or their subsidiaries at or subsequent to the Termination
Date (“Other Benefits”), which Other Benefits shall be payable in accordance
with such plan, policy, practice, program, contract or agreement, except as
explicitly modified by this Agreement.

6.9    Conditions to Receipt of Severance Benefits. In addition to the
requirement that Executive execute and not revoke the Severance Agreement, as a
condition for Executive’s right to receive any severance benefits hereunder,
Executive shall be required to comply with Sections 7.4 and 7.5 of this
Agreement; provided, however, that, prior to withholding any severance benefits
hereunder, the Company shall deliver to Executive written notice of any such
asserted noncompliance and provide Executive a period of not less than 30 days
following Executive’s receipt of such notice to respond to such assertion and
cure such noncompliance.

ARTICLE 7

CONFIDENTIALITY

7.1    Nondisclosure of Confidential Information. In the performance of his
duties, Executive may have access to confidential records, including, but not
limited to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by the Company or its
agents or consultants that is not otherwise known to the public (collectively,
the “Confidential Information”). Executive recognizes and acknowledges that the
Confidential Information is a valuable, special, and unique asset of the
Company’s business, access to and knowledge of which are essential to the
performance of Executive’s duties. Executive confirms that all such Confidential
Information is the exclusive property of the Company and that the Company has
taken efforts reasonable under the circumstances, of which this Section 7.1 is
an example, to maintain its secrecy. Except in the performance of his duties to
the Company or as required by a court or administrative order or as Executive
reasonably deems necessary for his financial, tax or legal advisors to

 

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advise him, Executive shall not, directly or indirectly, for any reason
whatsoever, disclose, divulge, communicate, use or otherwise disclose any
Confidential Information without the prior written consent of the Company duly
authorized by the Board. Executive shall also take all reasonable actions
appropriate to maintain the secrecy of all Confidential Information. All
records, lists, memoranda, correspondence, reports, manuals, emails, electronic
files, files, drawings, documents, equipment, and other tangible items
(including computer software), wherever located, incorporating the Confidential
Information, which Executive shall prepare, use or encounter, shall be and
remain the Company’s sole and exclusive property and shall be included in the
Confidential Information, except for Executive’s personal address book/file or
rolodex and information relating to Executive’s own compensation. Upon
termination of this Agreement, or whenever reasonably requested by the Company,
Executive shall promptly deliver to the Company any and all of the Confidential
Information, not previously delivered to the Company, that is in the possession
or under the control of Executive. Confidential Information shall not include
(x) information that becomes generally available to the public other than as a
result of unauthorized disclosure by Executive or his affiliates,
(y) information that becomes available to Executive subsequent to the
termination of Executive’s employment hereunder and on a non-confidential basis
from a source other than the Company or its affiliates who is not bound by a
duty of confidentiality, or other contractual, legal, or fiduciary obligation to
the Company and/or (z) information that is developed independently by Executive
subsequent to the termination of Executive’s employment hereunder without any
reliance on any other Confidential Information. Disclosure of Confidential
Information as required by applicable law or legal process shall not be a breach
of this Section 7.1. The provisions of this Section 7.1 shall continue in effect
notwithstanding termination of Executive’s employment for any reason.
Notwithstanding the foregoing, competition by Executive following termination of
his employment with the Company shall not be deemed to constitute breach of this
Agreement, so long as Executive does not otherwise breach this Section 7.1 in
furtherance of such competition.

7.2    Assignment of Intellectual Property Rights. Any ideas, processes,
designs, methods, substances, articles, know-how, copyrightable works,
maskworks, trade or service marks, trade secrets, inventions, developments,
discoveries, improvements, whether or not patentable or copyrightable, and other
matters that may be protected by intellectual property rights, that relate to
the Company’s business and are the results of Executive’s efforts during the
Term (collectively, the “Employee Work Product”), whether conceived or developed
alone or with others, and whether or not conceived during the regular working
hours of the Company, shall be deemed works made for hire and are the property
of the Company. In the event that for whatever reason such Employee Work Product
shall not be deemed a work made for hire, Executive agrees that such Employee
Work Product shall become the sole and exclusive property of the Company, and
Executive hereby assigns to the Company his entire right, title and interest in
and to each and every patent, copyright, trade or service mark (including any
attendant goodwill), trade secret or other intellectual property right embodied
in Employee Work Product. The foregoing work made for hire and assignment
provisions are and shall be in consideration of this agreement of employment by
the Company, and no further consideration is or shall be provided to Executive
by the Company with respect to these provisions. Executive agrees to execute any
assignment documents the Company may reasonably require confirming the Company’s
ownership of any of Employee Work Product (at the Company’s sole expense).
Executive also waives any and all moral rights with respect to any such works,
including without limitation any and all rights of identification of authorship
and/or rights of approval, restriction or limitation on use or subsequent
modifications.

 

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7.2.1    Executive understands that the Company is hereby advising Executive
that any provision in this Agreement requiring Executive to assign rights in any
invention does not apply to an invention that qualifies fully under the
provisions of Section 2870 of the California Labor Code (“Section 2870”).
Section 2870 provides as follows:

 

(a)

“Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer’s equipment, supplies
facilities, or trade secret information, except for those inventions that
either:

 

  (i)    Relate

at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or
development of the employer; or

 

  (ii)    Result

from any work performed by the employee for the employer.

 

(b)

The extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
the state and is unenforceable.”

7.2.2    By signing this Agreement, Executive acknowledges that Section 7.2.1
shall constitute written notice of the provisions of Section 2870.

7.3    Whistleblower Protections and Trade Secrets. Notwithstanding anything to
the contrary contained herein, nothing in this Agreement prohibits Executive
from reporting possible violations of federal law or regulation to any United
States governmental agency or entity in accordance with the provisions of and
rules promulgated under Section 21F of the Exchange Act or Section 806 of the
Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of
state or federal law or regulation (including but not limited to the right to
receive an award for information provided to any such government agencies).
Furthermore, in accordance with 18 U.S.C. § 1833, notwithstanding anything to
the contrary in this Agreement: (i) Executive shall not be in breach of this
Agreement, and shall not be held criminally or civilly liable under any federal
or state trade secret law (x) for the disclosure of a trade secret that is made
in confidence to a federal, state, or local government official or to an
attorney solely for the purpose of reporting or investigating a suspected
violation of law, or (y) for the disclosure of a trade secret that is made in a
complaint or other document filed in a lawsuit or other proceeding, if such
filing is made under seal; and (ii) if Executive files a lawsuit for retaliation
by the Company for reporting a suspected violation of law, Executive may
disclose the trade secret to Executive’s attorney, and may use the trade secret
information in the court proceeding, if Executive files any document containing
the trade secret under seal, and does not disclose the trade secret, except
pursuant to court order.

 

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7.4    Covenant Not to Compete. During the Term, Executive shall not, directly
or indirectly, work for or provide services to or own an equity interest (except
for a Permissible Investment) in any person, firm or entity engaged in the
residential home building or development business that competes against the
Company in Arizona, California, Nevada, Colorado, Washington, Oregon, Texas and
in any “other market” in which the Company develops real property. For purposes
of this Agreement, “other market” shall be defined as the area within a 100 mile
radius of any real property owned by the Company.

7.5    No Solicitation. For a period of twenty-four (24) months after the
Termination Date, Executive shall not, directly or indirectly, for himself or on
behalf of any entity with which he is affiliated or employed, solicit any person
known to Executive to be an employee of the Company or any of its subsidiaries
(or any person known to Executive to have been such an employee within six
months prior to such occurrence) to become employed by or provide personal
services to any person or entity other than the Company or its subsidiaries or
to terminate such individual’s employment with the Company or any of its
subsidiaries. Executive shall not be deemed to have solicited any such person in
violation of this provision if Executive places, or assists another person in
placing, an advertisement seeking employment candidates in a publication,
including but not limited to an internet publication, or generally available to
the public or within the residential construction and development industry. In
addition, this Section 7.5 shall not be deemed to prohibit any Person from
hiring, inducing or attempting to induce, solicit or encourage any employee of
Parent, the Company or any of their subsidiaries to leave their employ, provided
that Executive does not participate in or direct the prohibited activity.

7.6    Mutual Non-Disparagement. Executive agrees not to publish or disseminate,
directly or indirectly, any statements, whether written or oral, that are or
could be harmful to or reflect negatively on the Company and/or its businesses,
or that are otherwise disparaging of the Company and/or its businesses, or any
of their past or present or future officers or directors in their capacity as
such, or any of their policies, procedures, practices, decision-making, conduct,
professionalism or compliance with standards. The Company agrees that its
directors and executive officers shall not, and that none of Parent, the Company
or their subsidiaries shall, publish or disseminate, directly or indirectly, any
statements, whether written or oral, that are or could be harmful to or reflect
negatively on Executive, or that are otherwise disparaging of Executive. For
avoidance of doubt, the foregoing shall not be violated by statements that the
maker reasonably believes to be true in response to legal process, required by
governmental testimony or filings, or administrative or arbitral proceedings
(including, without limitation, depositions in connection with such
proceedings), and nothing herein shall be deemed to prohibit or limit Executive
from engaging in formal performance reviews or evaluations of Company personnel.

7.7    Ancillary and Independent Provisions. The representations and covenants
contained in this Article 7 on the part of Executive will be construed as
ancillary to and independent of any other provision of this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
any officer, director, or shareholder of the Company, whether predicated on this
Agreement or otherwise, shall not constitute a

 

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defense to the enforcement by the Company of the covenants of Executive
contained in this Article 7. In addition, the provisions of this Article 7 shall
continue to be binding upon Executive in accordance with their terms,
notwithstanding the termination of Executive’s employment hereunder for any
reason.

7.8    Consideration. The restrictions set forth in this Article 7 are being
given for good and valuable consideration, the receipt and sufficiency of which
is acknowledged by Executive.

7.9    Time Periods. If Executive violates any covenant contained in this
Article 7 and the Company brings legal action for injunctive or other relief,
the Company shall not, as a result of the time involved in obtaining the relief,
be deprived of the benefit of the full period of any such covenant. Accordingly,
the covenants of Executive contained in this Article 7 shall be deemed to have
durations as specified above.

7.10    Reasonableness of Limitations. The Parties agree that the limitations
contained in this Article 7 with respect to time, geographical area, and scope
of activity are reasonable. However, if any court or arbitrator shall determine
that the time, geographical area, or scope of activity of any restriction
contained in this Article 7 is unenforceable, it is the intention of the Parties
that such restrictive covenant set forth herein shall not thereby be terminated
but shall be deemed amended to the extent required to render it valid and
enforceable.

7.11    Irreparable Injury. The promised service of Executive under this
Agreement and the other promises of this Article 7 are of special, unique,
unusual, extraordinary, or intellectual character, which gives them peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law.

7.12    Remedies for Breach. Executive agrees that money damages will not be a
sufficient remedy for any breach of the obligations under this Article 7 hereof
and that the Company shall be entitled to seek injunctive relief and specific
performance as remedies for any such breach. Executive agrees that the Company
shall be entitled to seek such relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of
proving actual damages and without the necessity of posting a bond or making any
undertaking in connection therewith. Such remedies shall not be deemed to be the
exclusive remedies for any breach of the obligations in this Article 7, but
shall be in addition to all other remedies available at law or in equity.

ARTICLE 8.

ARBITRATION

8.1    General. Any controversy, dispute, or claim between the Parties,
including any claim arising out of, in connection with, or in relation to the
formation, interpretation, performance or breach of this Agreement shall be
settled exclusively by arbitration, before a single arbitrator, in accordance
with this Article 8 and the then applicable JAMS Employment Arbitration Rules
and Procedures (“JAMS Rules”), which are, as of the Effective Date, available at
https://www.jamsadr.com/rules-employment-arbitration/.

 

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Judgment upon any award rendered by the arbitrator may be entered by any state
or federal court having jurisdiction thereof. Such arbitration shall be
administered by JAMS. Arbitration shall be the exclusive remedy for determining
any such dispute, regardless of its nature. Notwithstanding the foregoing,
either party may in an appropriate matter apply to a court for provisional
relief, including a temporary restraining order or a preliminary injunction, on
the ground that the award to which the applicant may be entitled in arbitration
may be rendered ineffectual without provisional relief. Unless mutually agreed
by the Parties otherwise, any arbitration shall take place in Orange County,
California.

8.2    Selection of Arbitrator. In the event the Parties are unable to agree
upon an arbitrator, the arbitrator shall be selected in accordance the JAMS
Rules.

8.3    Applicability of Arbitration; Remedial Authority. This agreement to
resolve any disputes by binding arbitration shall extend to claims against any
parent, subsidiary or affiliate of each Party, and, when acting within such
capacity, any officer, director, stockholder, employee or agent of each Party,
or of any of the above, and shall apply as well to claims arising out of state
and federal statutes and local ordinances as well as to claims arising under the
common law. In the event of a dispute subject to this Article 8, the parties to
the arbitration shall be entitled to reasonable discovery subject to the
discretion of the arbitrator. The remedial authority of the arbitrator (which
shall include the right to grant injunctive or other equitable relief) shall be
the same as, but no greater than, would be the remedial power of a court having
jurisdiction over the parties and their dispute. The arbitrator shall, upon an
appropriate motion, dismiss any claim without an evidentiary hearing if the
party bringing the motion establishes that he or it would be entitled to summary
judgment if the matter had been pursued in court litigation. In the event of a
conflict between the JAMS Rules and these procedures, the provisions of these
procedures shall govern.

8.4    Fees and Costs. Any filing or administrative fees shall be borne
initially by the Party requesting arbitration. The Company shall be responsible
for the costs and fees of the arbitration. Notwithstanding the foregoing, except
as may be awarded to a prevailing party under applicable law, each Party shall
be responsible for and pay their own attorneys’ fees and costs incurred in
connection with such arbitration, provided, that in the event Executive is the
prevailing party with respect to at least one material issue in any such
arbitration, the Company shall be responsible for and pay Executive’s attorneys’
fees and costs incurred in connection with such arbitration.

8.5    Award Final and Binding. The arbitrator shall render an award and written
opinion, and the award shall be final and binding upon the parties. If any of
the provisions of this Article 8, or of this Agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to ensure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration. If a court should find that
the arbitration provisions of this Agreement are not absolutely binding, then
the Parties intend any arbitration decision and award to be fully admissible in
evidence in any subsequent action, given great weight by any finder of fact, and
treated as determinative to the maximum extent permitted by law.

 

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ARTICLE 9

CODE SECTION 409A

9.1    General. The intent of the Parties is that payments and benefits under
this Agreement comply with, or be exempt from, Code Section 409A and,
accordingly, to the maximum extent permitted, this Agreement shall be
interpreted in accordance therewith. In no event whatsoever shall the Company be
liable for any additional tax, interest or penalty that may be imposed on
Executive by Code Section 409A or any damages for failing to comply with Code
Section 409A.

9.2    Reimbursements. To the extent that reimbursements or other in-kind
benefits, under this Agreement constitute “nonqualified deferred compensation”
subject to Code Section 409A, (i) the right to reimbursement or in-kind benefits
shall not be subject to liquidation or exchange for another benefit, (ii) the
amount of expenses eligible for reimbursement, or in-kind benefits, provided
during any taxable year shall not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year,
and (iii) such payments shall be made on or before the last day of Executive’s
taxable year following the taxable year in which the expense occurred.

9.3    Six-Month Delay. Notwithstanding anything to the contrary in this
Agreement, no compensation or benefits, including without limitation any
severance payments or benefits payable hereunder, shall be paid to Executive
during the six (6) month period following his Separation from Service to the
extent that paying such amounts at the time or times indicated in this Agreement
would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the
Code. If the payment of any such amounts is delayed as a result of the previous
sentence, then on the first day following the end of such six (6) month period
(or, if earlier, on the date of Executive’s death), the Company shall pay
Executive (or his estate) a lump-sum amount equal to the cumulative amount that
would have otherwise been payable to Executive during such six (6) month period.

9.4    Separation From Service. A termination of employment shall not be deemed
to have occurred for purposes of any provision of this Agreement providing for
the payment of any mounts or benefits upon or following a termination of
employment that are considered “nonqualified deferred compensation” under Code
Section 409A unless such termination is also a Separation from Service and, for
purposes of any such provision of this Agreement, references to a “termination,”
“termination of employment” or like terms shall mean Separation from Service.

9.5    Payment Date. Whenever a payment under this Agreement specifies a payment
period with reference to a number of days (e.g., “payment shall be made within
thirty (30) days following Termination Date”), the actual date of payment within
the specified period shall be determined by the Company. Any payments made under
this Agreement shall be considered separate payments and not one of a series of
payments for purposes of Code Section 409A.

 

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ARTICLE 10

EXCISE TAX

10.1    Notwithstanding any other provisions in this Agreement, in the event
that any payment or benefit received or to be received by Executive (including
but not limited to any payment or benefit received in connection with a change
in control of Parent or the Company or the termination of Executive’s
employment, whether pursuant to the terms of this Agreement or any other plan,
program, arrangement or agreement) (all such payments and benefits, together,
the “Total Payments”) would be subject (in whole or part) to any excise tax
imposed under Section 4999 of the Code, or any successor provision thereto (the
“Excise Tax”), then, after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in such other plan,
program, arrangement or agreement, the Company will reduce the Total Payments to
the extent necessary so that no portion of the Total Payments is subject to the
Excise Tax (but in no event to less than zero); provided, however, that the
Total Payments will only be reduced if (i) the net amount of such Total
Payments, as so reduced (and after subtracting the net amount of federal, state,
municipal and local income and employment taxes on such reduced Total Payments
and after taking into account the phase out of itemized deductions and personal
exemptions attributable to such reduced Total Payments), is greater than or
equal to (ii) the net amount of such Total Payments without such reduction (but
after subtracting the net amount of federal, state, municipal and local income
and employment taxes on such Total Payments and the amount of Excise Tax to
which Executive would be subject in respect of such unreduced Total Payments and
after taking into account the phase out of itemized deductions and personal
exemptions attributable to such unreduced Total Payments).

10.2    In the case of a reduction in the Total Payments, the Total Payments
will be reduced in the following order: (i) payments that are payable in cash
that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A
24(a) will be reduced (if necessary, to zero), with amounts that are payable
last reduced first; (ii) payments and benefits due in respect of any equity
valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with
the highest values reduced first (as such values are determined under Treasury
Regulation Section 1.280G-1, Q&A 24), will next be reduced; (iii) payments that
are payable in cash that are valued at less than full value under Treasury
Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced
first, will next be reduced; (iv) payments and benefits due in respect of any
equity valued at less than full value under Treasury Regulation
Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values
are determined under Treasury Regulation Section 1.280G-1, Q&A 24), will next be
reduced; and (v) all other non-cash benefits not otherwise described in clauses
(ii) or (iv) will be next reduced pro-rata. Any reductions made pursuant to each
of clauses (i)-(v) above will be made in the following manner: first, a pro-rata
reduction of cash payment and payments and benefits due in respect of any equity
not subject to Code Section 409A, and second, a pro-rata reduction of cash
payments and payments and benefits due in respect of any equity subject to Code
Section 409A as deferred compensation.

10.3    For purposes of determining whether and the extent to which the Total
Payments will be subject to the Excise Tax: (i) no portion of the Total Payments
the receipt or enjoyment of which Executive shall have waived at such time and
in such manner as not

 

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to constitute a “payment” within the meaning of Section 280G(b) of the Code will
be taken into account; (ii) no portion of the Total Payments will be taken into
account which, in the opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to Executive and selected by the accounting firm which was,
immediately prior to the change in control, Parent’s independent auditor (the
“Auditor”), does not constitute a “parachute payment” within the meaning of
Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of
the Code) and, in calculating the Excise Tax, no portion of such Total Payments
will be taken into account which, in the opinion of Tax Counsel, constitutes
reasonable compensation for services actually rendered, within the meaning of
Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as set forth
in Section 280G(b)(3) of the Code) that is allocable to such reasonable
compensation; and (iii) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments will be determined by the
Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.

10.4    At the time that payments are made under this Agreement, the Company
will provide Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations,
including any opinions or other advice the Company received from Tax Counsel,
the Auditor, or other advisors or consultants (and any such opinions or advice
which are in writing will be attached to the statement). If Executive objects to
the Company’s calculations, the Company will pay to Executive such portion of
the Total Payments (up to 100% thereof) as Executive determines is necessary to
result in the proper application of this Article 10. All determinations required
by this Article 10 (or requested by either Executive or the Company in
connection with this Article 10) will be at the expense of the Company. The fact
that Executive’s right to payments or benefits may be reduced by reason of the
limitations contained in this Article 10 will not of itself limit or otherwise
affect any other rights of Executive under this Agreement.

ARTICLE 11

MISCELLANEOUS

11.1    Amendments. The provisions of this Agreement may not be waived, altered,
amended or repealed, in whole or in part, except by the signed written consent
of the Parties sought to be bound by such waiver, alteration, amendment or
repeal.

11.2    Entire Agreement. This Agreement constitutes the total and complete
agreement of the Parties with respect to the subject matter herein, and
supersedes all prior and contemporaneous understandings and agreements
heretofore made, and there are no other representations, understandings or
agreements.

11.3    Assistance in Litigation, Investigations and Inquiries. During the Term
and for a period of two years thereafter, Executive shall, upon reasonable
notice, furnish such information and proper assistance to the Company as may
reasonably be required by the Company in connection with any litigation, or
governmental or regulatory investigation or inquiry in which the Company or any
of its affiliates is, or may become, a party or subject; provided that (i) the
Company shall make reasonable efforts to limit Executive’s assistance to regular
business hours and minimize disruption of Executive’s other activities (whether
personal, professional or otherwise), and (ii) the total number of hours
required of Executive

 

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in connection with any such assistance shall not exceed 100 hours in the
aggregate. The Company shall reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in rendering such assistance. The
provisions of this Section 11.3 shall continue in effect notwithstanding
termination of Executive’s employment hereunder for any reason.

11.4    Counterparts. This Agreement may be executed in one of more
counterparts, each of which shall be deemed and original, but all of which shall
together constitute one and the same instrument.

11.5    Severability. Each term, covenant, condition or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant, condition or provision shall be deemed by an arbitrator or
a court of competent jurisdiction to be invalid or unenforceable, the court or
arbitrator finding such invalidity or unenforceability shall modify or reform
this Agreement to give as much effect as possible to the terms and provisions of
this Agreement. Any term or provision which cannot be so modified or reformed
shall be deleted and the remaining terms and provisions shall continue in full
force and effect.

11.6    Waiver or Delay. The failure or delay on the part of the Company or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the Party making the waiver. A written waiver of default shall not
operate as a waiver of any other default or of the same type of default on a
future occasion.

11.7    Successors and Assigns. This Agreement shall be binding on and shall
inure to the benefit of the Parties to it and their respective heirs, legal
representatives, successors and assigns, except as otherwise provided herein.
The Company will require any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. “Company” means the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid that assumes and agrees to perform this Agreement by operation of
law or otherwise.

11.8    No Assignment or Transfer by Executive. Neither this Agreement nor any
of the rights, benefits, obligations or duties hereunder may be assigned or
transferred by Executive. Any purported assignment or transfer by Executive
shall be void.

11.9    Necessary Acts. Each party to this Agreement shall perform any further
acts and execute and deliver any additional agreements, assignments or documents
that may be reasonably necessary to carry out the provisions or to effectuate
the purpose of this Agreement.

11.10    Governing Law. This Agreement and all subsequent agreements between the
parties shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of California.

 

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11.11    Notices. All notices, requests, demands and other communications to be
given under this Agreement shall be in writing and shall be delivered
personally, sent by facsimile transmission or sent by certified, registered or
express or overnight mail, postage prepaid, and shall be deemed received when so
delivered personally or sent by facsimile transmission (with written
confirmation received) or, if mailed, four (4) days after the date of mailing or
the next day after overnight mail, and properly addressed to the Party at the
address set forth as follows or any other address that any Party may designate
by written notice to the other Party:

 

To Executive:    The last available mailing address provided by Executive to the
Company. To Parent and/or the Company:   

William Lyon Homes, Inc.

4695 MacArthur Court, 8th Floor

Newport Beach, California 92660

Attn: Compensation Committee Chair

Facsimile: (949) 596-0882

11.12    Headings and Captions. The headings and captions used herein are solely
for the purpose of reference only and are not to be considered as construing or
interpreting the provisions of this Agreement.

11.13    Construction. All terms and definitions contained herein shall be
construed in such a manner that shall give effect to the fullest extent possible
to the express or implied intent of the Parties hereby.

11.14    Counsel. Executive has been advised by the Company that he should
consider seeking the advice of counsel in connection with the execution of this
Agreement and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate.

11.15    Survival. The obligations of the Parties under this Agreement which by
their nature may require either partial or total performance after the
expiration or termination of the Term or this Agreement shall survive any
termination or expiration of this Agreement.

11.16    Obligations. Parent agrees that if the Company is unable to perform all
or part of its obligations under this Agreement (whether before or after the
expiration or termination of this Agreement), then Parent will perform such
obligations of the Company in the same manner and to the same extent the Company
would be required to perform.

11.17    Withholding of Compensation. Executive hereby agrees that the Company
may deduct and withhold from the compensation or other amounts payable to
Executive hereunder or otherwise in connection with Executive’s employment any
amounts required to be deducted and withheld by the Company under the provisions
of any applicable Federal, state and local statute, law, regulation, ordinance
or order and any benefit deductions.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and delivered and effective as of the date first written above.

 

“PARENT” WILLIAM LYON HOMES By:     /s/ Matthew R. Niemann Name:   Matthew R.
Niemann Title:   Chair of the Compensation Committee

 

“COMPANY” WILLIAM LYON HOMES, INC. By:     /s/ Jason R. Liljestrom Name:   Jason
R. Liljestrom Title:   Senior Vice President, General Counsel and Corporate
Secretary

 

“EXECUTIVE”   /s/ Matthew R. Zaist Matthew R. Zaist

 

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EXHIBIT A

WILLIAM LYON HOMES

AMENDED AND RESTATED 2012 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD GRANT NOTICE

William Lyon Homes, a Delaware corporation, (the “Company”), pursuant to its
Amended and Restated 2012 Equity Incentive Plan, as amended from time to time
(the “Plan”), hereby grants to the individual listed below (the “Participant”),
in consideration of the mutual agreements set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the number of shares of the Company’s Class A Common Stock set
forth below (the “Shares”). This Restricted Stock award is subject to all of the
terms and conditions as set forth herein and in the Restricted Stock Award
Agreement attached hereto as Exhibit A (the “Agreement”) (including without
limitation the Restrictions on the Shares set forth in the Agreement), that
certain Employment Agreement entered into between Participant and the Company as
of January     , 2019 (the “Employment Agreement”) and the Plan, each of which
is incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Restricted
Stock Award Grant Notice (the “Grant Notice”) and the Agreement.

 

Participant:

Matthew R. Zaist

 

Grant Date:

January [    ], 2019

 

Vesting Commencement Date:

January 2, 2019

 

Total Number of Shares of Restricted Stock:

134,650 Shares

 

Vesting Schedule:

Subject to the terms and conditions of the Plan, this Grant Notice, the
Agreement and the Employment Agreement, the Restrictions shall lapse as to 100%
of the Shares on the third anniversary of the Vesting Commencement Date set
forth above, provided, that the Participant continues to provide services to the
Company through such vesting date. Notwithstanding the foregoing, the
Restrictions shall lapse on an accelerated basis to the extent provided pursuant
to the terms of the Employment Agreement.

By his signature and the Company’s signature below, the Participant agrees to be
bound by the terms and conditions of the Plan, the Agreement and this Grant
Notice. The Participant has reviewed the Agreement, the Plan and this Grant
Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Agreement and the Plan. Subject to the Employment
Agreement, the Participant hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Administrator upon any questions
arising under the Plan, this Grant Notice or the Agreement. In addition, by
signing below, the Participant agrees that the Company, in its sole discretion,
may satisfy any withholding obligations in accordance with Section 2.2(d) of the
Agreement by (i) withholding Shares otherwise releasable to the Participant upon
vesting of the shares of Restricted Stock, (ii) instructing a broker on the
Participant’s behalf to sell Shares otherwise releasable to the Participant upon
vesting of the shares of Restricted Stock and submit the proceeds of such sale
to the Company, or (iii) using any other method permitted by Section 2.2(d) of
the Agreement or the Plan.

 

WILLIAM LYON HOMES:    PARTICIPANT: By:        By:      Print Name:       
Print Name:      Title:           Address:        Address:                 

 

A-1

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EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AWARD AGREEMENT

William Lyon Homes, a Delaware corporation (the “Company”), pursuant to the
Company’s Amended and Restated 2012 Equity Incentive Plan, as amended from time
to time (the “Plan”) and in accordance with that certain Employment Agreement
entered into between the Participant indicated in the attached Grant Notice (the
“Grant Notice”) and the Company effective as of January __, 2019 (the
“Employment Agreement”), has granted to the Participant the number of shares of
Restricted Stock (the “Shares”) set forth in the Grant Notice. The Shares are
subject to all of the terms and conditions set forth in this Restricted Stock
Award Agreement (together with the Grant Notice, the “Agreement”), the
Employment Agreement and the Plan.

ARTICLE I.

GENERAL

1.1    Incorporation of Terms of Plan. The Award (as defined below) is subject
to the terms and conditions of the Employment Agreement and the Plan, which are
incorporated herein by reference. In the event of any inconsistency between the
Employment Agreement, the Plan and this Agreement, the terms of the Employment
Agreement shall first control, followed by the terms of the Plan.

1.2    Defined Terms. Wherever the following terms are used in this Agreement
they shall have the meanings specified below, unless the context clearly
indicates otherwise. Capitalized terms not specifically defined herein shall
have the meanings specified in the Plan and the Grant Notice.

(a)    “Change in Control” shall have the meaning set forth in the Employment
Agreement.

(b)     “Termination of Consultancy” shall mean the time when the engagement of
the Participant as a Consultant to the Company or an Affiliate is terminated for
any reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death, Disability or retirement, but excluding:
(a) terminations where there is a simultaneous employment or continuing
employment of the Participant by the Company or any Affiliate, and
(b) terminations where there is a simultaneous re-establishment of a consulting
relationship or continuing consulting relationship between the Participant and
the Company or any Affiliate. The Administrator, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Consultancy, including, but not by way of limitation, the question of whether
a particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Affiliate
has an absolute and unrestricted right to terminate a Consultant’s service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.

(c)    “Termination of Directorship” shall mean the time when the Participant,
if he or she is or becomes a Non-Employee Director, ceases to be a Non-Employee
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Non-Employee
Director.

(d)    “Termination of Employment” shall mean the time when the
employee-employer relationship between the Participant and the Company or any
Affiliate is terminated for any

 

A-2

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reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, Disability or retirement, but
excluding: (a) terminations where there is a simultaneous reemployment or
continuing employment of the Participant by the Company or any Affiliate, and
(b) terminations where there is a simultaneous establishment of a consulting
relationship or continuing consulting relationship between the Participant and
the Company or any Affiliate. The Administrator, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a particular leave of absence constitutes a Termination of Employment.

(e)    “Termination of Services” shall mean the Participant’s Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.

ARTICLE II.

AWARD OF RESTRICTED STOCK

2.1    Award of Restricted Stock.

(a)    Award. Pursuant to the Grant Notice and upon the terms and conditions set
forth in the Employment Agreement, the Plan and this Agreement, effective as of
the Grant Date set forth in the Grant Notice, the Company has granted to the
Participant an award of Restricted Stock (the “Award”) under the Plan in
consideration of the Participant’s past and/or continued employment with or
service to the Company or any Affiliate, and for other good and valuable
consideration. The number of Shares subject to the Award is set forth in the
Grant Notice.

(b)    Book Entry Form; Certificates. At the sole discretion of the
Administrator, the Shares will be issued in either (i) uncertificated form, with
the Shares recorded in the name of the Participant in the books and records of
the Company’s transfer agent with appropriate notations regarding the
restrictions on transfer imposed pursuant to this Agreement, and upon vesting
and the satisfaction of all conditions set forth in Sections 2.2(b) and
(d) hereof, the Company shall remove such notations on any such vested Shares in
accordance with Section 2.1(e) below; or (ii) certificated form pursuant to the
terms of Sections 2.1(c), (d) and (e) below.

(c)    Legend. Certificates representing Shares issued pursuant to this
Agreement shall, until all Restrictions (as defined below) imposed pursuant to
this Agreement lapse or have been removed and the Shares have thereby become
vested or the Shares represented thereby have been forfeited hereunder, bear the
following legend (or such other legend as shall be determined by the
Administrator):

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING
REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF A RESTRICTED
STOCK AWARD AGREEMENT, BY AND BETWEEN WILLIAM LYON HOMES AND THE REGISTERED
OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY,
OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH
AGREEMENT.”

(d)    Escrow. The Secretary of the Company or such other escrow holder as the
Administrator may appoint may retain physical custody of any certificates
representing the Shares until all of the Restrictions on transfer imposed
pursuant to this Agreement lapse or shall have been removed;

 

A-3

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in such event, the Participant shall not retain physical custody of any
certificates representing unvested Shares issued to him. The Participant, by
acceptance of the Award, shall be deemed to appoint, and does so appoint, the
Company and each of its authorized representatives as the Participant’s
attorney(s)-in-fact to effect any transfer of unvested forfeited Shares (or
Shares otherwise reacquired by the Company hereunder) to the Company as may be
required pursuant to the Plan or this Agreement and to execute such documents as
the Company or such representatives deem necessary or advisable in connection
with any such transfer.

(e)    Removal of Notations; Delivery of Certificates Upon Vesting. As soon as
administratively practicable after the vesting of any Shares subject to the
Award pursuant to Section 2.2(b) hereof, the Company shall, as applicable,
either remove the notations on any Shares subject to the Award issued in book
entry form which have vested or deliver to the Participant a certificate or
certificates evidencing the number of Shares subject to the Award which have
vested (or, in either case, such lesser number of Shares as may be permitted
pursuant to Section 10.1 of the Plan). The Participant (or the beneficiary or
personal representative of the Participant in the event of the Participant’s
death or incapacity, as the case may be) shall deliver to the Company any
representations or other documents or assurances required by the Company. The
Shares so delivered shall no longer be subject to the Restrictions hereunder.

2.2    Restrictions.

(a)    Forfeiture. Subject to Section 2.2(c), any Award that is not vested as of
the date of the Participant’s Termination of Services shall thereupon be
forfeited immediately and without any further action by the Company. For
purposes of this Agreement, “Restrictions” shall mean the restrictions on sale
or other transfer set forth in Sections 3.2 and the risk of forfeiture set forth
in Sections 2.2(a) and 2.2(b) and the vesting schedule set forth on the Grant
Notice.

(b)    Vesting and Lapse of Restrictions. Subject to Sections 2.2(a) and 2.2(c),
the Award shall vest and the Restrictions shall lapse in accordance with the
vesting schedule set forth on the Grant Notice.

(c)    Acceleration of Vesting. Notwithstanding any other provision of this
Agreement to the contrary, in the event of a Change in Control or Termination of
Services, the vesting of the Award and the lapse of the Restrictions shall
accelerate to the extent provided in the Employment Agreement or, if more
favorable, any other written agreement between the Participant and the Company
in effect as of the date of such Change in Control or Termination of Services.

(d)    Tax Withholding. The Company or its Affiliates shall be entitled to
require a cash payment (or to elect, or permit the Participant to elect, such
other form of payment determined in accordance with Section 10.1 of the Plan) by
or on behalf of the Participant and/or to deduct from other compensation payable
to the Participant any sums required by federal, state or local tax law to be
withheld with respect to the grant or vesting of the Award or the lapse of the
Restrictions hereunder. In satisfaction of the foregoing requirement with
respect to the grant or vesting of the Award or the lapse of the Restrictions
hereunder, unless otherwise determined by the Company, the Company or its
Affiliates shall withhold Shares otherwise releasable under the Award having a
fair market value equal to the sums required to be withheld by federal, state
and/or local tax law. Notwithstanding any other provision of this Agreement
(including without limitation Section 2.1(b) hereof), the Company shall not be
obligated to deliver any new certificate representing Shares to the Participant
or the Participant’s legal representative or enter any such Shares in book entry
form unless and until the Participant or the Participant’s legal representative,
as applicable, shall have paid or otherwise satisfied in full the amount of all
federal, state and local taxes applicable to the taxable income of the
Participant resulting from the grant or vesting of the Award or the issuance of
Shares hereunder.

 

A-4

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(e)    Conditions to Delivery of Shares. Subject to Section 2.1 above, the
Shares deliverable under this Award may be either previously authorized but
unissued Shares, treasury Shares or Shares purchased on the open market. Such
Shares shall be fully paid and nonassessable. The Company shall not be required
to release or deliver any Shares under this Award prior to fulfillment of the
conditions set forth in Section 13.1 of the Plan.

(f)    To ensure compliance with the Restrictions, the provisions of the charter
documents of the Company, and/or Applicable Law and for other proper purposes,
the Company may issue appropriate “stop transfer” and other instructions to its
transfer agent with respect to the Restricted Stock. The Company shall notify
the transfer agent as and when the Restrictions lapse.

2.3    Consideration to the Company. In consideration of the grant of the Award
pursuant hereto, the Participant agrees to render faithful and efficient
services to the Company or any Affiliate.

ARTICLE III.

OTHER PROVISIONS

3.1    Section 83(b) Election. If the Participant makes an election under
Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of
the date of transfer of the Restricted Stock rather than as of the date or dates
upon which the Participant would otherwise be taxable under Section 83(a) of the
Code, the Participant hereby agrees to deliver a copy of such election to the
Company promptly after filing such election with the Internal Revenue Service.

3.2    Restricted Stock Not Transferable. Until the Restrictions hereunder lapse
or expire pursuant to this Agreement and the Shares vest, the Restricted Stock
(including any Shares received by holders thereof with respect to Restricted
Stock as a result of stock dividends, stock splits or any other form of
recapitalization) shall be subject to the restrictions on transferability set
forth in Section 12.3 of the Plan; provided, however, that this Section 3.2
notwithstanding, the Shares may be transferred to a transferee specifically
approved by the Administrator, after taking into account Applicable Law.

3.3    Rights as Stockholder. Except as otherwise provided herein, upon the
Grant Date, the Participant shall have all the rights of a stockholder of the
Company with respect to the Shares, subject to the Restrictions, including,
without limitation, voting rights and rights to receive any cash or stock
dividends, in respect of the Shares subject to the Award and deliverable
hereunder.

3.4    Not a Contract of Service Relationship. Nothing in this Agreement or in
the Plan shall confer upon the Participant any right to continue to serve as an
Employee or other service provider of the Company or any of its Affiliates or
shall interfere with or restrict in any way the rights of the Company and its
Affiliates, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason whatsoever,
with or without cause, subject to any obligations of the Company under the
Employment Agreement in connection with such discharge or termination and except
to the extent expressly provided otherwise in a written agreement between the
Company or an Affiliate and the Participant.

3.5    Governing Law. The laws of the State of Delaware shall govern the
interpretation, validity, administration, enforcement and performance of the
terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.

 

A-5

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3.6    Conformity to Securities Laws. The Participant acknowledges that the Plan
and this Agreement are intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act, and any and all
Applicable Law. Notwithstanding anything herein to the contrary, the Plan shall
be administered, and the Award is granted, only in such a manner as to conform
to such Applicable Law. To the extent permitted by Applicable Law, the Plan and
this Agreement shall be deemed amended to the extent necessary to conform to
such Applicable Law.

3.7    Amendment, Suspension and Termination. To the extent permitted by the
Plan, this Agreement may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Administrator or
the Board; provided, however, that, except as may otherwise be provided by the
Plan, no amendment, modification, suspension or termination of this Agreement
shall adversely affect the Award in any material way without the prior written
consent of the Participant.

3.8    Notices. Any notice to be given under the terms of this Agreement shall
be addressed to the Company in care of the Secretary of the Company at the
Company’s principal office, and any notice to be given to the Participant shall
be addressed to the Participant at the Participant’s last address reflected on
the Company’s records. Any notice shall be deemed duly given when sent via email
or when sent by reputable overnight courier or by certified mail (return receipt
requested) through the United States Postal Service.

3.9    Successors and Assigns. The Company or any Affiliate may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company and its Affiliates. Subject to the restrictions on transfer set forth in
Section 3.2 hereof, this Agreement shall be binding upon the Participant and his
heirs, executors, administrators, successors and assigns.

3.10    Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan or this Agreement, the Award and this Agreement shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, this Agreement shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.

3.11    Entire Agreement. The Plan, the Grant Notice, the Employment Agreement
and this Agreement (including all Exhibits thereto, if any) constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and its Affiliates and the
Participant with respect to the subject matter hereof.

3.12    Limitation on the Participant’s Rights. Participation in the Plan
confers no rights or interests other than as herein provided. This Agreement
creates only a contractual obligation on the part of the Company as to amounts
payable and shall not be construed as creating a trust. The Plan, in and of
itself, has no assets. The Participant shall have only the rights of a general
unsecured creditor of the Company and its Affiliates with respect to amounts
credited and benefits payable, if any, with respect to the Shares issuable
hereunder.

 

A-6

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EXHIBIT B

WILLIAM LYON HOMES

AMENDED AND RESTATED 2012 EQUITY INCENTIVE PLAN

PERFORMANCE STOCK UNIT AWARD GRANT NOTICE

William Lyon Homes, a Delaware corporation, (the “Company”), pursuant to its
Amended and Restated 2012 Equity Incentive Plan, as amended from time to time
(the “Plan”), hereby grants to the individual listed below (the “Participant”),
in consideration of the mutual agreements set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the number of Performance Stock Units set forth below (the
“Performance Stock Units” or “PSUs”). If and when it vests, each PSU entitles
the Participant to receive a number of shares of the Company’s Class A Common
Stock (each, a “Share”) as determined below. This PSU award is subject to all of
the terms and conditions as set forth herein and in the Performance Stock Unit
Award Agreement attached hereto as Exhibit A (the “Agreement”), the Performance
Criteria and Measurement attached hereto as Exhibit B, that certain Employment
Agreement entered into between Participant and the Company as of January     ,
2019 (the “Employment Agreement”) and the Plan, each of which is incorporated
herein by reference. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Performance Stock Unit Award
Grant Notice (the “Grant Notice”) and the Agreement.

 

Participant:

Matthew R. Zaist

 

Grant Date:

January [    ], 2019

 

Total Number of PSUs:

89,767

 

Number of Shares Issuable; Vesting:

2-Year Performance Period. The number of Shares issuable in respect of the
2-Year Performance Period (as defined in Exhibit B) shall be determined by
multiplying the Achievement Factor (as determined in accordance with Exhibit B)
for the 2-Year Performance Period by 50% of the Total Number of PSUs, and
rounding down to the nearest whole Share.

 

  3-Year Performance Period. The number of Shares issuable in respect of the
3-Year Performance Period (as defined in Exhibit B) shall equal the greater of:

 

  •  

the positive difference obtained by subtracting (i) the number of Shares issued
in respect of the 2-Year Performance Period, if any, from (ii) the product
obtained by multiplying the Achievement Factor for the 3-Year Performance Period
by the Total Number of PSUs; and

 

  •  

the product obtained by multiplying the Achievement Factor for the 3-Year
Performance Period by 50% of the Total Number of PSUs, in each case, rounding up
to the nearest whole Share.

 

  Except as otherwise provided in the Employment Agreement or Section 2.4 of the
Agreement, the Participant must provide continuous services to the Company
through the end of the applicable Performance Period (each, a “Vesting Date”) to
be eligible for any Shares issuable in settlement of the PSUs for such
Performance Period. Any Shares issuable in respect of a Performance Period shall
be issued within ten days following the applicable Determination Date (as
defined in Exhibit B).

 

  The maximum number of Shares that may be issued in respect of the PSUs is
179,534.

 

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By his signature and the Company’s signature below, the Participant agrees to be
bound by the terms and conditions of the Plan, the Agreement and this Grant
Notice. The Participant has reviewed the Agreement, the Plan and this Grant
Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Agreement and the Plan. Subject to the Employment
Agreement, the Participant hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Administrator upon any questions
arising under the Plan, this Grant Notice or the Agreement. In addition, by
signing below, the Participant also agrees that the Company, in its sole
discretion, may satisfy any withholding obligations in accordance with
Section 2.6(b) of the Agreement by (i) withholding Shares otherwise issuable to
the Participant following the vesting of the PSUs, (ii) instructing a broker on
the Participant’s behalf to sell Shares otherwise issuable to the Participant
following the vesting of the PSUs and submit the proceeds of such sale to the
Company, or (iii) using any other method permitted by Section 2.6(b) of the
Agreement or the Plan.

 

WILLIAM LYON HOMES:    PARTICIPANT: By:        By:      Print Name:       
Print Name:      Title:           Address:        Address:                 

 

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EXHIBIT A

TO PERFORMANCE STOCK UNIT AWARD GRANT NOTICE

PERFORMANCE STOCK UNIT AWARD AGREEMENT

William Lyon Homes, a Delaware corporation (the “Company”), pursuant to the
Company’s Amended and Restated 2012 Equity Incentive Plan, as amended from time
to time (the “Plan”) and in accordance with that certain Employment Agreement
entered into between the Participant indicated in the attached Grant Notice (the
“Grant Notice”) and the Company effective as of January __, 2019 (the
“Employment Agreement”), has granted to the Participant an award of performance
stock units (“Performance Stock Units” or “PSUs”). The PSUs are subject to all
of the terms and conditions set forth in this Performance Stock Unit Award
Agreement (collectively with the Grant Notice and Exhibit B thereto, the
“Agreement”), the Employment Agreement and the Plan.

ARTICLE I.

GENERAL

1.1    Incorporation of Terms of Plan. The PSUs are subject to the terms and
conditions of the Employment Agreement and the Plan, which are incorporated
herein by reference. In the event of any inconsistency between the Employment
Agreement, the Plan and this Agreement, the terms of the Employment Agreement
shall first control, followed by the terms of the Plan.

1.2    Defined Terms. Wherever the following terms are used in this Agreement
they shall have the meanings specified below, unless the context clearly
indicates otherwise. Capitalized terms not specifically defined herein shall
have the meanings specified in the Plan and the Grant Notice.

(a)    “Change in Control” shall have the meaning set forth in the Employment
Agreement.

(b)    “Termination of Consultancy” shall mean the time when the engagement of
Participant as a Consultant to the Company or an Affiliate is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death, Disability or retirement, but excluding:
(a) terminations where there is a simultaneous employment or continuing
employment of Participant by the Company or any Affiliate, and (b) terminations
where there is a simultaneous re-establishment of a consulting relationship or
continuing consulting relationship between Participant and the Company or any
Affiliate. The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a particular
leave of absence constitutes a Termination of Consultancy. Notwithstanding any
other provision of the Plan, the Company or any Affiliate has an absolute and
unrestricted right to terminate a Consultant’s service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

(c)    “Termination of Directorship” shall mean the time when Participant, if he
or she is or becomes a Non-Employee Director, ceases to be a Non-Employee
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Non-Employee
Director.

(d)    “Termination of Employment” shall mean the time when the
employee-employer relationship between Participant and the Company or any
Affiliate is terminated for any reason, with or

 

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without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability or retirement, but excluding:
(a) terminations where there is a simultaneous reemployment or continuing
employment of Participant by the Company or any Affiliate, and (b) terminations
where there is a simultaneous establishment of a consulting relationship or
continuing consulting relationship between Participant and the Company or any
Affiliate. The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a particular
leave of absence constitutes a Termination of Employment.

(e)    “Termination of Services” shall mean Participant’s Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.

1.3    General. Each PSU represents the right to receive a number of Shares
determined in accordance with Exhibit B if and when it vests. The PSUs shall not
be treated as property or as a trust fund of any kind.

ARTICLE II.

GRANT OF PERFORMANCE STOCK UNITS

2.1    Grant of PSUs. In consideration of the Participant’s continued employment
with or service to the Company or an Affiliate and for other good and valuable
consideration, effective as of the Grant Date set forth in the Notice of Grant
(the “Grant Date”), the Company granted the Participant the number of PSUs set
forth in the Notice of Grant.

2.2    Company’s Obligation to Pay. Subject to and until the PSUs shall have
vested in the manner set forth in Article II hereof, the Participant will have
no right to payment of any such PSUs. Prior to actual payment of any vested
PSUs, such PSUs will represent an unsecured obligation of the Company, payable
(if at all) only from the general assets of the Company.

2.3    Vesting Schedule. Subject to Section 2.4, the PSUs will vest and become
nonforfeitable according to the vesting schedule set forth in the Grant Notice.
Except as set forth in Section 2.4 and unless otherwise determined by the
Administrator, employment or service for a portion, even a substantial portion,
of the vesting period will not entitle the Participant to any proportionate
vesting or avoid or mitigate a termination of rights and benefits upon or
following a Termination of Services as provided in Section 2.5 below.

2.4    Change in Control Treatment; Acceleration. In the event of a Change in
Control prior to the end of any Performance Period (as defined in Exhibit B),
each Performance Period then in effect shall be shortened to end on the date of
the Change in Control, and the Administrator will determine the Company’s Rank
as of the date of the Change in Control, and the Achievement Factor for each
such Performance Period shall be the greater of (i) 1.0 and (ii) the Achievement
Factor based on actual performance. For the avoidance of doubt, the PSUs shall
be subject to any accelerated vesting applicable to such PSUs set forth in the
Employment Agreement or any other written agreement with the Company or any of
its Affiliates to which the Participant is a party on the Grant Date.

 

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2.5    Forfeiture, Termination and Cancellation upon Termination of Services.
Subject to Section 2.4, upon the Participant’s Termination of Services prior to
a Vesting Date for any reason, the PSUs subject to such Performance Period will
be automatically forfeited, terminated and cancelled as of the applicable
termination date without payment of any consideration by the Company, and the
Participant, or the Participant’s beneficiary or personal representative, as the
case may be, shall have no further rights hereunder. In addition, any PSUs that
do not vest in accordance with the Grant Notice and Exhibit B will be
automatically forfeited, terminated and cancelled as of the Determination Date
applicable to the 3-Year Performance Period without payment of any consideration
by the Company, and the Participant, or the Participant’s beneficiary or
personal representative, as the case may be, shall have no further rights
hereunder.

2.6    Payment after Vesting.

(a)    On or before the tenth day following the Determination Date for each
Performance Period, the Company shall deliver to the Participant that number of
Shares, if any, issuable in respect of such Performance Period, as determined in
accordance with the Grant Notice and Exhibit B. Notwithstanding the foregoing,
to the extent permitted by Section 409A (as defined below), in the event Shares
cannot be issued because of the failure to meet one or more of the conditions
set forth in Sections 2.9(a), (b) or (c) hereof, then the Shares shall be issued
pursuant to the preceding sentence as soon as administratively practicable after
the Administrator determines that Shares can again be issued in accordance with
Sections 2.9(a), (b) and (c) hereof. In no event will the PSUs be settled in
cash.

(b)    The Company or its Affiliates shall be entitled to require a cash payment
(or to elect, or permit the Participant to elect, such other form of payment
determined in accordance with Section 10.1 of the Plan) by or on behalf of the
Participant and/or to deduct from other compensation payable to the Participant
any sums required by federal, state or local tax law to be withheld with respect
to the PSUs or the issuance of Shares. In satisfaction of the foregoing
requirement with respect to the PSUs or the issuance of Shares, unless otherwise
determined by the Company, the Company or its Affiliates shall withhold Shares
otherwise issuable in respect of the PSUs having a fair market value equal to
the sums required to be withheld by federal, state and/or local tax law.
Notwithstanding any other provision of this Agreement, the Company shall not be
obligated to deliver any new certificate representing Shares to the Participant
or the Participant’s legal representative or enter any such Shares in book entry
form unless and until the Participant or the Participant’s legal representative,
as applicable, shall have paid or otherwise satisfied in full the amount of all
federal, state and local taxes applicable to the taxable income of the
Participant resulting from the PSUs or the issuance of Shares.

2.7    Rights as Stockholder. As a holder of PSUs the Participant is not, and
does not have any of the rights or privileges of, a stockholder of the Company,
including, without limitation, any dividend rights or voting rights, in respect
of the PSUs and any Shares issuable upon vesting or settlement thereof unless
and until such Shares shall have been issued by the Company to the Participant.

2.8    Dividends. The Participant shall be entitled to receive payments equal to
any cash dividends and other distributions paid prior to the settlement of the
PSUs with respect to that number of Shares issued following the vesting of the
PSUs, such cash payment to be made at the same time that Shares are delivered to
the Participant in respect of the PSUs. If any dividends or distributions are
paid in Shares prior to the settlement of the PSUs, the number of PSUs shall be
proportionately increased to reflect such Share dividend.

 

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2.9    Conditions to Delivery of Shares. Subject to Section 13.1 of the Plan,
the Shares deliverable hereunder, or any portion thereof, may be either
previously authorized but unissued Shares or issued Shares which have then been
reacquired by the Company. Such Shares shall be fully paid and nonassessable.
Unless an applicable exemption otherwise applies to the Company or the
Participant, as applicable, the Company shall not be required to issue or
deliver any Shares deliverable hereunder prior to fulfillment of all of the
following conditions:

(a)    The admission of such Shares to listing on all stock exchanges on which
the Shares are then listed;

(b)    The completion of any registration or other qualification of such Shares
under any state, federal or foreign law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Administrator shall, in its absolute discretion, deem necessary or
advisable;

(c)    The obtaining of any approval or other clearance from any state, federal
or foreign governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;

(d)    The receipt by the Company of full payment of any applicable withholding
tax, which may be in one or more of the forms of consideration permitted under
Section 2.6 hereof; and

(e)    The lapse of such reasonable period of time following a Vesting Date as
the Administrator may from time to time establish for reasons of administrative
convenience.

ARTICLE III.

OTHER PROVISIONS

3.1    Grant is Not Transferable. The PSUs may not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and will not be subject to sale under execution, attachment or similar process.
Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose
of the PSUs, or any right or privilege conferred hereby, or upon any attempted
sale under any execution, attachment or similar process, the PSUs will terminate
immediately and will become null and void.

3.2    Notices. Any notice to be given under the terms of this Agreement shall
be addressed to the Company in care of the Secretary of the Company at the
Company’s principal office, and any notice to be given to the Participant shall
be addressed to the Participant at the Participant’s last address reflected on
the Company’s records. Any notice shall be deemed duly given when sent via email
or when sent by reputable overnight courier or by certified mail (return receipt
requested) through the United States Postal Service.

3.3    Not a Contract of Service Relationship. Nothing in this Agreement or in
the Plan shall confer upon the Participant any right to continue to serve as an
Employee or other service provider of the Company or any of its Affiliates or
shall interfere with or restrict in any way the rights of the Company and its
Affiliates, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason whatsoever,
with or without cause, subject to any obligations of the Company under the
Employment Agreement in connection with such discharge or termination and except
to the extent expressly provided otherwise in a written agreement between the
Company or an Affiliate and the Participant.

 

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3.4    Governing Law. The laws of the State of Delaware shall govern the
interpretation, validity, administration, enforcement and performance of the
terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.

3.5    Conformity to Securities Laws. The Participant acknowledges that the Plan
and this Agreement are intended to conform to the extent necessary with all
provisions of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, and state and foreign securities laws and regulations.
Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the PSUs are granted, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
this Agreement shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.

3.6    Amendments, Suspension and Termination. To the extent permitted by the
Plan, this Agreement may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Administrator or
the Board, provided, that, except as may otherwise be provided by the Plan, no
amendment, modification, suspension or termination of this Agreement shall
adversely affect the PSUs in any material way without the Participant’s prior
written consent.

3.7    Successors and Assigns. The Company or any Affiliate may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company and its Affiliates. Subject to the restrictions on transfer herein set
forth in Section 3.3 hereof, this Agreement shall be binding upon the
Participant and his heirs, executors, administrators, successors and assigns.

3.8    Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan or this Agreement, the Plan, the PSUs and this Agreement
shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) that are requirements for the application of
such exemptive rule. To the extent permitted by applicable law, this Agreement
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule.

3.9    Not a Contract of Employment. Nothing in this Agreement or in the Plan
shall confer upon the Participant any right to continue to serve as an employee
or other service provider of the Company or any of its Affiliates.

3.10    Entire Agreement. The Plan, the Grant Notice, the Employment Agreement
and this Agreement (including all Exhibits thereto, if any) constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and its Affiliates and the
Participant with respect to the subject matter hereof.

3.11    Section 409A. The PSUs are not intended to constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Code (together
with any Department of Treasury regulations and other interpretive guidance
issued thereunder, including without limitation any such regulations or other
guidance that may be issued after the date hereof, “Section 409A”). However,
notwithstanding any other provision of the Plan or this Agreement, if at any
time the Administrator determines that the PSUs (or any portion thereof) may be
subject to Section 409A, the Administrator shall adopt such amendments to the
Plan or this Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other
actions, as the Administrator determines are necessary or appropriate either for
the PSUs to be exempt from the application of Section 409A or to comply with the
requirements of Section 409A, provided that no such amendments, policies,
procedures or other alterations to this Agreement or the PSUs shall reduce the
Participant’s originally-intended economic benefits.

 

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3.12    Limitation on the Participant’s Rights. Participation in the Plan
confers no rights or interests other than as herein provided. Neither the Plan
nor any underlying program, in and of itself, has any assets. The Participant
shall have only the rights of a general unsecured creditor of the Company with
respect to amounts credited and benefits payable, if any, with respect to the
PSUs, and rights no greater than the right to receive the Shares as a general
unsecured creditor with respect to PSUs, as and when payable hereunder.

 

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EXHIBIT B

TO PERFORMANCE STOCK UNIT AWARD GRANT NOTICE

PERFORMANCE CRITERIA AND MEASUREMENT

 

1.

Definitions.

For purposes of the charts, calculations and conditions below:

 

  a.

“Company Percentile” means the absolute value of:

 

  •  

the quotient of (i) the Company’s Rank (as defined below), divided by (ii) the
total number of companies in the TSR Index (including the Company, but after
removal of any companies in accordance with the calculation of the Company’s
Rank), expressed as a percentage;

 

  •  

minus 100%.

 

  b.

“Ending Price” means the volume-weighted average price of one share of a
company’s common stock on the applicable stock exchange during the 60 days
immediately preceding the last day of the 2-Year Performance Period or the
3-Year Performance Period, as applicable.

 

  c.

“Starting Price” means the volume-weighted average price of one share of a
company’s common stock on the applicable stock exchange during the 60 days
immediately preceding January 1, 2019

 

  d.

“TSR” means, for the Company and each other company in the TSR Index, the
quotient of (a) divided by (b), expressed as a percentage, where:

 

  •  

(a) equals the sum of (i) the Ending Price minus the Starting Price and (ii) the
sum of all dividends paid on one share of the company’s common stock during the
2-Year Performance Period or 3-Year Performance Period, as applicable, provided
that all dividends are treated as “reinvested” at the end of each calendar
quarter; and

 

  •  

(b) equals the Starting Price.

 

  e.

“TSR Index” means the following companies (subject to adjustment in accordance
with the calculation of the Company’s Rank): KB Home; Meritage Homes; Hovnanian
Enterprises; MDC Holdings; Beazer Homes USA; M/I Homes; Century Communities; LGI
Homes; The New Home Company; TRI Pointe Group; Green Brick Partners; and Taylor
Morrison.

 

2.

Performance Goal. The performance goal applicable to the PSUs will be the TSR of
the Company relative to the companies in the TSR Index, as measured over the
applicable Performance Period. Achievement of the performance goal will be
determined by the percentile rank of the Company’s TSR relative to the TSR of
each other company in the TSR Index (as expressed by the Company Percentile).

 

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3.

Company’s Rank. The Company’s “Rank” will be determined by the Company’s
position within the ranking of each company in the TSR Index (including the
Company) in descending order based on their respective TSRs (with the highest
TSR having a Rank of one). For purposes of developing the ordering provided in
the immediately-preceding sentence, (A) any company that filed for bankruptcy
protection under the United States Bankruptcy Code during the applicable
performance period will be assigned the lowest order of any company in the TSR
Index, and (B) any company that is acquired during the applicable Performance
Period, or otherwise no longer listed on a national securities exchange at the
end of the applicable Performance Period (other than the Company), will be
removed from the TSR Index and will be excluded for purposes of ordering the
companies in the TSR Index (and for purposes of calculating the Company
Percentile).

 

4.

Performance Periods. There shall be two performance periods (each, a
“Performance Period”) as follows: January 1, 2019 through December 31, 2020 (the
“2-Year Performance Period”), January 1, 2019 through December 31, 2021 (the
“3-Year Performance Period”).

 

5.

Achievement Factor. As soon as administratively practicable following the end of
each Performance Period (and in any event no later than the first regularly
scheduled meeting of the Compensation Committee of the Board following the end
of each Performance Period), the Administrator shall determine the Company
Percentile for such Performance Period and calculate the Achievement Factor
(such date of determination, the “Determination Date”). For the purposes hereof,
“Achievement Factor” shall mean the factor determined under the table below,
based on the Company Percentile. Straight-line interpolation will be used to
determine the Achievement Factor for any Company Percentile between Threshold
Performance and Target Performance and between Target Performance and Maximum
Performance. The Shares issuable in respect of the PSUs shall in no event exceed
two times the Total Number of PSUs shown in the Grant Notice, and in the event
the Company Percentile for the Performance Period is less than 35%, the
Achievement Factor shall be zero.

 

Performance Level

  

Company Percentile for Performance Period

  

Achievement Factor

Below Threshold Performance

   less than 35%    0.0

Threshold Performance

   35%    0.5

Target Performance

   60%    1.0

Maximum Performance

   equals or exceeds 75%    2.0

 

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EXHIBIT C

William Lyon Homes, Inc.

SEVERANCE AGREEMENT AND GENERAL RELEASE

In consideration of the benefits provided under Section 6.6.2 of the Employment
Agreement by and among Matthew R. Zaist (“Executive”), William Lyon Homes, a
Delaware Corporation (“Parent”), and William Lyon Homes, Inc. a California
corporation, (the “Company”), to which this Severance Agreement and General
Release (this “Agreement”) is Exhibit C (the “Employment Agreement”), Executive
hereby agrees as follows:

1.    Relief from Duties. Executive is relieved of all job responsibilities and
authority, effective                         , and resigns from any and all
positions as an officer, director or employee of the Company or any parent,
subsidiary or affiliate of the Company. Subject to the terms of the Employment
Agreement, Executive will, on or before                         , return to the
Company all files, records, keys, and any other property of the Company and its
parents, subsidiaries and affiliates.

2.    Representation and Warranty. Executive represents to the Company that he
or she is signing this Agreement voluntarily and with a full understanding of,
and agreement with, its terms, for the purpose of receiving the payments and
benefits set forth in Section 6.6.2 of the Employment Agreement, thereby
resolving all claims between the parties arising out of his employment with, and
the termination of his relationship with, the Company.

3.    Severance Benefits and Unemployment Claims. In reliance on Executive’s
representations and releases in this Agreement, the Company will provide to
Executive the payments and benefits set forth in Section 6.6.2 of the Employment
Agreement at the times set forth therein. Should Executive file for unemployment
insurance benefits, the Company agrees not to challenge Executive’s claim.

4.    No Other Payments or Benefits. Executive agrees that he is not entitled to
receive, and will not claim, any payments or benefits other than what is
expressly set forth in Sections 6.6.1 and 6.6.2 of the Employment Agreement and
such other benefits which, by their terms, survive Executive’s termination of
employment, and hereby expressly waives any right to additional payments or
benefits.

5.    General Release by Executive. Subject to Section 6 below, Executive hereby
releases and discharges forever the Company, and each of its parents, affiliates
and subsidiaries, and each of their present and former directors, officers,
employees, trustees, agents, attorneys, administrators, plans, plan
administrators, insurers, parent corporations, subsidiaries, related and
affiliated companies and entities, shareholders, members, partners,
representatives, predecessors, successors and assigns, and all persons acting
by, through, under or in concert with them (hereinafter collectively referred to
as the “Executive Released Parties”), from and against all “Claims.” The
“Claims” released herein include any and all manner of action or actions, cause
or causes of action, in law or in equity, suits, debts, liens,

 

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contracts, agreements, promises, liability, claims, demands, damages, losses,
costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown,
fixed or contingent, which Executive now has or may hereafter have against the
Executive Released Parties, or any of them, by reason of any matter, cause, or
thing whatsoever from the beginning of time to the date hereof. Without limiting
the generality of the foregoing, Claims shall include: any claims in any way
arising out of, based upon, or related to his employment by or service as a
director to any of the Executive Released Parties, or any of them, or the
termination thereof; any claim for wages, salary, commissions, bonuses, fees,
incentive payments, profit-sharing payments, expense reimbursements, leave,
vacation, severance pay or other employee benefits; any alleged breach of any
express or implied contract of employment; any alleged torts or other alleged
legal restrictions on the Company’s rights to terminate his employment; and any
alleged violation of any federal, state or local statute or ordinance including,
without limitation, Claims arising under: the Age Discrimination in Employment
Act, as amended, 29 U.S.C. § 621, et seq. (the “ADEA”); Title VII of the Civil
Rights Act of 1964, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 2000
et seq.; the Equal Pay Act, as amended, 29 U.S.C. § 206(d); the Civil Rights Act
of 1866, 42 U.S.C. § 1981; the Family and Medical Leave Act of 1993, 29 U.S.C. §
2601 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et
seq.; the False Claims Act , 31 U.S.C. § 3729 et seq.; the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. § 1001 et seq.; the Worker
Adjustment and Retraining Notification Act, as amended, 29 U.S.C. § 2101 et seq.
the Fair Labor Standards Act, 29 U.S.C. § 215 et seq., the Sarbanes-Oxley Act of
2002; the California Fair Employment and Housing Act, as amended, Cal. Lab. Code
§ 12940 et seq.; the California Equal Pay Law, as amended, Cal. Lab. Code §§
1197.5(a),1199.5; the Moore-Brown-Roberti Family Rights Act of 1991, as amended,
Cal. Gov’t Code §§12945.2, 19702.3; the California Labor Code; the California
WARN Act, Cal. Lab. Code § 1400 et seq.; the California False Claims Act, Cal.
Gov’t Code § 12650 et seq.; the California Corporate Criminal Liability Act,
Cal. Penal Code § 387; Arizona Revised Statute 41-1461 et seq. (race, color,
religion, sex, age, disability or national origin discrimination); Nevada Rev.
Statute § 613.010 (Solicitation of Employees by Misrepresentation); Nevada Rev.
Statute § 613.310 et seq. (race, color, religion, sex, sexual orientation, age,
disability or national origin discrimination) or any other federal, state or
local law.

6.    Exclusions from General Release. Notwithstanding the generality of the
foregoing, Executive does not release the following claims and rights:

 

  (a)

Executive’s rights to the benefits of Sections 6.6.1 and 6.6.2 of the Employment
Agreement;

 

  (b)

Executive’s rights as a shareholder, option holder, or holder of any other
equity interests of Parent, the Company or any of their subsidiaries or
affiliates;

 

  (c)

any claims for unemployment compensation or any state disability insurance
benefits pursuant to the terms of applicable state law;

 

  (d)

claims to continued participation in certain of the Company’s group benefit
plans pursuant to the terms and conditions of the federal law known as COBRA or
the comparable California law known as Cal-COBRA;

 

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  (e)

any rights vested prior to the date of Executive’s termination of employment to
benefits under any Company-sponsored retirement or welfare benefit plan;

 

  (f)

Executive’s rights, if any, to indemnity and/or advancement of expenses pursuant
to applicable state law, the Company’s or Parent’s articles, bylaws or other
corporate governance documents, and/or to the protections of any director’ and
officers’ liability policies of the Company or any of its affiliates; and

 

  (g)

Executive’s rights under this Agreement and any other right that survives
termination of the Employment Agreement or that may not be released by private
agreement.

(collectively, the “Executive Unreleased Claims”).

7.    Rights Under the ADEA and Older Workers Benefit Protection Act. Without
limiting the scope of the foregoing release of Claims in any way, Executive
certifies that this release constitutes a knowing and voluntary waiver of any
and all rights or claims that exist or that Executive has or may claim to have
under the ADEA and that he is hereby advised of his rights under the Older
Workers Benefit Protection Act. This release does not govern any rights or
claims that might arise under the ADEA after the date this Agreement is signed
by the parties. Executive acknowledges that:

 

  (a)

the consideration provided pursuant to Section 6.6.2 of the Employment Agreement
is in addition to any consideration that he would otherwise be entitled to
receive;

 

  (b)

he has been and is hereby advised in writing to consult with an attorney prior
to signing this Agreement;

 

  (c)

he has been provided a full and ample opportunity to review this Agreement,
including a period of at least twenty-one (21) days, or forty-five (45) days if
applicable, within which to consider it;

 

  (d)

to the extent that Executive takes less than the twenty-one (21) day period, or
forty-five (45) day period if applicable, to consider this Agreement prior to
execution, Executive acknowledges that he had sufficient time to consider this
Agreement with counsel and that he expressly, voluntarily and knowingly waives
any additional time; and

 

  (e)

Executive is aware of his right to revoke this Agreement at any time within the
seven (7) day period following the date on which he executes the release and
that the release shall not become effective or

 

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  enforceable until the calendar day immediately following the expiration of the
seven (7) day revocation period. Executive further understands that he shall
relinquish any right he has to the consideration specified in Section 6.6.2 of
the Employment Agreement if he exercises his right to revoke this Agreement.
Notice of revocation must be made in writing, signed by Executive, and must be
received by the Company, at 4695 MacArthur Court, 8th Floor, Newport Beach, CA
92660 Attn: Corporate Human Resources, no later than 5:00 p.m. (Pacific Time) on
the seventh (7th) calendar day immediately following the date on which Executive
executes this Agreement.

8.    Unknown Claims. It is further understood and agreed that Executive waives
all rights under Section 1542 of the California Civil Code (“Section 1542”)
and/or any statute or common law principle of similar effect in any jurisdiction
with respect to any Claims other than the Executive Unreleased Claims.
Section 1542 reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

Notwithstanding the provisions of Section 1542 or any statute or common law
principle of similar effect in any jurisdiction, and for the purpose of
implementing a full and complete release and discharge of all claims, Executive
expressly acknowledges that this Agreement is intended to include in its effect,
without limitation, all Claims (other than the Executive Unreleased Claims)
which Executive does not know or suspect to exist in Executive’s favor at the
time of execution hereof, and that the general release agreed upon contemplates
the extinguishment of any such Claims.

9.    Covenant Not To Sue. Executive represents and covenants that he has not
filed, initiated or caused to be filed or initiated, any Claim, charge, suit,
complaint, grievance, action or cause of action against the Company or any of
the Executive Released Parties. Except to the extent that such waiver is
precluded by law, Executive further promises and agrees that he will not file,
initiate, or cause to be filed or initiated any Claim, charge, suit, complaint,
grievance, action, or cause of action based upon, arising out of, or relating to
any Claim, demand, or cause of action released herein (a “Released Claim”), nor
shall Executive participate, assist or cooperate in any Released Claim, whether
before a court or administrative agency or otherwise, unless required to do so
by law. The parties acknowledge that this Agreement will not prevent Executive
from filing a charge with the Equal Employment Opportunity Commission (or
similar state agency) or participating in any investigation conducted by the
Equal Employment Opportunity Commission (or similar state agency); provided,
however, that Executive acknowledges and agrees that any Released Claims by
Executive, or brought on his behalf, for personal relief in connection with such
a charge or investigation (such as reinstatement or monetary damages) would be
and hereby are barred.

 

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10.    No Assignment. Executive represents and warrants that he has made no
assignment or other transfer, and covenants that he will make no assignment or
other transfer, of any interest in any Claim which he may have against the
Executive Released Parties, or any of them.

11.    Indemnification of Executive Released Parties. Executive agrees to
indemnify and hold harmless the Executive Released Parties, and each of them,
against any loss, claim, demand, damage, expenses, or any other liability
whatsoever, including reasonable attorneys’ fees and costs resulting from:
(a) any breach of this release by Executive or Executive’s successors in
interest; (b) any assignment or transfer, or attempted assignment or transfer,
of any Released Claims; or (c) any action or proceeding brought by Executive or
Executive’s successors in interest, or any other, if such action or proceeding
arises out of, is based upon, or is related to any Released Claims; provided,
however, that this indemnification provision shall not apply to any challenge by
Executive of the release of claims under the ADEA, Title VII, or similar
discrimination laws or to Executive’s right to enforce any obligations under
this Agreement (or that are otherwise preserved by this Agreement), and any
right of the Executive Released Parties to recover attorneys’ fees and/or
expenses for such breach shall be governed by applicable law. It is the
intention of the parties that this indemnity does not require payment as a
condition precedent to recovery by any of the Executive Released Parties under
this indemnity.

12.    Entire Agreement/No Oral Modification. This Agreement (together with the
applicable provisions of the Employment Agreement) contains all of the terms,
promises, representations, and understandings made between the parties with
respect to the subject matter hereof. Executive agrees that no promises,
representations, or inducements have been made to him/her that caused him/her to
sign this Agreement other than those set forth in this Agreement. This Agreement
does not supersede Executives obligations under Article 7 of the Employment
Agreement or any other agreement concerning the assignment, use or disclosure of
confidential information or intellectual property.

13.    No Oral Modification/Waiver. This Agreement may be modified only by a
written instrument signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance. No delay on the part of the Company in exercising
any right hereunder shall operate as a waiver thereof, nor shall any waiver or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.

14.    Truthful Testimony; Notice of Request for Testimony. Nothing in this
Agreement is intended to or shall preclude Executive from providing testimony
that he reasonably and in good faith believes to be truthful in response to a
valid subpoena, court order, regulatory request or other judicial,
administrative or legal process or otherwise as required by law. Executive shall
notify the Company in writing as promptly as practicable after receiving any
such request of the anticipated testimony and at least ten (10) days prior to
providing such testimony (or, if such notice is not possible under the
circumstances, with as much prior notice as is possible) to afford the Company a
reasonable opportunity to challenge the subpoena, court order or similar legal
process. Moreover, nothing in this Agreement shall be construed or applied so as
to limit Executive from providing candid statements that he or

 

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she reasonably and in good faith believes to be truthful to any governmental or
regulatory body or any self-regulatory organization. In addition, nothing in
this Agreement prohibits Executive from reporting possible violations of federal
law or regulation to any United States governmental agency or entity in
accordance with the provisions of and rules promulgated under Section 21F of the
Exchange Act or Section 806 of the Sarbanes-Oxley Act of 2002, or any other
whistleblower protection provisions of state or federal law or regulation
(including the right to receive an award for information provided to any such
government agencies). Furthermore, in accordance with 18 U.S.C. § 1833,
notwithstanding anything to the contrary in this Agreement: (i) Executive shall
not be in breach of this Agreement, and shall not be held criminally or civilly
liable under any federal or state trade secret law (x) for the disclosure of a
trade secret that is made in confidence to a federal, state, or local government
official or to an attorney solely for the purpose of reporting or investigating
a suspected violation of law, or (y) for the disclosure of a trade secret that
is made in a complaint or other document filed in a lawsuit or other proceeding,
if such filing is made under seal; and (ii) if Executive files a lawsuit for
retaliation by the Company for reporting a suspected violation of law, Executive
may disclose the trade secret to Executive’s attorney, and may use the trade
secret information in the court proceeding, if Executive files any document
containing the trade secret under seal, and does not disclose the trade secret,
except pursuant to court order.

15.    Choice of Law and Forum. This Agreement shall be interpreted in
accordance with the laws of the State of California, and any dispute arising
under this Agreement shall be subject to arbitration in accordance with Article
8 of the Employment Agreement.

16.    Timely Execution and Return of Agreement. To receive the payments and
benefits as stated in Section 6.6.2 of the Employment Agreement, this signed
document must be delivered to the Company not later than
[                        (    )] days after the Company’s delivery of this
Agreement to Executive, in each case pursuant to the notice and delivery
requirements set forth in the Employment Agreement. Should Executive have any
questions, he should contact Corporate Human Resources at (949) 476-5440.

 

DATED:                 Matthew R. Zaist     WILLIAM LYON HOMES, INC. DATED:    
    By:             [                                         ]

 

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