PICO HOLDINGS, INC.

2014 EQUITY INCENTIVE PLAN

Table of Contents
 
 
Page
1.
Establishment, Purpose and Term of Plan
4
 
1.1
Establishment
4
 
1.2
Purpose
4
 
1.3
Term of Plan
4
2.
Definitions and Construction
4
 
2.1
Definitions
4
 
2.2
Construction
10
3.
Administration
10
 
3.1
Administration by the Committee
10
 
3.2
Authority of Officers
10
 
3.3
Administration with Respect to Insiders
10
 
3.4
Committee Complying with Section 162(m)
10
 
3.5
Powers of the Committee
10
 
3.6
Option or SAR Repricing
11
 
3.7
Indemnification
11
4.
Shares Subject to Plan
12
 
4.1
Maximum Number of Shares Issuable
12
 
4.2
Adjustment for Unissued or Forfeited Predecessor Plan Shares
12
 
4.3
Share Counting
12
 
4.4
Adjustments for Changes in Capital Structure
12
 
4.5
Assumption or Substitution of Awards
13
5.
Eligibility, Participation and Award Limitations
13
 
5.1
Persons Eligible for Awards
13
 
5.2
Participation in the Plan
13
 
5.3
Incentive Stock Option Limitations
13
 
5.4
Section 162(m) Award Limits
14
 
5.5
Nonemployee Director Award Limit
14
6.
Stock Options
14
 
6.1
Exercise Price
14
 
6.2
Exercisability and Term of Options
14
 
6.3
Payment of Exercise Price
14
 
6.4
Effect of Termination of Service
15
 
6.5
Transferability of Options
16
7.
Stock Appreciation Rights
16
 
7.1
Types of SARs Authorized
16

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7.2
Exercise Price
16
 
7.3
Exercisability and Term of SARs
16
 
7.4
Exercise of SARs
17
 
7.5
Deemed Exercise of SARs
17
 
7.6
Effect of Termination of Service
17
 
7.7
Transferability of SARs
17
8.
Restricted Stock Awards
17
 
8.1
Types of Restricted Stock Awards Authorized
18
 
8.2
Purchase Price
18
 
8.3
Payment of Purchase Price
18
 
8.4
Payment of Purchase Price
18
 
8.5
Vesting and Restrictions on Transfer
18
 
8.6
Voting Rights; Dividends and Distributions
18
 
8.7
Effect of Termination of Service
19
 
8.8
Nontransferability of Restricted Stock Award Rights
19
9.
Restricted Stock Units
19
 
9.1
Grant of Restricted Stock Unit Awards
19
 
9.2
Purchase Price
19
 
9.3
Vesting
19
 
9.4
Voting Rights, Dividend Equivalent Rights and Distributions
19
 
9.5
Effect of Termination of Service
20
 
9.6
Settlement of Restricted Stock Unit Awards
20
 
9.7
Nontransferability of Restricted Stock Unit Awards
20
10.
Performance Awards
20
 
10.1
Types of Performance Awards Authorized
20
 
10.2
Initial Value of Performance Shares and Performance Units
21
 
10.3
Establishment of Performance Period, Performance Goals and Performance Award
Formula
21
 
10.4
Measurement of Performance Goals
21
 
10.5
Settlement of Performance Awards
22
 
10.6
Voting Rights; Dividend Equivalent Rights and Distributions
23
 
10.7
Effect of Termination of Service
24
 
10.8
Nontransferability of Performance Awards
24
11.
Cash-Based Awards and Other Stock-Based Awards
24
 
11.1
Grant of Cash-Based Awards
24
 
11.2
Grant of Other Stock-Based Awards
24
 
11.3
Value of Cash-Based and Other Stock-Based Awards
24
 
11.4
Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards
25
 
11.5
Voting Rights; Dividend Equivalent Rights and Distributions
25
 
11.6
Effect of Termination of Service
25
 
11.7
Nontransferability of Cash-Based Awards and Other Stock-Based Awards
25

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12.
Standard Forms of Award Agreement
26
 
12.1
Award Agreements
26
 
12.2
Authority to Vary Terms
26
13.
Change in Control
26
 
13.1
Effect of Change in Control on Awards
26
 
13.2
Effect of Change in Control on Nonemployee Director Awards
27
 
13.3
Federal Excise Tax Under Section 4999 of the Code
27
14.
Compliance with Securities Law
27
15.
Compliance with Section 409A
27
 
15.1
Awards Subject to Section 409A
27
 
15.2
Deferral and/or Distribution Elections
28
 
15.3
Subsequent Elections
28
 
15.4
Payment of Section 409A Deferred Compensation
28
16.
Tax Withholding
30
 
16.1
Tax Withholding in General
30
 
16.2
Withholding in or Directed Sale of Shares
30
17.
Amendment, Suspension or Termination of Plan
30
18.
Miscellaneous Provisions
31
 
18.1
Repurchase Rights
31
 
18.2
Forfeiture Events
31
 
18.3
Provision of Information
31
 
18.4
Rights as Employee, Consultant or Director
31
 
18.5
Rights as a Shareholder
31
 
18.6
Delivery of Title to Shares
32
 
18.7
Fractional Shares
32
 
18.8
Retirement and Welfare Plans
32
 
18.9
Beneficiary Designation
32
 
18.10
Severability
32
 
18.11
No Constraint on Corporate Action
32
 
18.12
Unfunded Obligation
32
 
18.13
Choice of Law
32

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PICO Holdings, Inc.
2014 Equity Incentive Plan

1.Establishment, Purpose and Term of Plan.
1.1Establishment. The PICO Holdings, Inc. 2014 Equity Incentive Plan (the
“Plan”) is hereby established effective as of May 14, 2014, the date of its
approval by the shareholders of the Company (the “Effective Date”).

1.2Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its shareholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares,
Performance Units, Cash-Based Awards and Other Stock-Based Awards.

1.3Term of Plan. The Plan shall continue in effect until its termination by the
Committee; provided, however, that all Awards shall be granted, if at all,
within ten (10) years from the Effective Date.

2.Definitions and Construction.

2.1Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a)“Affiliate” means (i) a parent entity, other than a Parent Corporation, that
directly, or indirectly through one or more intermediary entities, controls the
Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that
is controlled by the Company directly or indirectly through one or more
intermediary entities. For this purpose, the terms “parent,” “subsidiary,”
“control” and “controlled by” shall have the meanings assigned such terms for
the purposes of registration of securities on Form S-8 under the Securities Act.
(b)“Award” means any Option, Stock Appreciation Right, Restricted Stock Purchase
Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share,
Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the
Plan.
(c)“Award Agreement” means a written or electronic agreement between the Company
and a Participant setting forth the terms, conditions and restrictions
applicable to an Award.
(d)“Board” means the Board of Directors of the Company.
(e)“Cash-Based Award” means an Award denominated in cash and granted pursuant to
Section 11.
(f)“Cashless Exercise” means a Cashless Exercise as defined in
Section 6.3(b)(i).
(g)“Cause” means, unless such term or an equivalent term is otherwise defined by
the applicable Award Agreement or other written agreement between a Participant
and a Participating Company applicable to an Award, any of the following:
(i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary
duty for personal profit, or falsification of any Participating Company
documents or records; (ii) the Participant’s material failure to abide by a
Participating Company’s code of conduct or other policies (including, without
limitation, policies relating to confidentiality and reasonable workplace
conduct); (iii) the Participant’s unauthorized use, misappropriation,
destruction or diversion of any tangible or intangible asset or corporate
opportunity of a Participating Company (including, without limitation, the
Participant’s improper use or disclosure of a Participating Company’s
confidential or proprietary information); (iv) any intentional act by the
Participant which has a material detrimental effect on a Participating Company’s
reputation or business; (v) the Participant’s repeated failure to perform any
reasonable assigned duties after written notice from a Participating Company of,
and a reasonable opportunity to cure, such failure; (vi) any material breach by
the Participant of any employment,

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service, non-disclosure, non-competition, non-solicitation or other similar
agreement between the Participant and a Participating Company, which breach is
not cured pursuant to the terms of such agreement; or (vii) the Participant’s
conviction (including any plea of guilty or nolo contendere) of any criminal act
involving fraud, dishonesty, misappropriation or moral turpitude, or which
impairs the Participant’s ability to perform his or her duties with a
Participating Company.
(h)“Change in Control” means, unless such term or an equivalent term is
otherwise defined by the applicable Award Agreement or other written agreement
between the Participant and a Participating Company applicable to an Award, the
occurrence of any one or a combination of the following:
(i)any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as such term is defined in
Rule 13d‑3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the total Fair Market
Value or total combined voting power of the Company’s then‑outstanding
securities entitled to vote generally in the election of Directors; provided,
however, that a Change in Control shall not be deemed to have occurred if such
degree of beneficial ownership results from any of the following: (A) an
acquisition by any person who on the Effective Date is the beneficial owner of
more than fifty percent (50%) of such voting power, (B) any acquisition directly
from the Company, including, without limitation, pursuant to or in connection
with a public offering of securities, (C) any acquisition by the Company,
(D) any acquisition by a trustee or other fiduciary under an employee benefit
plan of a Participating Company or (E) any acquisition by an entity owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of the voting securities of the Company; or
(ii)an Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”) in which the shareholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding securities entitled
to vote generally in the election of Directors or, in the case of an Ownership
Change Event described in Section 2.1(ee)(iii), the entity to which the assets
of the Company were transferred (the “Transferee”), as the case may be; or
(iii)a date specified by the Committee following approval by the shareholders of
a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a
transaction described in subsections (i) or (ii) of this Section 2.1(h) in which
a majority of the members of the board of directors of the continuing, surviving
or successor entity, or parent thereof, immediately after such transaction is
comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through one or
more subsidiary corporations or other business entities. The Committee shall
determine whether multiple events described in subsections (i), (ii) and (iii)
of this Section 2.1(h) are related and to be treated in the aggregate as a
single Change in Control, and its determination shall be final, binding and
conclusive.
(i)“Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations and administrative guidelines promulgated thereunder.
(j)“Committee” means the Compensation Committee and such other committee or
subcommittee of the Board, if any, duly appointed to administer the Plan and
having such powers in each instance as shall be specified by the Board. If, at
any time, there is no committee of the Board then authorized or properly
constituted to administer the Plan, the Board shall exercise all of the powers
of the Committee granted herein, and, in any event, the Board may in its
discretion exercise any or all of such powers.
(k)“Company” means PICO Holdings, Inc., a California corporation, and any
successor corporation thereto.

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(l)“Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a Director) to a Participating Company,
provided that the identity of such person, the nature of such services or the
entity to which such services are provided would not preclude the Company from
offering or selling securities to such person pursuant to the Plan in reliance
on registration on Form S‑8 under the Securities Act.
(m)“Covered Employee” means, at any time the Plan is subject to Section 162(m),
any Employee who is or may reasonably be expected to become a “covered employee”
as defined in Section 162(m), or any successor statute, and who, with respect to
a Performance Award, is designated, either as an individual Employee or a member
of a class of Employees, by the Committee no later than the earlier of (i) the
date that is ninety (90) days after the beginning of the Performance Period, or
(ii) the date on which twenty-five percent (25%) of the Performance Period has
elapsed, as a “Covered Employee” under this Plan for such applicable Performance
Period.
(n)“Director” means a member of the Board.
(o)“Disability” means, unless such term or an equivalent term is otherwise
defined by the applicable Award Agreement or other written agreement between the
Participant and a Participating Company applicable to an Award, the permanent
and total disability of the Participant, within the meaning of Section 22(e)(3)
of the Code.
(p)“Dividend Equivalent Right” means the right of a Participant, granted at the
discretion of the Committee or as otherwise provided by the Plan, to receive a
credit for the account of such Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an
Award held by such Participant.
(q)“Employee” means any person treated as an employee (including an Officer or a
Director who is also treated as an employee) in the records of a Participating
Company and, with respect to any Incentive Stock Option granted to such person,
who is an employee for purposes of Section 422 of the Code; provided, however,
that neither service as a Director nor payment of a Director’s fee shall be
sufficient to constitute employment for purposes of the Plan. The Company shall
determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as the case may be.
For purposes of an individual’s rights, if any, under the terms of the Plan as
of the time of the Company’s determination of whether or not the individual is
an Employee, all such determinations by the Company shall be final, binding and
conclusive as to such rights, if any, notwithstanding that the Company or any
court of law or governmental agency subsequently makes a contrary determination
as to such individual’s status as an Employee.
(r)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(s)“Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:
(i)Except as otherwise determined by the Committee, if, on such date, the Stock
is listed or quoted on a national or regional securities exchange or quotation
system, the Fair Market Value of a share of Stock shall be the closing price of
a share of Stock as quoted on the national or regional securities exchange or
quotation system constituting the primary market for the Stock, as reported in
The Wall Street Journal or such other source as the Company deems reliable. If
the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or quotation system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded or
quoted prior to the relevant date, or such other appropriate day as shall be
determined by the Committee, in its discretion.

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(ii)Notwithstanding the foregoing, the Committee may, in its discretion,
determine the Fair Market Value of a share of Stock on the basis of the opening,
closing, or average of the high and low sale prices of a share of Stock on such
date or the preceding trading day, the actual sale price of a share of Stock
received by a Participant, any other reasonable basis using actual transactions
in the Stock as reported on a national or regional securities exchange or
quotation system, or on any other basis consistent with the requirements of
Section 409A. The Committee may vary its method of determination of the Fair
Market Value as provided in this Section for different purposes under the Plan
to the extent consistent with the requirements of Section 409A.
(iii)If, on such date, the Stock is not listed or quoted on a national or
regional securities exchange or quotation system, the Fair Market Value of a
share of Stock shall be as determined by the Committee in good faith without
regard to any restriction other than a restriction which, by its terms, will
never lapse, and in a manner consistent with the requirements of Section 409A.
(t)“Full Value Award” means any Award settled in Stock, other than (i) an
Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase
Right or an Other Stock-Based Award under which the Company will receive
monetary consideration equal to the Fair Market Value (determined on the
effective date of grant) of the shares subject to such Award.
(u)“Incentive Stock Option” means an Option intended to be (as set forth in the
Award Agreement) and which qualifies as an incentive stock option within the
meaning of Section 422(b) of the Code.
(v)“Incumbent Director” means a director who either (i) is a member of the Board
as of the Effective Date or (ii) is elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but excluding a director
who was elected or nominated in connection with an actual or threatened proxy
contest relating to the election of directors of the Company).
(w)“Insider” means an Officer, a Director or other person whose transactions in
Stock are subject to Section 16 of the Exchange Act.
(x)“Net Exercise” means a Net Exercise as defined in Section 6.3(b)(iii).
(y)“Nonemployee Director” means a Director who is not an Employee.
(z)“Nonemployee Director Award” means any Award granted to a Nonemployee
Director.
(aa)“Nonstatutory Stock Option” means an Option not intended to be (as set forth
in the Award Agreement) or which does not qualify as an incentive stock option
within the meaning of Section 422(b) of the Code.
(bb)“Officer” means any person designated by the Board as an officer of the
Company.
(cc)“Option” means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(dd)“Other Stock-Based Award” means an Award denominated in shares of Stock and
granted pursuant to Section 11.
(ee)“Ownership Change Event” means the occurrence of any of the following with
respect to the Company: (i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of
securities of the Company representing more than fifty percent (50%) of the
total combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of Directors; (ii) a merger or
consolidation in which the Company is a party; or (iii) the sale, exchange, or
transfer of

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all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).
(ff)“Parent Corporation” means any present or future “parent corporation” of the
Company, as defined in Section 424(e) of the Code.
(gg)“Participant” means any eligible person who has been granted one or more
Awards.
(hh)“Participating Company” means the Company or any Parent Corporation,
Subsidiary Corporation or Affiliate.
(ii)“Participating Company Group” means, at any point in time, the Company and
all other entities collectively which are then Participating Companies.
(jj)“Performance Award” means an Award of Performance Shares or Performance
Units.
(kk)“Performance Award Formula” means, for any Performance Award, a formula or
table established by the Committee pursuant to Section 10.3 which provides the
basis for computing the value of a Performance Award at one or more levels of
attainment of the applicable Performance Goal(s) measured as of the end of the
applicable Performance Period.
(ll)“Performance-Based Compensation” means compensation under an Award that
satisfies the requirements of Section 162(m) for certain performance-based
compensation paid to Covered Employees.
(mm)“Performance Goal” means a performance goal established by the Committee
pursuant to Section 10.3.
(nn)“Performance Period” means a period established by the Committee pursuant to
Section 10.3 at the end of which one or more Performance Goals are to be
measured.
(oo)“Performance Share” means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based upon attainment of applicable Performance
Goal(s).
(pp)“Performance Unit” means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon attainment of applicable Performance
Goal(s).
(qq)“Predecessor Plan” means the Company’s 2005 Long-Term Incentive Plan.
(rr)“Restricted Stock Award” means an Award of a Restricted Stock Bonus or a
Restricted Stock Purchase Right.
(ss)“Restricted Stock Bonus” means Stock granted to a Participant pursuant to
Section 8.
(tt)“Restricted Stock Purchase Right” means a right to purchase Stock granted to
a Participant pursuant to Section 8.
(uu)“Restricted Stock Unit” means a right granted to a Participant pursuant to
Section 9 to receive on a future date or occurrence of a future event a share of
Stock or cash in lieu thereof, as determined by the Committee.
(vv)“Rule 16b‑3” means Rule 16b‑3 under the Exchange Act, as amended from time
to time, or any successor rule or regulation.

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(ww)“SAR” or “Stock Appreciation Right” means a right granted to a Participant
pursuant to Section 7 to receive payment, for each share of Stock subject to
such Award, of an amount equal to the excess, if any, of the Fair Market Value
of a share of Stock on the date of exercise of the Award over the exercise price
thereof.
(xx)“Section 162(m)” means Section 162(m) of the Code.
(yy)“Section 409A” means Section 409A of the Code.
(zz)“Section 409A Deferred Compensation” means compensation provided pursuant to
an Award that constitutes nonqualified deferred compensation within the meaning
of Section 409A.
(aaa)“Securities Act” means the Securities Act of 1933, as amended.
(bbb)“Service” means a Participant’s employment or service with the
Participating Company Group, whether as an Employee, a Director or a Consultant.
Unless otherwise provided by the Committee, a Participant’s Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders Service or a change in the Participating Company for
which the Participant renders Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service
shall not be deemed to have been interrupted or terminated if the Participant
takes any military leave, sick leave, or other bona fide leave of absence
approved by the Company. However, unless otherwise provided by the Committee, if
any such leave taken by a Participant exceeds ninety (90) days, then on the
ninety-first (91st) day following the commencement of such leave the
Participant’s Service shall be deemed to have terminated, unless the
Participant’s right to return to Service is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, an unpaid leave of absence shall not be treated as Service for
purposes of determining vesting under the Participant’s Award Agreement. A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the business entity for which the Participant
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Participant’s Service has terminated and the effective date of and reason for
such termination.
(ccc)“Stock” means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.4.
(ddd)“Stock Tender Exercise” means a Stock Tender Exercise as defined in
Section 6.3(b)(ii).
(eee)“Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.
(fff)

“Ten Percent Owner” means a Participant who, at the time an Option is granted to
the Participant, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of a Participating Company (other
than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(ggg)“Trading Compliance Policy” means the written policy of the Company
pertaining to the purchase, sale, transfer or other disposition of the Company’s
equity securities by Directors, Officers, Employees or other service providers
who may possess material, nonpublic information regarding the Company or its
securities.
(hhh)“Vesting Conditions” mean those conditions established in accordance with
the Plan prior to the satisfaction of which an Award or shares subject to an
Award remain subject to forfeiture or a repurchase option in favor of the
Company exercisable for the Participant’s monetary purchase price, if any, for
such shares upon the Participant’s termination of Service or failure of a
performance condition to be satisfied.

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2.2Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of the Plan.
Except when otherwise indicated by the context, the singular shall include the
plural and the plural shall include the singular. Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

3.Administration.

3.1Administration by the Committee. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan, of any Award Agreement
or of any other form of agreement or other document employed by the Company in
the administration of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final, binding and conclusive upon
all persons having an interest in the Plan or such Award, unless fraudulent or
made in bad faith. Any and all actions, decisions and determinations taken or
made by the Committee in the exercise of its discretion pursuant to the Plan or
Award Agreement or other agreement thereunder (other than determining questions
of interpretation pursuant to the preceding sentence) shall be final, binding
and conclusive upon all persons having an interest therein. All expenses
incurred in connection with the administration of the Plan shall be paid by the
Company.

3.2Authority of Officers. Any Officer shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, determination or
election that is the responsibility of or that is allocated to the Company
herein, provided that the Officer has apparent authority with respect to such
matter, right, obligation, determination or election. To the extent permitted by
applicable law, the Committee may, in its discretion, delegate to a committee
comprised of one or more Officers the authority to grant one or more Awards,
without further approval of the Committee, to any Employee, other than a person
who, at the time of such grant, is an Insider or a Covered Employee, and to
exercise such other powers under the Plan as the Committee may determine;
provided, however, that (a) such Officers may not grant Awards for more than
10,000 shares to any single Employee in any fiscal year of the Company, (b) each
such Award shall be subject to the terms and conditions of the appropriate
standard form of Award Agreement approved by the Board or the Committee and
shall conform to the provisions of the Plan, and (c) each such Award shall
conform to such other limits and guidelines as may be established from time to
time by the Committee.

3.3Administration with Respect to Insiders. With respect to participation by
Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b‑3.

3.4Committee Complying with Section 162(m). If the Company is a “publicly held
corporation” within the meaning of Section 162(m), the Board may establish a
Committee of “outside directors” within the meaning of Section 162(m) to approve
the grant of any Award intended to result in the payment of Performance-Based
Compensation.

3.5Powers of the Committee. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Committee shall have the
full and final power and authority, in its discretion:
(a)to determine the persons to whom, and the time or times at which, Awards
shall be granted and the number of shares of Stock, units or monetary value to
be subject to each Award;
(b)to determine the type of Award granted;
(c)to determine whether an Award granted to a Covered Employee shall be intended
to result in Performance-Based Compensation;
(d)to determine the Fair Market Value of shares of Stock or other property;
(e)to determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of shares
pursuant to any Award, (ii) the method of payment for shares purchased pursuant
to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with any Award, including by the withholding or
delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the Performance Measures, Performance Period, Performance Award Formula and
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of expiration of any Award,
(vii) the effect of any

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Participant’s termination of Service on any of the foregoing, and (viii) all
other terms, conditions and restrictions applicable to any Award or shares
acquired pursuant thereto not inconsistent with the terms of the Plan;
(f)to determine whether an Award will be settled in shares of Stock, cash, other
property or in any combination thereof;
(g)to approve one or more forms of Award Agreement;
(h)to amend, modify, extend, cancel or renew any Award or to waive any
restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
(i)to accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;
(j)to prescribe, amend or rescind rules, guidelines and policies relating to the
Plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy,
accounting principles or custom of, foreign jurisdictions whose residents may be
granted Awards; and
(k)to correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award Agreement and to make all other determinations and take
such other actions with respect to the Plan or any Award as the Committee may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.
3.6Option or SAR Repricing. Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
shareholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Committee
shall not approve a program providing for either (a) the cancellation of
outstanding Options or SARs having exercise prices per share greater than the
then Fair Market Value of a share of Stock (“Underwater Awards”) and the grant
in substitution therefore of new Options or SARs having a lower exercise price,
Full Value Awards or payments in cash, or (b) the amendment of outstanding
Underwater Awards to reduce the exercise price thereof. This Section shall not
be construed to apply to (i) “issuing or assuming a stock option in a
transaction to which Section 424(a) applies,” within the meaning of Section 424
of the Code, (ii) adjustments pursuant to the assumption of or substitution for
an Option or SAR in a manner that would comply with Section 409A, or (iii) an
adjustment pursuant to Section 4.4.

3.7Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or the Committee or as officers or employees of
the Participating Company Group, to the extent permitted by applicable law,
members of the Board or the Committee and any officers or employees of the
Participating Company Group to whom authority to act for the Board, the
Committee or the Company is delegated shall be indemnified by the Company
against all reasonable expenses, including attorneys’ fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

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4.Shares Subject to Plan.

4.1Maximum Number of Shares Issuable. Subject to adjustment as provided in
Sections 4.2, 4.3 and 4.4, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be equal to one million (1,000,000) shares
and shall consist of authorized but unissued or reacquired shares of Stock or
any combination thereof.

4.2Adjustment for Unissued or Forfeited Predecessor Plan Shares. The maximum
aggregate number of shares of Stock that may be issued under the Plan as set
forth in Section 4.1 shall be cumulatively increased from time to time by:
(a)the aggregate number of shares of Stock that remain available for the future
grant of awards under the Predecessor Plan immediately prior to its termination
as of the Effective Date;
(b)the number of shares of Stock subject to that portion of any option or other
award outstanding pursuant to the Predecessor Plan as of the Effective Date
which, on or after the Effective Date, expires or is terminated or canceled for
any reason without having been exercised or settled in full; and
(c)the number of shares of Stock acquired pursuant to the Predecessor Plan
subject to forfeiture or repurchase by the Company for an amount not greater
than the Participant’s purchase price which, on or after the Effective Date, is
so forfeited or repurchased;
provided, however, that the aggregate number of shares of Stock authorized for
issuance under the Predecessor Plan that may become authorized for issuance
under the Plan pursuant to this Section 4.2 shall not exceed two million three
hundred thousand (2,300,000) shares.
4.3Share Counting.
(a)Each share of Stock subject to an Award other than a Full Value Award shall
be counted against the limit set forth in Section 4.1 as one (1) share. Each one
(1) share of Stock subject to a Full Value Award granted pursuant to the Plan or
forfeited or repurchased pursuant to Section 4.3(b) shall be counted for
purposes of the limit set forth in Section 4.1 as 2.25 shares.
(b)If an outstanding Award for any reason expires or is terminated or canceled
without having been exercised or settled in full, or if shares of Stock acquired
pursuant to an Award subject to forfeiture or repurchase are forfeited or
repurchased by the Company for an amount not greater than the Participant’s
purchase price, the shares of Stock allocable to the terminated portion of such
Award or such forfeited or repurchased shares of Stock shall again be available
for issuance under the Plan. Shares of Stock shall not be deemed to have been
issued pursuant to the Plan with respect to any portion of an Award that is
settled in cash. Upon payment in shares of Stock pursuant to the exercise of an
SAR, the number of shares available for issuance under the Plan shall be reduced
by the gross number of shares for which the SAR is exercised. If the exercise
price of an Option is paid by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant, or by means of a
Net-Exercise, the number of shares available for issuance under the Plan shall
be reduced by the gross number of shares for which the Option is exercised.
Shares withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to the exercise or settlement of Options or SARs pursuant
to Section 16.2 shall not again be available for issuance under the Plan. Shares
withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to the vesting or settlement of Full Value Awards pursuant
to Section 16.2 shall again become available for issuance under the Plan.

4.4Adjustments for Changes in Capital Structure. Subject to any required action
by the shareholders of the Company and the requirements of Sections 409A and 424
of the Code to the extent applicable, in the event of any change in the Stock
effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the shareholders of the Company in a form other than
Stock (excepting regular, periodic cash dividends) that has a material effect on
the Fair Market Value of shares of Stock, appropriate and proportionate
adjustments shall be made in the number and kind of shares subject to the Plan
and to any outstanding Awards, the Award limits set forth in Section 5.3 and
Section 5.4, and in the exercise or purchase price per share under any
outstanding Award in order to prevent dilution

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or enlargement of Participants’ rights under the Plan. For purposes of the
foregoing, conversion of any convertible securities of the Company shall not be
treated as “effected without receipt of consideration by the Company.” If a
majority of the shares which are of the same class as the shares that are
subject to outstanding Awards are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of another
corporation (the “New Shares”), the Committee may unilaterally amend the
outstanding Awards to provide that such Awards are for New Shares. In the event
of any such amendment, the number of shares subject to, and the exercise or
purchase price per share of, the outstanding Awards shall be adjusted in a fair
and equitable manner as determined by the Committee, in its discretion. Any
fractional share resulting from an adjustment pursuant to this Section shall be
rounded down to the nearest whole number and the exercise or purchase price per
share shall be rounded up to the nearest whole cent. In no event may the
exercise or purchase price, if any, under any Award be decreased to an amount
less than the par value, if any, of the stock subject to such Award. The
Committee in its discretion, may also make such adjustments in the terms of any
Award to reflect, or related to, such changes in the capital structure of the
Company or distributions as it deems appropriate, including modification of
Performance Goals, Performance Award Formulas and Performance Periods. The
adjustments determined by the Committee pursuant to this Section shall be final,
binding and conclusive.

4.5Assumption or Substitution of Awards. The Committee may, without affecting
the number of shares of Stock reserved or available hereunder, authorize the
issuance or assumption of benefits under this Plan in connection with any
merger, consolidation, acquisition of property or stock, or reorganization upon
such terms and conditions as it may deem appropriate, subject to compliance with
Section 409A and any other applicable provisions of the Code.

5.Eligibility, Participation and Award Limitations.

5.1Persons Eligible for Awards. Awards may be granted only to Employees,
Consultants and Directors.

5.2     Participation in the Plan. Awards are granted solely at the discretion
of the Committee. Eligible persons may be granted more than one Award. However,
eligibility in accordance with this Section shall not entitle any person to be
granted an Award, or, having been granted an Award, to be granted an additional
Award.

5.3    Incentive Stock Option Limitations.
(a)Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.
Subject to adjustment as provided in Section 4.4, the maximum aggregate number
of shares of Stock that may be issued under the Plan pursuant to the exercise of
Incentive Stock Options shall not exceed four million (4,000,000) shares. The
maximum aggregate number of shares of Stock that may be issued under the Plan
pursuant to all Awards other than Incentive Stock Options shall be the number of
shares determined in accordance with Section 4.1, subject to adjustment as
provided in Sections 4.2, 4.3, and 4.4.
(b)Persons Eligible. An Incentive Stock Option may be granted only to a person
who, on the effective date of grant, is an Employee of the Company, a Parent
Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”). Any person who is not an Employee of an ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option.
(c)Fair Market Value Limitation. To the extent that options designated as
Incentive Stock Options (granted under all stock plans of the Participating
Company Group, including the Plan) become exercisable by a Participant for the
first time during any calendar year for stock having a Fair Market Value greater
than One Hundred Thousand Dollars ($100,000), the portion of such options which
exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes
of this Section, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of stock shall be determined as of the time the option with respect to such
stock is granted. If the Code is amended to provide for a limitation different
from that set forth in this Section, such different limitation shall be deemed
incorporated herein effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code. If

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an Option is treated as an Incentive Stock Option in part and as a Nonstatutory
Stock Option in part by reason of the limitation set forth in this Section, the
Participant may designate which portion of such Option the Participant is
exercising. In the absence of such designation, the Participant shall be deemed
to have exercised the Incentive Stock Option portion of the Option first. Upon
exercise of the Option, shares issued pursuant to each such portion shall be
separately identified.
5.4    Section 162(m) Award Limits. Subject to adjustment as provided in
Section 4.4, no Covered Employee shall be granted within any fiscal year of the
Company one or more Awards intended to qualify for treatment as
Performance-Based Compensation which in the aggregate are for more than
1,000,000 shares or, if applicable, which could result in such Covered Employee
receiving more than $15,000,000 for each full fiscal year of the Company
contained in the Performance Period for such Award.

5.5    Nonemployee Director Award Limit. No Nonemployee Director shall be
granted within any fiscal year of the Company one or more Nonemployee Director
Awards pursuant to the Plan which in the aggregate are for more than a number of
shares of Stock determined by dividing $250,000 by the Fair Market Value of a
share of Stock determined on the last trading day immediately preceding the date
on which the applicable Nonemployee Director Award is granted.

6.Stock Options.
Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Committee shall establish. Such
Award Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1Exercise Price. The exercise price for each Option shall be established in
the discretion of the Committee; provided, however, that (a) the exercise price
per share shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the Option and (b) no Incentive Stock Option
granted to a Ten Percent Owner shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price less than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner that would qualify under the provisions of Section
409A or Section 424(a) of the Code.

6.2Exercisability and Term of Options. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner shall be exercisable after the expiration of five
(5) years after the effective date of grant of such Option and (c) no Option
granted to an Employee who is a non-exempt employee for purposes of the Fair
Labor Standards Act of 1938, as amended, shall be first exercisable until at
least six (6) months following the date of grant of such Option (except in the
event of such Employee’s death, disability or retirement, upon a Change in
Control, or as otherwise permitted by the Worker Economic Opportunity Act).
Subject to the foregoing, unless otherwise specified by the Committee in the
grant of an Option, each Option shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.

6.3Payment of Exercise Price.
(a)Forms of Consideration Authorized. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or in cash
equivalent; (ii) if permitted by the Committee and subject to the limitations
contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock
Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may
be approved by the Committee from time to time to the extent permitted by
applicable law, or (iv) by any combination thereof. The Committee may at any
time or from time to time grant

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Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.
(b)Limitations on Forms of Consideration.
(i)Cashless Exercise. A “Cashless Exercise” means the delivery of a properly
executed notice of exercise together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares being acquired upon the exercise of
the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company’s sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.
(ii)Stock Tender Exercise. A “Stock Tender Exercise” means the delivery of a
properly executed exercise notice accompanied by a Participant’s tender to the
Company, or attestation to the ownership, in a form acceptable to the Company of
whole shares of Stock owned by the Participant having a Fair Market Value that
does not exceed the aggregate exercise price for the shares with respect to
which the Option is exercised. A Stock Tender Exercise shall not be permitted if
it would constitute a violation of the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock. If required by the
Company, an Option may not be exercised by tender to the Company, or attestation
to the ownership, of shares of Stock unless such shares either have been owned
by the Participant for a period of time required by the Company (and not used
for another option exercise by attestation during such period) or were not
acquired, directly or indirectly, from the Company.
(iii)Net Exercise. A “Net Exercise” means the delivery of a properly executed
exercise notice followed by a procedure pursuant to which (1) the Company will
reduce the number of shares otherwise issuable to a Participant upon the
exercise of an Option by the largest whole number of shares having a Fair Market
Value that does not exceed the aggregate exercise price for the shares with
respect to which the Option is exercised, and (2) the Participant shall pay to
the Company in cash the remaining balance of such aggregate exercise price not
satisfied by such reduction in the number of whole shares to be issued.
6.4Effect of Termination of Service.
(a)Option Exercisability. Subject to earlier termination of the Option as
otherwise provided by this Plan and unless otherwise provided by the Committee,
an Option shall terminate immediately upon the Participant’s termination of
Service to the extent that it is then unvested and shall be exercisable after
the Participant’s termination of Service to the extent it is then vested only
during the applicable time period determined in accordance with this Section and
thereafter shall terminate.
(i)Disability. If the Participant’s Service terminates because of the Disability
of the Participant, the Option, to the extent unexercised and exercisable for
vested shares on the date on which the Participant’s Service terminated, may be
exercised by the Participant (or the Participant’s guardian or legal
representative) at any time prior to the expiration of twelve (12) months (or
such longer or shorter period provided by the Award Agreement) after the date on
which the Participant’s Service terminated, but in any event no later than the
date of expiration of the Option’s term as set forth in the Award Agreement
evidencing such Option (the “Option Expiration Date”).
(ii)Death. If the Participant’s Service terminates because of the death of the
Participant, the Option, to the extent unexercised and exercisable for vested
shares on the date on which the Participant’s Service terminated, may be
exercised by the Participant’s legal representative or other person who acquired
the right to exercise the Option by reason of the Participant’s death at any
time prior to the expiration of twelve (12) months (or such longer or shorter
period provided by the Award Agreement) after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date. The Participant’s Service shall be deemed to have terminated on
account of death if the Participant dies within three (3) months (or such longer
or shorter period provided by the Award Agreement) after the Participant’s
termination of Service.

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(iii)Termination for Cause. Notwithstanding any other provision of the Plan to
the contrary, if the Participant’s Service is terminated for Cause or if,
following the Participant’s termination of Service and during any period in
which the Option otherwise would remain exercisable, the Participant engages in
any act that would constitute Cause, the Option shall terminate in its entirety
and cease to be exercisable immediately upon such termination of Service or act.
(iv)Other Termination of Service. If the Participant’s Service terminates for
any reason, except Disability, death or Cause, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of three (3) months (or such longer or shorter
period provided by the Award Agreement) after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date.
(b)Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other
than termination of Service for Cause, if the exercise of an Option within the
applicable time periods set forth in Section 6.4(a) is prevented by the
provisions of Section 14 below, the Option shall remain exercisable until the
later of (i) thirty (30) days after the date such exercise first would no longer
be prevented by such provisions or (ii) the end of the applicable time period
under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5Transferability of Options. During the lifetime of the Participant, an Option
shall be exercisable only by the Participant or the Participant’s guardian or
legal representative. An Option shall not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Option, an
Option shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S‑8 under the
Securities Act or, in the case of an Incentive Stock Option, only as permitted
by applicable regulations under Section 421 of the Code in a manner that does
not disqualify such Option as an Incentive Stock Option.

7.Stock Appreciation Rights.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the
number of shares of Stock subject to the Award, in such form as the Committee
shall establish. Such Award Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
7.1Types of SARs Authorized. SARs may be granted in tandem with all or any
portion of a related Option (a “Tandem SAR”) or may be granted independently of
any Option (a “Freestanding SAR”). A Tandem SAR may only be granted concurrently
with the grant of the related Option.

7.2Exercise Price. The exercise price for each SAR shall be established in the
discretion of the Committee; provided, however, that (a) the exercise price per
share subject to a Tandem SAR shall be the exercise price per share under the
related Option and (b) the exercise price per share subject to a Freestanding
SAR shall be not less than the Fair Market Value of a share of Stock on the
effective date of grant of the SAR. Notwithstanding the foregoing, an SAR may be
granted with an exercise price lower than the minimum exercise price set forth
above if such SAR is granted pursuant to an assumption or substitution for
another stock appreciation right in a manner that would qualify under the
provisions of Section 409A of the Code.

7.3Exercisability and Term of SARs.
(a)Tandem SARs. Tandem SARs shall be exercisable only at the time and to the
extent, and only to the extent, that the related Option is exercisable, subject
to such provisions as the Committee may specify where the Tandem SAR is granted
with respect to less than the full number of shares of Stock subject to the
related Option. The Committee may, in its discretion, provide in any Award
Agreement evidencing a Tandem SAR that such SAR may not be exercised without the
advance approval of the Company and, if such approval is not given, then the
Option shall nevertheless remain exercisable in accordance with its terms. A
Tandem SAR shall terminate and cease to be exercisable no later than the date on
which the related Option expires or is terminated or canceled. Upon the exercise
of a Tandem SAR with respect to some or all of the shares subject to such SAR,
the

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related Option shall be canceled automatically as to the number of shares with
respect to which the Tandem SAR was exercised. Upon the exercise of an Option
related to a Tandem SAR as to some or all of the shares subject to such Option,
the related Tandem SAR shall be canceled automatically as to the number of
shares with respect to which the related Option was exercised.
(b)Freestanding SARs. Freestanding SARs shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such SAR; provided, however,
that (i) no Freestanding SAR shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such SAR and (ii) no
Freestanding SAR granted to an Employee who is a non-exempt employee for
purposes of the Fair Labor Standards Act of 1938, as amended, shall be first
exercisable until at least six (6) months following the date of grant of such
SAR (except in the event of such Employee’s death, disability or retirement,
upon a Change in Control, or as otherwise permitted by the Worker Economic
Opportunity Act). Subject to the foregoing, unless otherwise specified by the
Committee in the grant of a Freestanding SAR, each Freestanding SAR shall
terminate ten (10) years after the effective date of grant of the SAR, unless
earlier terminated in accordance with its provisions.
7.4Exercise of SARs. Upon the exercise (or deemed exercise pursuant to
Section 7.5) of an SAR, the Participant (or the Participant’s legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant’s death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum
upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR,
in cash, shares of Stock, or any combination thereof as determined by the
Committee, in a lump sum upon the date of exercise of the SAR. When payment is
to be made in shares of Stock, the number of shares to be issued shall be
determined on the basis of the Fair Market Value of a share of Stock on the date
of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed
exercised on the date on which the Company receives notice of exercise from the
Participant or as otherwise provided in Section 7.5.

7.5Deemed Exercise of SARs. If, on the date on which an SAR would otherwise
terminate or expire, the SAR by its terms remains exercisable immediately prior
to such termination or expiration and, if so exercised, would result in a
payment to the holder of such SAR, then any portion of such SAR which has not
previously been exercised shall automatically be deemed to be exercised as of
such date with respect to such portion.

7.6Effect of Termination of Service. Subject to earlier termination of the SAR
as otherwise provided herein and unless otherwise provided by the Committee, an
SAR shall be exercisable after a Participant’s termination of Service only to
the extent and during the applicable time period determined in accordance with
Section 6.4 (treating the SAR as if it were an Option) and thereafter shall
terminate.

7.7Transferability of SARs. During the lifetime of the Participant, an SAR shall
be exercisable only by the Participant or the Participant’s guardian or legal
representative. An SAR shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Award, a Tandem
SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S‑8 under the Securities Act.

8.Restricted Stock Awards.
Restricted Stock Awards shall be evidenced by Award Agreements specifying
whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase
Right and the number of shares of Stock subject to the Award, in such form as
the Committee shall establish. Such Award Agreements may incorporate all or any
of the terms of the Plan by reference and shall comply with and be subject to
the following terms and conditions:

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8.1Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be
granted in the form of either a Restricted Stock Bonus or a Restricted Stock
Purchase Right. Restricted Stock Awards may be granted upon such conditions as
the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 10.4. If either
the grant of or satisfaction of Vesting Conditions applicable to a Restricted
Stock Award is to be contingent upon the attainment of one or more Performance
Goals, the Committee shall follow procedures substantially equivalent to those
set forth in Sections 10.3 through 10.5(a).

8.2Purchase Price. The purchase price for shares of Stock issuable under each
Restricted Stock Purchase Right shall be established by the Committee in its
discretion. No monetary payment (other than applicable tax withholding) shall be
required as a condition of receiving shares of Stock pursuant to a Restricted
Stock Bonus, the consideration for which shall be services actually rendered to
a Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
shares of Stock subject to a Restricted Stock Award.

8.3Purchase Period. A Restricted Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Restricted Stock
Purchase Right.

8.4Payment of Purchase Price. Except as otherwise provided below, payment of the
purchase price for the number of shares of Stock being purchased pursuant to any
Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash
equivalent, (b) by such other consideration as may be approved by the Committee
from time to time to the extent permitted by applicable law, or (c) by any
combination thereof.

8.5Vesting and Restrictions on Transfer. Shares issued pursuant to any
Restricted Stock Award may (but need not) be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award. During any period in
which shares acquired pursuant to a Restricted Stock Award remain subject to
Vesting Conditions, such shares may not be sold, exchanged, transferred,
pledged, assigned or otherwise disposed of other than pursuant to an Ownership
Change Event or as provided in Section 8.8. The Committee, in its discretion,
may provide in any Award Agreement evidencing a Restricted Stock Award that, if
the satisfaction of Vesting Conditions with respect to any shares subject to
such Restricted Stock Award would otherwise occur on a day on which the sale of
such shares would violate the provisions of the Trading Compliance Policy, then
satisfaction of the Vesting Conditions automatically shall be determined on the
next trading day on which the sale of such shares would not violate the Trading
Compliance Policy. Upon request by the Company, each Participant shall execute
any agreement evidencing such transfer restrictions prior to the receipt of
shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement
on such certificates of appropriate legends evidencing any such transfer
restrictions.

8.6Voting Rights; Dividends and Distributions. Except as provided in this
Section, Section 8.5 and any Award Agreement, during any period in which shares
acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, the Participant shall have all of the rights of a shareholder of the
Company holding shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to such shares;
provided, however, that if so determined by the Committee and provided by the
Award Agreement, such dividends and distributions shall be subject to the same
Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid, and otherwise shall
be paid no later than the end of the calendar year in which such dividends or
distributions are paid to shareholders (or, if later, the 15th day of the third
month following the date such dividends or distributions are paid to
shareholders). In the event of a dividend or distribution paid in shares of
Stock or other property or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.4, any and all new,
substituted or additional securities or other property (other than regular,
periodic cash dividends) to which the Participant is entitled by reason of the
Participant’s Restricted Stock Award shall be immediately subject to the

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same Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments were
made.

8.7Effect of Termination of Service. Unless otherwise provided by the Committee
in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s
Service terminates for any reason, whether voluntary or involuntary (including
the Participant’s death or disability), then (a) the Company shall have the
option to repurchase for the purchase price paid by the Participant any shares
acquired by the Participant pursuant to a Restricted Stock Purchase Right which
remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service and (b) the Participant shall forfeit to the Company any
shares acquired by the Participant pursuant to a Restricted Stock Bonus which
remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company.

8.8Nontransferability of Restricted Stock Award Rights. Rights to acquire shares
of Stock pursuant to a Restricted Stock Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or the laws of descent and distribution.
All rights with respect to a Restricted Stock Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participant’s guardian or legal representative.

9.Restricted Stock Units.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying
the number of Restricted Stock Units subject to the Award, in such form as the
Committee shall establish. Such Award Agreements may incorporate all or any of
the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
9.1Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be
granted upon such conditions as the Committee shall determine, including,
without limitation, upon the attainment of one or more Performance Goals
described in Section 10.4. If either the grant of a Restricted Stock Unit Award
or the Vesting Conditions with respect to such Award is to be contingent upon
the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).
9.2Purchase Price. No monetary payment (other than applicable tax withholding,
if any) shall be required as a condition of receiving a Restricted Stock Unit
Award, the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
shares of Stock issued upon settlement of the Restricted Stock Unit Award.
9.3Vesting. Restricted Stock Unit Awards may (but need not) be made subject to
Vesting Conditions based upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be established by the
Committee and set forth in the Award Agreement evidencing such Award. The
Committee, in its discretion, may provide in any Award Agreement evidencing a
Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with
respect to any shares subject to the Award would otherwise occur on a day on
which the sale of such shares would violate the provisions of the Trading
Compliance Policy, then the satisfaction of the Vesting Conditions automatically
shall be determined on the first to occur of (a) the next trading day on which
the sale of such shares would not violate the Trading Compliance Policy or
(b) the last day of the calendar year in which the original vesting date
occurred.
9.4Voting Rights, Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Restricted Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing

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any Restricted Stock Unit Award that the Participant shall be entitled to
Dividend Equivalent Rights with respect to the payment of cash dividends on
Stock during the period beginning on the date such Award is granted and ending,
with respect to each share subject to the Award, on the earlier of the date the
Award is settled or the date on which it is terminated. Dividend Equivalent
Rights, if any, shall be paid by crediting the Participant with a cash amount or
with additional whole Restricted Stock Units as of the date of payment of such
cash dividends on Stock, as determined by the Committee. The number of
additional Restricted Stock Units (rounded to the nearest whole number), if any,
to be credited shall be determined by dividing (a) the amount of cash dividends
paid on the dividend payment date with respect to the number of shares of Stock
represented by the Restricted Stock Units previously credited to the Participant
by (b) the Fair Market Value per share of Stock on such date. If so determined
by the Committee and provided by the Award Agreement, such cash amount or
additional Restricted Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time as the
Restricted Stock Units originally subject to the Restricted Stock Unit Award. In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.4, appropriate adjustments shall be made
in the Participant’s Restricted Stock Unit Award so that it represents the right
to receive upon settlement any and all new, substituted or additional securities
or other property (other than regular, periodic cash dividends) to which the
Participant would be entitled by reason of the shares of Stock issuable upon
settlement of the Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Vesting Conditions as
are applicable to the Award
9.5Effect of Termination of Service. Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Restricted Stock Unit Award,
if a Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then the
Participant shall forfeit to the Company any Restricted Stock Units pursuant to
the Award which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.
9.6Settlement of Restricted Stock Unit Awards. The Company shall issue to a
Participant on the date on which Restricted Stock Units subject to the
Participant’s Restricted Stock Unit Award vest or on such other date determined
by the Committee in compliance with Section 409A, if applicable, and set forth
in the Award Agreement one (1) share of Stock (and/or any other new, substituted
or additional securities or other property pursuant to an adjustment described
in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise
to be settled on such date, subject to the withholding of applicable taxes, if
any. If permitted by the Committee, the Participant may elect, consistent with
the requirements of Section 409A, to defer receipt of all or any portion of the
shares of Stock or other property otherwise issuable to the Participant pursuant
to this Section, and such deferred issuance date(s) and amount(s) elected by the
Participant shall be set forth in the Award Agreement. Notwithstanding the
foregoing, the Committee, in its discretion, may provide for settlement of any
Restricted Stock Unit Award by payment to the Participant in cash of an amount
equal to the Fair Market Value on the payment date of the shares of Stock or
other property otherwise issuable to the Participant pursuant to this Section.
9.7Nontransferability of Restricted Stock Unit Awards. The right to receive
shares pursuant to a Restricted Stock Unit Award shall not be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit Award granted
to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.
10.Performance Awards.
Performance Awards shall be evidenced by Award Agreements in such form as the
Committee shall establish. Such Award Agreements may incorporate all or any of
the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
10.1Types of Performance Awards Authorized. Performance Awards may be granted in
the form of either Performance Shares or Performance Units. Each Award Agreement
evidencing a Performance Award shall specify the number of Performance Shares or
Performance Units subject thereto, the Performance Award Formula, the
Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.

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10.2Initial Value of Performance Shares and Performance Units. Unless otherwise
provided by the Committee in granting a Performance Award, each Performance
Share shall have an initial monetary value equal to the Fair Market Value of one
(1) share of Stock, subject to adjustment as provided in Section 4.4, on the
effective date of grant of the Performance Share, and each Performance Unit
shall have an initial monetary value established by the Committee at the time of
grant. The final value payable to the Participant in settlement of a Performance
Award determined on the basis of the applicable Performance Award Formula will
depend on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.

10.3Establishment of Performance Period, Performance Goals and Performance Award
Formula. In granting each Performance Award, the Committee shall establish in
writing the applicable Performance Period, Performance Award Formula and one or
more Performance Goals which, when measured at the end of the Performance
Period, shall determine on the basis of the Performance Award Formula the final
value of the Performance Award to be paid to the Participant. Unless otherwise
permitted in compliance with the requirements under Section 162(m) with respect
to each Performance Award intended to result in the payment of Performance-Based
Compensation, the Committee shall establish the Performance Goal(s) and
Performance Award Formula applicable to each Performance Award no later than the
earlier of (a) the date ninety (90) days after the commencement of the
applicable Performance Period or (b) the date on which 25% of the Performance
Period has elapsed, and, in any event, at a time when the outcome of the
Performance Goals remains substantially uncertain. Once established, the
Performance Goals and Performance Award Formula applicable to a Performance
Award intended to result in the payment of Performance-Based Compensation to a
Covered Employee shall not be changed during the Performance Period. The Company
shall notify each Participant granted a Performance Award of the terms of such
Award, including the Performance Period, Performance Goal(s) and Performance
Award Formula.

10.4Measurement of Performance Goals. Performance Goals shall be established by
the Committee on the basis of targets to be attained (“Performance Targets”)
with respect to one or more measures of business or financial performance (each,
a “Performance Measure”), subject to the following:
(a)Performance Measures. Performance Measures shall be calculated in accordance
with the Company’s financial statements, or, if such measures are not reported
in the Company’s financial statements, they shall be calculated in accordance
with generally accepted accounting principles, a method used generally in the
Company’s industry, or in accordance with a methodology established by the
Committee prior to the grant of the Performance Award. As specified by the
Committee, Performance Measures may be calculated with respect to the Company
and each Subsidiary Corporation consolidated therewith for financial reporting
purposes, one or more Subsidiary Corporations or such division or other business
unit of any of them selected by the Committee. Unless otherwise determined by
the Committee prior to the grant of the Performance Award, the Performance
Measures applicable to the Performance Award shall be calculated prior to the
accrual of expense for any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) on the Performance Measures
of any change in accounting standards or any extraordinary, unusual or
nonrecurring item, as determined by the Committee, occurring after the
establishment of the Performance Goals applicable to the Performance Award. Each
such adjustment, if any, shall be made solely for the purpose of providing a
consistent basis from period to period for the calculation of Performance
Measures in order to prevent the dilution or enlargement of the Participant’s
rights with respect to a Performance Award. Performance Measures may be based
upon one or more of the following, as determined by the Committee:
(i)revenue;
(ii)sales;
(iii)expenses;
(iv)operating income;
(v)gross margin;
(vi)operating margin;

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(vii)earnings before any one or more of: stock-based compensation expense,
interest, taxes, depreciation and amortization;
(viii)pre-tax profit;
(ix)net operating income;
(x)net income;
(xi)economic value added;
(xii)free cash flow;
(xiii)operating cash flow;
(xiv)balance of cash, cash equivalents and marketable securities;
(xv)stock price;
(xvi)earnings per share;
(xvii)return on shareholder equity;
(xviii)return on capital;
(xix)return on assets;
(xx)return on investment;
(xxi)total shareholder return;
(xxii)employee satisfaction;
(xxiii)employee retention;
(xxiv)market share;
(xxv)customer satisfaction;
(xxvi)product development;
(xxvii)research and development expenses;
(xxviii)completion of an identified special project; and
(xxix)completion of a joint venture or other corporate transaction.
(b)Performance Targets. Performance Targets may include a minimum, maximum,
target level and intermediate levels of performance, with the final value of a
Performance Award determined under the applicable Performance Award Formula by
the Performance Target level attained during the applicable Performance Period.
A Performance Target may be stated as an absolute value, an increase or decrease
in a value, or as a value determined relative to an index, budget or other
standard selected by the Committee.
10.5Settlement of Performance Awards.
(a)Determination of Final Value. As soon as practicable following the completion
of the Performance Period applicable to a Performance Award, the Committee shall
certify in writing the extent to which the applicable Performance Goals have
been attained and the resulting final value of the Award earned by the
Participant and to be paid upon its settlement in accordance with the applicable
Performance Award Formula.
(b)Discretionary Adjustment of Award Formula. In its discretion, the Committee
may, either at the time it grants a Performance Award or at any time thereafter,
provide for the positive or negative adjustment of the Performance Award Formula
applicable to a Performance Award granted to any Participant who is not a
Covered Employee to reflect such Participant’s individual performance in his or
her position with the Company or such other factors as the Committee may
determine. If permitted under a Covered Employee’s Award Agreement, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the

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Covered Employee upon its settlement notwithstanding the attainment of any
Performance Goal and the resulting value of the Performance Award determined in
accordance with the Performance Award Formula. No such reduction may result in
an increase in the amount payable upon settlement of another Participant’s
Performance Award that is intended to result in Performance-Based Compensation.
(c)Effect of Leaves of Absence. Unless otherwise required by law or a
Participant’s Award Agreement, payment of the final value, if any, of a
Performance Award held by a Participant who has taken in excess of thirty (30)
days in unpaid leaves of absence during a Performance Period shall be prorated
on the basis of the number of days of the Participant’s Service during the
Performance Period during which the Participant was not on an unpaid leave of
absence.
(d)Notice to Participants. As soon as practicable following the Committee’s
determination and certification in accordance with Sections 10.5(a) and (b), the
Company shall notify each Participant of the determination of the Committee.
(e)Payment in Settlement of Performance Awards. As soon as practicable following
the Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period
described in Section 15.1 (except as otherwise provided below or consistent with
the requirements of Section 409A), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s death)
of the final value of the Participant’s Performance Award. Payment of such
amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If
permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the
payment to be made to the Participant pursuant to this Section, and such
deferred payment date(s) elected by the Participant shall be set forth in the
Award Agreement. If any payment is to be made on a deferred basis, the Committee
may, but shall not be obligated to, provide for the payment during the deferral
period of Dividend Equivalent Rights or interest.
(f)Provisions Applicable to Payment in Shares. If payment is to be made in
shares of Stock, the number of such shares shall be determined by dividing the
final value of the Performance Award by the Fair Market Value of a share of
Stock determined by the method specified in the Award Agreement. Shares of Stock
issued in payment of any Performance Award may be fully vested and freely
transferable shares or may be shares of Stock subject to Vesting Conditions as
provided in Section 8.5. Any shares subject to Vesting Conditions shall be
evidenced by an appropriate Award Agreement and shall be subject to the
provisions of Sections 8.5 through 8.8 above.
10.6Voting Rights; Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Performance Share Awards until the date of the issuance of such shares, if any
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share
Award that the Participant shall be entitled to Dividend Equivalent Rights with
respect to the payment of cash dividends on Stock during the period beginning on
the date the Award is granted and ending, with respect to each share subject to
the Award, on the earlier of the date on which the Performance Shares are
settled or the date on which they are forfeited. Such Dividend Equivalent
Rights, if any, shall be credited to the Participant either in cash or in the
form of additional whole Performance Shares as of the date of payment of such
cash dividends on Stock, as determined by the Committee. The number of
additional Performance Shares (rounded to the nearest whole number), if any, to
be so credited shall be determined by dividing (a) the amount of cash dividends
paid on the dividend payment date with respect to the number of shares of Stock
represented by the Performance Shares previously credited to the Participant by
(b) the Fair Market Value per share of Stock on such date. Dividend Equivalent
Rights, if any, shall be accumulated and paid to the extent that the related
Performance Shares become nonforfeitable. Settlement of Dividend Equivalent
Rights may be made in cash, shares of Stock, or a combination thereof as
determined by the Committee, and may be paid on the same basis as settlement of
the related Performance Share as provided in Section 10.5. Dividend Equivalent
Rights shall not be paid with respect to Performance Units. In the event of a
dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in

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Section 4.4, appropriate adjustments shall be made in the Participant’s
Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other
property (other than regular, periodic cash dividends) to which the Participant
would be entitled by reason of the shares of Stock issuable upon settlement of
the Performance Share Award, and all such new, substituted or additional
securities or other property shall be immediately subject to the same
Performance Goals as are applicable to the Award.

10.7Effect of Termination of Service. Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Performance Award, the effect
of a Participant’s termination of Service on the Performance Award shall be as
follows:
(a)Death or Disability. If the Participant’s Service terminates because of the
death or Disability of the Participant before the completion of the Performance
Period applicable to the Performance Award, the final value of the Participant’s
Performance Award shall be determined by the extent to which the applicable
Performance Goals have been attained with respect to the entire Performance
Period and shall be prorated based on the number of months of the Participant’s
Service during the Performance Period. Payment shall be made following the end
of the Performance Period in any manner permitted by Section 10.5.
(b)Other Termination of Service. If the Participant’s Service terminates for any
reason except death or Disability before the completion of the Performance
Period applicable to the Performance Award, such Award shall be forfeited in its
entirety; provided, however, that in the event of an involuntary termination of
the Participant’s Service, the Committee, in its discretion, may waive the
automatic forfeiture of all or any portion of any such Award and determine the
final value of the Performance Award in the manner provided by Section 10.7(a).
Payment of any amount pursuant to this Section shall be made following the end
of the Performance Period in any manner permitted by Section 10.5.
10.8Nontransferability of Performance Awards. Prior to settlement in accordance
with the provisions of the Plan, no Performance Award shall be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Performance Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.
11.Cash-Based Awards and Other Stock-Based Awards.
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award
Agreements in such form as the Committee shall establish. Such Award Agreements
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
11.1Grant of Cash-Based Awards. Subject to the provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts and upon such terms and conditions, including the
achievement of performance criteria, as the Committee may determine.

11.2Grant of Other Stock-Based Awards. The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted securities,
stock-equivalent units, stock appreciation units, securities or debentures
convertible into common stock or other forms determined by the Committee) in
such amounts and subject to such terms and conditions as the Committee shall
determine. Other Stock-Based Awards may be made available as a form of payment
in the settlement of other Awards or as payment in lieu of compensation to which
a Participant is otherwise entitled. Other Stock-Based Awards may involve the
transfer of actual shares of Stock to Participants, or payment in cash or
otherwise of amounts based on the value of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.

11.3Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award
shall specify a monetary payment amount or payment range as determined by the
Committee. Each Other Stock-Based Award shall be expressed in terms of shares of
Stock or units based on such shares of Stock, as determined by the Committee.
The Committee may require the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be

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established by the Committee and set forth in the Award Agreement evidencing
such Award. If the Committee exercises its discretion to establish performance
criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that
will be paid to the Participant will depend on the extent to which the
performance criteria are met. The establishment of performance criteria with
respect to the grant or vesting of any Cash-Based Award or Other Stock-Based
Award intended to result in Performance-Based Compensation shall follow
procedures substantially equivalent to those applicable to Performance Awards
set forth in Section 10.

11.4Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards.
Payment or settlement, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in
cash, shares of Stock or other securities or any combination thereof as the
Committee determines. The determination and certification of the final value
with respect to any Cash-Based Award or Other Stock-Based Award intended to
result in Performance-Based Compensation shall comply with the requirements
applicable to Performance Awards set forth in Section 10. To the extent
applicable, payment or settlement with respect to each Cash-Based Award and
Other Stock-Based Award shall be made in compliance with the requirements of
Section 409A.

11.5Voting Rights; Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by Other
Stock-Based Awards until the date of the issuance of such shares of Stock (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), if any, in settlement of such Award.
However, the Committee, in its discretion, may provide in the Award Agreement
evidencing any Other Stock-Based Award that the Participant shall be entitled to
Dividend Equivalent Rights with respect to the payment of cash dividends on
Stock during the period beginning on the date such Award is granted and ending,
with respect to each share subject to the Award, on the earlier of the date the
Award is settled or the date on which it is terminated. Such Dividend Equivalent
Rights, if any, shall be paid in accordance with the provisions set forth in
Section 9.4. Dividend Equivalent Rights shall not be granted with respect to
Cash-Based Awards. In the event of a dividend or distribution paid in shares of
Stock or other property or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.4, appropriate
adjustments shall be made in the Participant’s Other Stock-Based Award so that
it represents the right to receive upon settlement any and all new, substituted
or additional securities or other property (other than regular, periodic cash
dividends) to which the Participant would be entitled by reason of the shares of
Stock issuable upon settlement of such Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same
Vesting Conditions and performance criteria, if any, as are applicable to the
Award.

11.6Effect of Termination of Service. Each Award Agreement evidencing a
Cash-Based Award or Other Stock-Based Award shall set forth the extent to which
the Participant shall have the right to retain such Award following termination
of the Participant’s Service. Such provisions shall be determined in the
discretion of the Committee, need not be uniform among all Cash-Based Awards or
Other Stock-Based Awards, and may reflect distinctions based on the reasons for
termination, subject to the requirements of Section 409A, if applicable.

11.7Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior
to the payment or settlement of a Cash-Based Award or Other Stock-Based Award,
the Award shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. The Committee may impose such
additional restrictions on any shares of Stock issued in settlement of
Cash-Based Awards and Other Stock-Based Awards as it may deem advisable,
including, without limitation, minimum holding period requirements, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such shares of Stock are then listed and/or
traded, or under any state securities laws or foreign law applicable to such
shares of Stock.

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12.Standard Forms of Award Agreement.

12.1Award Agreements. Each Award shall comply with and be subject to the terms
and conditions set forth in the appropriate form of Award Agreement approved by
the Committee and as amended from time to time. No Award or purported Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement, which execution may be evidenced by electronic
means.

12.2Authority to Vary Terms. The Committee shall have the authority from time to
time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the Plan.

13.Change in Control.

13.1Effect of Change in Control on Awards. Subject to the requirements and
limitations of Section 409A, if applicable, the Committee may provide for any
one or more of the following:
(a)Accelerated Vesting. In its discretion, the Committee may provide in the
grant of any Award or at any other time may take such action as it deems
appropriate to provide for acceleration of the exercisability, vesting and/or
settlement in connection with a Change in Control of each or any outstanding
Award or portion thereof and shares acquired pursuant thereto upon such
conditions, including termination of the Participant’s Service prior to, upon,
or following the Change in Control, and to such extent as the Committee
determines.
(b)Assumption, Continuation or Substitution. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent thereof, as the case may be (the “Acquiror”),
may, without the consent of any Participant, assume or continue the Company’s
rights and obligations under each or any Award or portion thereof outstanding
immediately prior to the Change in Control or substitute for each or any such
outstanding Award or portion thereof a substantially equivalent award with
respect to the Acquiror’s stock, as applicable. For purposes of this Section, if
so determined by the Committee in its discretion, an Award denominated in shares
of Stock shall be deemed assumed if, following the Change in Control, the Award
confers the right to receive, subject to the terms and conditions of the Plan
and the applicable Award Agreement, for each share of Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether stock,
cash, other securities or property or a combination thereof) to which a holder
of a share of Stock on the effective date of the Change in Control was entitled
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Stock); provided, however, that if such consideration is not solely common stock
of the Acquiror, the Committee may, with the consent of the Acquiror, provide
for the consideration to be received upon the exercise or settlement of the
Award, for each share of Stock subject to the Award, to consist solely of common
stock of the Acquiror equal in Fair Market Value to the per share consideration
received by holders of Stock pursuant to the Change in Control. Any Award or
portion thereof which is neither assumed or continued by the Acquiror in
connection with the Change in Control nor exercised or settled as of the time of
consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in Control.
(c)Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its
discretion and without the consent of any Participant, determine that, upon the
occurrence of a Change in Control, each or any Award denominated in shares of
Stock or portion thereof outstanding immediately prior to the Change in Control
and not previously exercised or settled shall be canceled in exchange for a
payment with respect to each vested share (and each unvested share, if so
determined by the Committee) of Stock subject to such canceled Award in
(i) cash, (ii) stock of the Company or of a corporation or other business entity
a party to the Change in Control, or (iii) other property which, in any such
case, shall be in an amount having a Fair Market Value equal to the Fair Market
Value of the consideration to be paid per share of Stock in the Change in
Control, reduced (but not below zero) by the exercise or purchase price per
share, if any, under such Award. In the event such determination is made by the
Committee, an Award having an exercise or purchase price per share equal to or
greater than the Fair Market Value of the consideration to be paid per share of
Stock in the Change in Control may be canceled without payment

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of consideration to the holder thereof. Payment pursuant to this Section
(reduced by applicable withholding taxes, if any) shall be made to Participants
in respect of the vested portions of their canceled Awards as soon as
practicable following the date of the Change in Control and in respect of the
unvested portions of their canceled Awards in accordance with the vesting
schedules applicable to such Awards.
13.2Effect of Change in Control on Nonemployee Director Awards. Subject to the
requirements and limitations of Section 409A, if applicable, including as
provided by Section 15.4(f), in the event of a Change in Control, each
outstanding Nonemployee Director Award shall become immediately exercisable and
vested in full and, except to the extent assumed, continued or substituted for
pursuant to Section 13.1(b), shall be settled effective immediately prior to the
time of consummation of the Change in Control.

13.3Federal Excise Tax Under Section 4999 of the Code.
(a)Excess Parachute Payment. If any acceleration of vesting pursuant to an Award
and any other payment or benefit received or to be received by a Participant
would subject the Participant to any excise tax pursuant to Section 4999 of the
Code due to the characterization of such acceleration of vesting, payment or
benefit as an “excess parachute payment” under Section 280G of the Code, then,
provided such election would not subject the Participant to taxation under
Section 409A, the Participant may elect to reduce the amount of any acceleration
of vesting called for under the Award in order to avoid such characterization.
(b)Determination by Independent Accountants. To aid the Participant in making
any election called for under Section 13.3(a), no later than the date of the
occurrence of any event that might reasonably be anticipated to result in an
“excess parachute payment” to the Participant as described in Section 13.3(a),
the Company shall request a determination in writing by the professional firm
engaged by the Company for general tax purposes, or, if the tax firm so engaged
by the Company is serving as accountant or auditor for the Acquiror, the Company
will appoint a nationally recognized tax firm to make the determinations
required by this Section (the “Tax Firm”). As soon as practicable thereafter,
the Tax Firm shall determine and report to the Company and the Participant the
amount of such acceleration of vesting, payments and benefits which would
produce the greatest after-tax benefit to the Participant. For the purposes of
such determination, the Tax Firm may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Participant shall furnish to the Tax Firm such
information and documents as the Tax Firm may reasonably request in order to
make its required determination. The Company shall bear all fees and expenses
the Tax Firm charge in connection with its services contemplated by this
Section.
14.Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock pursuant to any Award
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities and the requirements of
any stock exchange or market system upon which the Stock may then be listed. In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award, or (b) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares under the Plan shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares as to which such requisite authority shall not have been obtained.
As a condition to issuance of any Stock, the Company may require the Participant
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
15.Compliance with Section 409A.

15.1Awards Subject to Section 409A. The Company intends that Awards granted
pursuant to the Plan shall either be exempt from or comply with Section 409A,
and the Plan shall be so construed. The

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provisions of this Section 15 shall apply to any Award or portion thereof that
constitutes or provides for payment of Section 409A Deferred Compensation. Such
Awards may include, without limitation:
(a)A Nonstatutory Stock Option or SAR that includes any feature for the deferral
of compensation other than the deferral of recognition of income until the later
of (i) the exercise or disposition of the Award or (ii) the time the stock
acquired pursuant to the exercise of the Award first becomes substantially
vested.
(b)Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other
Stock-Based Award that either (i) provides by its terms for settlement of all or
any portion of the Award at a time or upon an event that will or may occur later
than the end of the Short-Term Deferral Period (as defined below) or
(ii) permits the Participant granted the Award to elect one or more dates or
events upon which the Award will be settled after the end of the Short-Term
Deferral Period.
Subject to the provisions of Section 409A, the term “Short-Term Deferral Period”
means the 2½ month period ending on the later of (i) the 15th day of the third
month following the end of the Participant’s taxable year in which the right to
payment under the applicable portion of the Award is no longer subject to a
substantial risk of forfeiture or (ii) the 15th day of the third month following
the end of the Company’s taxable year in which the right to payment under the
applicable portion of the Award is no longer subject to a substantial risk of
forfeiture. For this purpose, the term “substantial risk of forfeiture” shall
have the meaning provided by Section 409A.
15.2Deferral and/or Distribution Elections. Except as otherwise permitted or
required by Section 409A, the following rules shall apply to any compensation
deferral and/or payment elections (each, an “Election”) that may be permitted or
required by the Committee pursuant to an Award providing Section 409A Deferred
Compensation:
(a)Elections must be in writing and specify the amount of the payment in
settlement of an Award being deferred, as well as the time and form of payment
as permitted by this Plan.
(b)Elections shall be made by the end of the Participant’s taxable year prior to
the year in which services commence for which an Award may be granted to the
Participant.
(c)Elections shall continue in effect until a written revocation or change in
Election is received by the Company, except that a written revocation or change
in Election must be received by the Company prior to the last day for making the
Election determined in accordance with paragraph (b) above or as permitted by
Section 15.3.
15.3Subsequent Elections. Except as otherwise permitted or required by Section
409A, any Award providing Section 409A Deferred Compensation which permits a
subsequent Election to delay the payment or change the form of payment in
settlement of such Award shall comply with the following requirements:
(a)No subsequent Election may take effect until at least twelve (12) months
after the date on which the subsequent Election is made.
(b)Each subsequent Election related to a payment in settlement of an Award not
described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a
delay of the payment for a period of not less than five (5) years from the date
on which such payment would otherwise have been made.
(c)No subsequent Election related to a payment pursuant to Section 15.4(a)(iv)
shall be made less than twelve (12) months before the date on which such payment
would otherwise have been made.
(d)Subsequent Elections shall continue in effect until a written revocation or
change in the subsequent Election is received by the Company, except that a
written revocation or change in a subsequent Election must be received by the
Company prior to the last day for making the subsequent Election determined in
accordance the preceding paragraphs of this Section 15.3.
15.4Payment of Section 409A Deferred Compensation.
(a)Permissible Payments. Except as otherwise permitted or required by Section
409A, an Award providing Section 409A Deferred Compensation must provide for
payment in settlement of the Award only upon one or more of the following:

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(i)The Participant’s “separation from service” (as defined by Section 409A);
(ii)The Participant’s becoming “disabled” (as defined by Section 409A);
(iii)The Participant’s death;
(iv)A time or fixed schedule that is either (i) specified by the Committee upon
the grant of an Award and set forth in the Award Agreement evidencing such Award
or (ii) specified by the Participant in an Election complying with the
requirements of Section 15.2 or 15.3, as applicable;
(v)A change in the ownership or effective control or the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 409A; or
(vi)The occurrence of an “unforeseeable emergency” (as defined by Section 409A).
(b)Installment Payments. It is the intent of this Plan that any right of a
Participant to receive installment payments (within the meaning of Section 409A)
shall, for all purposes of Section 409A, be treated as a right to a series of
separate payments.
(c)Required Delay in Payment to Specified Employee Pursuant to Separation from
Service. Notwithstanding any provision of the Plan or an Award Agreement to the
contrary, except as otherwise permitted by Section 409A, no payment pursuant to
Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred
Compensation may be made to a Participant who is a “specified employee” (as
defined by Section 409A) as of the date of the Participant’s separation from
service before the date (the “Delayed Payment Date”) that is six (6) months
after the date of such Participant’s separation from service, or, if earlier,
the date of the Participant’s death. All such amounts that would, but for this
paragraph, become payable prior to the Delayed Payment Date shall be accumulated
and paid on the Delayed Payment Date.
(d)Payment Upon Disability. All distributions of Section 409A Deferred
Compensation payable pursuant to Section 15.4(a)(ii) by reason of a Participant
becoming disabled shall be paid in a lump sum or in periodic installments as
established by the Participant’s Election. If the Participant has made no
Election with respect to distributions of Section 409A Deferred Compensation
upon becoming disabled, all such distributions shall be paid in a lump sum upon
the determination that the Participant has become disabled.
(e)Payment Upon Death. If a Participant dies before complete distribution of
amounts payable upon settlement of an Award subject to Section 409A, such
undistributed amounts shall be distributed to his or her beneficiary under the
distribution method for death established by the Participant’s Election upon
receipt by the Committee of satisfactory notice and confirmation of the
Participant’s death. If the Participant has made no Election with respect to
distributions of Section 409A Deferred Compensation upon death, all such
distributions shall be paid in a lump sum upon receipt by the Committee of
satisfactory notice and confirmation of the Participant’s death.
(f)Payment Upon Change in Control. Notwithstanding any provision of the Plan or
an Award Agreement to the contrary, to the extent that any amount constituting
Section 409A Deferred Compensation would become payable under this Plan by
reason of a Change in Control, such amount shall become payable only if the
event constituting a Change in Control would also constitute a change in
ownership or effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company within the meaning of Section
409A. Any Award which constitutes Section 409A Deferred Compensation and which
would vest and otherwise become payable upon a Change in Control as a result of
the failure of the Acquiror to assume, continue or substitute for such Award in
accordance with Section 13.1(b) shall vest to the extent provided by such Award
but shall be converted automatically at the effective time of such Change in
Control into a right to receive, in cash on the date or dates such award would
have been settled in accordance with its then existing settlement schedule (or
as required by Section 15.4(c)), an amount or amounts equal in the aggregate to
the intrinsic value of the Award at the time of the Change in Control.
(g)Payment Upon Unforeseeable Emergency. The Committee shall have the authority
to provide in the Award Agreement evidencing any Award providing for
Section 409A Deferred

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Compensation for payment pursuant to Section 15.4(a)(vi) in settlement of all or
a portion of such Award in the event that a Participant establishes, to the
satisfaction of the Committee, the occurrence of an unforeseeable emergency. In
such event, the amount(s) distributed with respect to such unforeseeable
emergency cannot exceed the amounts reasonably necessary to satisfy the
emergency need plus amounts necessary to pay taxes reasonably anticipated as a
result of such distribution(s), after taking into account the extent to which
such emergency need is or may be relieved through reimbursement or compensation
by insurance or otherwise, by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship) or by cessation of deferrals under the Award. All distributions with
respect to an unforeseeable emergency shall be made in a lump sum upon the
Committee’s determination that an unforeseeable emergency has occurred. The
Committee’s decision with respect to whether an unforeseeable emergency has
occurred and the manner in which, if at all, the payment in settlement of an
Award shall be altered or modified, shall be final, conclusive, and not subject
to approval or appeal.
(h)Prohibition of Acceleration of Payments. Notwithstanding any provision of the
Plan or an Award Agreement to the contrary, this Plan does not permit the
acceleration of the time or schedule of any payment under an Award providing
Section 409A Deferred Compensation, except as permitted by Section 409A.
(i)No Representation Regarding Section 409A Compliance. Notwithstanding any
other provision of the Plan, the Company makes no representation that Awards
shall be exempt from or comply with Section 409A. No Participating Company shall
be liable for any tax, penalty or interest imposed on a Participant by Section
409A.
16.Tax Withholding.

16.1Tax Withholding in General. The Company shall have the right to deduct from
any and all payments made under the Plan, or to require the Participant, through
payroll withholding, cash payment or otherwise, to make adequate provision for,
the federal, state, local and foreign taxes (including social insurance), if
any, required by law to be withheld by any Participating Company with respect to
an Award or the shares acquired pursuant thereto. The Company shall have no
obligation to deliver shares of Stock, to release shares of Stock from an escrow
established pursuant to an Award Agreement, or to make any payment in cash under
the Plan until the Participating Company Group’s tax withholding obligations
have been satisfied by the Participant.

16.2Withholding in or Directed Sale of Shares. The Company shall have the right,
but not the obligation, to deduct from the shares of Stock issuable to a
Participant upon the exercise or settlement of an Award, or to accept from the
Participant the tender of, a number of whole shares of Stock having a Fair
Market Value, as determined by the Company, equal to all or any part of the tax
withholding obligations of any Participating Company. The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company may require a Participant to direct a
broker, upon the vesting, exercise or settlement of an Award, to sell a portion
of the shares subject to the Award determined by the Company in its discretion
to be sufficient to cover the tax withholding obligations of any Participating
Company and to remit an amount equal to such tax withholding obligations to such
Participating Company in cash.

17.Amendment, Suspension or Termination of Plan.
The Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s shareholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Sections 4.2, 4.3, and
4.4), (b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company’s shareholders under any applicable law, regulation or rule,
including the rules of any stock exchange or quotation system upon which the
Stock may then be listed or quoted. No amendment, suspension or termination of
the Plan shall affect any then outstanding Award unless expressly provided by
the Committee. Except as provided by the next sentence, no amendment, suspension
or termination of the Plan may have a materially adverse effect on any then
outstanding Award without the consent of the Participant. Notwithstanding any
other provision of the Plan or any Award Agreement to the contrary, the
Committee may, in its sole and absolute discretion and without the consent of
any Participant, amend the Plan or any Award Agreement, to

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take effect retroactively or otherwise, as it deems necessary or advisable for
the purpose of conforming the Plan or such Award Agreement to any present or
future law, regulation or rule applicable to the Plan, including, but not
limited to, Section 409A.
18.Miscellaneous Provisions.

18.1Repurchase Rights. Shares issued under the Plan may be subject to one or
more repurchase options, or other conditions and restrictions as determined by
the Committee in its discretion at the time the Award is granted. The Company
shall have the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons as may be
selected by the Company. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

18.2Forfeiture Events.
(a)The Committee may specify in an Award Agreement that the Participant’s
rights, payments, and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture, or recoupment upon the occurrence of
specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service, or any accounting restatement due to material noncompliance of the
Company with any financial reporting requirements of securities laws as a result
of which, and to the extent that, such reduction, cancellation, forfeiture, or
recoupment is required by applicable securities laws.
(b)If the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, any Participant who
knowingly or through gross negligence engaged in the misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for
(i) the amount of any payment in settlement of an Award received by such
Participant during the twelve- (12-) month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying such financial
reporting requirement, and (ii) any profits realized by such Participant from
the sale of securities of the Company during such twelve- (12-) month period.
18.3Provision of Information. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company’s common shareholders.

18.4Rights as Employee, Consultant or Director. No person, even though eligible
pursuant to Section 5, shall have a right to be selected as a Participant, or,
having been so selected, to be selected again as a Participant. Nothing in the
Plan or any Award granted under the Plan shall confer on any Participant a right
to remain an Employee, Consultant or Director or interfere with or limit in any
way any right of a Participating Company to terminate the Participant’s Service
at any time. To the extent that an Employee of a Participating Company other
than the Company receives an Award under the Plan, that Award shall in no event
be understood or interpreted to mean that the Company is the Employee’s employer
or that the Employee has an employment relationship with the Company.

18.5Rights as a Shareholder. A Participant shall have no rights as a shareholder
with respect to any shares covered by an Award until the date of the issuance of
such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). No adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Section 4.4 or
another provision of the Plan.

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18.6Delivery of Title to Shares. Subject to any governing rules or regulations,
the Company shall issue or cause to be issued the shares of Stock acquired
pursuant to an Award and shall deliver such shares to or for the benefit of the
Participant by means of one or more of the following: (a) by delivering to the
Participant evidence of book entry shares of Stock credited to the account of
the Participant, (b) by depositing such shares of Stock for the benefit of the
Participant with any broker with which the Participant has an account
relationship, or (c) by delivering such shares of Stock to the Participant in
certificate form.

18.7Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise or settlement of any Award.

18.8Retirement and Welfare Plans. Neither Awards made under this Plan nor shares
of Stock or cash paid pursuant to such Awards may be included as “compensation”
for purposes of computing the benefits payable to any Participant under any
Participating Company’s retirement plans (both qualified and non-qualified) or
welfare benefit plans unless such other plan expressly provides that such
compensation shall be taken into account in computing a Participant’s benefit.

18.9Beneficiary Designation. Subject to local laws and procedures, each
Participant may file with the Company a written designation of a beneficiary who
is to receive any benefit under the Plan to which the Participant is entitled in
the event of such Participant’s death before he or she receives any or all of
such benefit. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant’s lifetime. If a married Participant designates a beneficiary other
than the Participant’s spouse, the effectiveness of such designation may be
subject to the consent of the Participant’s spouse. If a Participant dies
without an effective designation of a beneficiary who is living at the time of
the Participant’s death, the Company will pay any remaining unpaid benefits to
the Participant’s legal representative.

18.10Severability. If any one or more of the provisions (or any part thereof) of
this Plan shall be held invalid, illegal or unenforceable in any respect, such
provision shall be modified so as to make it valid, legal and enforceable, and
the validity, legality and enforceability of the remaining provisions (or any
part thereof) of the Plan shall not in any way be affected or impaired thereby.

18.11No Constraint on Corporate Action. Nothing in this Plan shall be construed
to: (a) limit, impair, or otherwise affect the Company’s or another
Participating Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be necessary
or appropriate.

18.12Unfunded Obligation. Participants shall have the status of general
unsecured creditors of the Company. Any amounts payable to Participants pursuant
to the Plan shall be considered unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974. No Participating Company shall be required to
segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations. The Company
shall retain at all times beneficial ownership of any investments, including
trust investments, which the Company may make to fulfill its payment obligations
hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary
relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company. The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.

18.13Choice of Law. Except to the extent governed by applicable federal law, the
validity, interpretation, construction and performance of the Plan and each
Award Agreement shall be governed by the laws of the State of California,
without regard to its conflict of law rules.

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IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the PICO Holdings, Inc. 2014 Equity Incentive Plan as duly
adopted by the Board on February 27, 2014.
 
 
 
 
 
/s/ James F. Mosier
 
      James F. Mosier, Secretary

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PICO Holdings, Inc.
Stock Option Grant Notice
2014 Equity Incentive Plan

PICO Holdings, Inc. (the “Company”), pursuant to its 2014 Equity Incentive Plan
(the “Plan”), hereby grants to Optionholder an option to purchase the number of
shares of the Company’s Stock as specified and on the terms set forth below (the
“Option”). This Option is subject to all of the terms and conditions as set
forth in this Stock Option Grant Notice (the “Grant Notice”), in the Option
Agreement (the “Agreement” and, together with this Grant Notice, the “Award
Agreement”), the Plan and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety. Capitalized terms not
explicitly defined herein but defined in the Plan or the Award Agreement will
have the same definitions as in the Plan or the Award Agreement, as applicable.
If there is any conflict between the terms in this Grant Notice, the Agreement
or the Plan, the terms of the Plan will control.
Optionholder:
[Name]
 
Date of Grant:
[Date]
 
Vesting Commencement Date:
[Date]
 
Number of Shares Subject to Option:
[____]
 
Exercise Price (Per Share):
$[___]
 
Total Exercise Price:
$[___]
 
Expiration Date:
[Date]
 

Type of Grant:          Incentive Stock Option1     Nonstatutory Stock Option
Vesting Conditions:
[_________________] subject to the potential vesting acceleration described in
Section 1 of the Agreement.

Exercise Conditions:    [_________________]
Payment:         By one or a combination of the following items (described in
the Agreement):
X
By cash, check, bank draft or money order payable to the Company

X
Pursuant to a Cashless Exercise (as defined in the Agreement) if the shares are
publicly traded

X
By a Stock Tender Exercise (as defined in the Agreement) if the shares are
publicly traded

X
If and only to the extent this option is a Nonstatutory Stock Option, and
subject to the Company’s consent at the time of exercise, by a Net Exercise (as
defined in the Agreement) arrangement

Additional Terms/Acknowledgements: By their signatures below, the Company and
the Optionholder agree that the Option is governed by this Grant Notice and by
the provisions of the Agreement and the Plan, both of which are attached to and
made a part of this document. The Optionholder acknowledges receipt of copies of
the Agreement, the Plan, and the stock plan prospectus for this Plan and
represents that the Participant has read and is familiar with their provisions.
As of the Date of Grant set forth above, this Grant Notice, the Agreement and
the Plan set forth the entire understanding between Optionholder and the Company
and any Participating Company regarding the Option and supersedes all prior oral
and written agreements, promises and/or representations on that subject, with
the exception of (i) stock options or other stock awards previously granted and
delivered to Optionholder, (ii) any compensation recovery policy maintained by
the Company or any applicable Participating Company or otherwise required by
applicable law and (iii) any written employment or severance or change in
control (or similar) arrangement between the Optionholder and the Company or any
Participating Company that would provide for vesting acceleration of this Option
upon the terms and conditions set forth therein.

                                                                         

1 If this is an Incentive Stock Option, it (plus other outstanding Incentive
Stock Options) cannot be first exercisable for more than $100,000 in value
(measured by exercise price) in any calendar year. Any excess over $100,000 is a
Nonstatutory Stock Option.

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The Optionholder hereby accepts the Option subject to all of the terms and
conditions of this Notice, the Agreement and the Plan. The Optionholder consents
to receive such documents by electronic delivery and to participate in the Plan
through an on-line or electronic system established and maintained by the
Company or any other Participating Company or another third party designated by
the Company or any other Participating Company.

PICO Holdings Inc.

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     
Optionholder:

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     

Attachments: Option Agreement, 2014 Equity Incentive Plan and Notice of Exercise

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Attachment
Agreement

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Attachment II
2014 Equity Incentive Plan

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Attachment III
Notice of Exercise

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PICO Holdings, Inc.
2014 Equity Incentive Plan Name
Option Agreement
(Incentive Stock Option or Nonstatutory Stock Option)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option
Agreement (the “Agreement”, and together with the Grant Notice, the “Award
Agreement”) and in consideration of your services, PICO Holdings, Inc. (the
“Company”) has granted you an option (the “Option”) under its 2014 Equity
Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s
Stock indicated in your Grant Notice at the exercise price indicated in your
Grant Notice. Your Option is granted to you effective as of the date of grant
set forth in the Grant Notice (the “Date of Grant”). Capitalized terms not
explicitly defined in this Agreement or in the Grant Notice but defined in the
Plan will have the same definitions as in the Plan.
The details of your Option, in addition to those set forth in the Grant Notice
and the Plan, are as follows:
1.Vesting.

(a)General Vesting. Subject to the provisions contained herein, your Option will
vest, if at all, in accordance with the Vesting Conditions provided in the Grant
Notice and the potential vesting acceleration provisions of this Section 1.
Vesting will cease upon the termination of your Service.

(b)Effect of a Change in Control. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business
entity or parent thereof, as the case may be (the “Acquiror”), may, without your
consent or the consent of any Participant, assume or continue the Company’s
rights and obligations under your Option or portion thereof outstanding
immediately prior to the Change in Control or substitute for your outstanding
Option or portion thereof a substantially equivalent award with respect to the
Acquiror’s stock, as applicable so long as you are not adversely affected due to
any such substitution. For purposes of this Section, your Option shall be deemed
assumed if, following the Change in Control, your Option confers the right to
receive, subject to the terms and conditions of the Plan and this Award
Agreement, for each share of Stock subject to your Option immediately prior to
the Change in Control, the consideration (whether stock, cash, other securities
or property or a combination thereof) to which a holder of a share of Stock on
the effective date of the Change in Control was entitled (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Stock); provided, however,
that if such consideration is not solely common stock of the Acquiror, the
Committee may, with the consent of the Acquiror, provide for the consideration
to be received upon the exercise or settlement of your Option, for each share of
Stock subject to your Option, to consist solely of common stock of the Acquiror
equal in Fair Market Value to the per share consideration received by holders of
Stock pursuant to the Change in Control.  If your Option or any portion of your
Option is neither assumed, continued or substituted for by the Acquiror in
connection with the Change in Control nor exercised or settled as of the time of
consummation of the Change in Control, and provided that you are providing
continued Services through the date immediately prior to the Change in Control,
your Option or portion thereof, as applicable, shall become vested in full
immediately prior to, and contingent upon, the effective time of the Change in
Control.

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(c)Acceleration of Vesting Upon a Termination Without Cause. If your Service
terminates at any time as a result of (1) your termination by the Company or
Participating Company, as applicable, without Cause (excluding your death or
Disability) or (2) your Resignation for Good Reason (as defined below), then
effective as of the date of such termination of Service, the vesting of your
Option shall accelerate in full.

(i)“Resignation for Good Reason” means the voluntary resignation from employment
with the Company within a period of 180 days after the initial occurrence,
without your express written consent, of any of the following conditions (each,
a “Good Reason”) which remains in effect for thirty (30) days after your
delivery of written notice of the occurrence of such condition(s) to the Board
within sixty (60) days following your knowledge of the initial occurrence of
such condition(s): (i) a material diminution in your authority, duties or
responsibilities; (ii) a material reduction in your base salary; (iii) a
material reduction in the health and welfare insurance, retirement or other
benefits available to you as of the Grant Date (except for reductions in such
benefits applicable to senior executive employees of the Company generally) and
provided that such material reduction shall only be deemed “Good Reason” if it
constitutes a material reduction in your base compensation; (iv) the relocation
of you to a facility or a location more than fifty (50) miles from La Jolla,
California; or (v) the failure of the Company or Acquiror to honor any material
term of the employment, severance or other similar agreement under which you
provide Services.

2.Number of Shares and Exercise Price. The number of shares of Stock subject to
your Option and your exercise price per share in your Grant Notice will be
adjusted for any changes in Stock effected without receipt of consideration by
the Company, as provided in Section 4.4 of the Plan.

3.Exercise Restriction for Non-Exempt Employees. If you are an Employee eligible
for overtime compensation under the Fair Labor Standards Act of 1938, as amended
(that is, a “Non-Exempt Employee”), and except as otherwise provided in the
Plan, you may not exercise your Option until you have completed at least six (6)
months of Service measured from the Date of Grant, even if you have already been
an employee for more than six (6) months. Consistent with the provisions of the
Worker Economic Opportunity Act, you may exercise your Option as to any vested
portion prior to such six (6) month anniversary in the case of (i) your death or
disability, (ii) a Change in Control or (iii) your termination of Continuous
Service on your “retirement” (as defined in the Company’s benefit plans) or
otherwise as permitted by the Worker Economic Opportunity Act.

4.Exercise Conditions. As set forth in your Grant Notice and subject to the
provisions of your Option, you may elect at any time that is during the term of
your Option, to exercise all or part of your Option if the applicable vesting
and exercisability conditions have been satisfied.

5.Method of Payment. You must pay the full amount of the exercise price for the
shares you wish to exercise. You may pay the exercise price in cash or by check,
bank draft or money order payable to the Company or in any other manner
permitted by your Grant Notice, which may include one or more of the following

(a)Provided that at the time of exercise the Stock is publicly traded, pursuant
to a Cashless Exercise program described in Section 6.3 of the Plan. This manner
of payment is also known as a “broker-assisted exercise”, “same day sale”, or
“sell to cover”.

(b)Provided that at the time of exercise the Stock is publicly traded, by a
Stock Tender Exercise as described in Section 6.3 of the Plan.

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(c)If this Option is a Nonstatutory Stock Option, subject to the consent of the
Company at the time of exercise, by a Net Exercise arrangement as described in
Section 6.3 of the Plan.

6.Whole Shares. You may exercise your Option only for whole shares of Stock.

7.Securities Law Compliance. In no event may you exercise your Option unless the
shares of Stock issuable upon exercise are then registered under the Securities
Act or, if not registered, the Company has determined that your exercise and the
issuance of the shares would be exempt from the registration requirements of the
Securities Act. The exercise of your Option also must comply with all other
applicable laws and regulations governing your Option, and you may not exercise
your Option if the Company determines that such exercise would not be in
material compliance with such laws and regulations (including any restrictions
on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if
applicable).

8.Term. You may not exercise your Option before the Date of Grant or after the
expiration of your Option’s term. Notwithstanding the provisions of Section 6.4
of the Plan, the term of your Option expires upon the earliest of the following:

(a)twelve (12) months after the termination of your Service as a result of (1)
your termination by the Company or Participating Company, as applicable, without
Cause (excluding your death or Disability) or (2) your Resignation for Good
Reason;

(b)twelve (12) months after the termination of your Service due to your
Disability (except as otherwise provided in Section 8(c) below);

(c)eighteen (18) months after your death if you die either during your Service
or within three (3) months after your Service terminates for any reason;

(d)three (3) months after the termination of your Service for any reason other
than as provided in Section 8(a) through 8(c); provided, however, that if during
any part of such three (3) month period your Option is not exercisable solely
because of the condition set forth in the section above relating to “Securities
Law Compliance,” your Option will not expire until the earlier of the Expiration
Date or until it has been exercisable for an aggregate period of thirty (30)
days after the date such exercise first would no longer be prevented because of
the condition set forth in the section above relating to “Securities Law
Compliance”; provided further, if during any part of such three (3) month
period, the sale of any Stock received upon exercise of your Option would
violate the Company’s insider trading policy, then your Option will not expire
until the earlier of the Expiration Date or until it has been exercisable for an
aggregate period of thirty (30) days after the date such exercise first would no
longer be in violation of the Company’s insider trading policy. Notwithstanding
the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Service
terminates within six (6) months after the Date of Grant, and (iii) you have
vested in a portion of your Option at the time of your termination of Service,
your Option will not expire until the earlier of (x) the later of (A) the date
that is seven (7) months after the Date of Grant, and (B) the date that is three
(3) months after the termination of your Service, and (y) the Expiration Date;

(e)the Expiration Date indicated in your Grant Notice; or

(f)the day before the tenth (10th) anniversary of the Date of Grant.

If your Option is an Incentive Stock Option, note that to obtain the federal
income tax advantages associated with an Incentive Stock Option, the Code
requires that at all times beginning on the Date of Grant

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and ending on the day three (3) months before the date of your Option’s
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your Option under certain circumstances for your benefit but
cannot guarantee that your Option will necessarily be treated as an Incentive
Stock Option if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your Option more than three (3) months after the date your employment
with the Company or an Affiliate terminates.
9.Exercise.

(a)You may exercise the vested and exercisable portion of your Option during its
term by (i) delivering a Notice of Exercise (in a form designated by the
Company) or completing such other documents and/or procedures designated by the
Company for exercise and (ii) paying the exercise price and any applicable
withholding taxes to the Company’s Secretary, stock plan administrator, or such
other person as the Company may designate, together with such additional
documents as the Company may then require.

(b)By exercising your Option you agree that, as a condition to any exercise of
your Option, the Company may require you to enter into an arrangement providing
for the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (i) the exercise of your Option, (ii) the lapse of
any substantial risk of forfeiture to which the shares of Stock are subject at
the time of exercise, or (iii) the disposition of shares of Stock acquired upon
such exercise.

(c)If your Option is an Incentive Stock Option, by exercising your Option you
agree that you will notify the Company in writing within fifteen (15) days after
the date of any disposition of any of the shares of the Stock issued upon
exercise of your Option that occurs within two (2) years after the Date of Grant
or within one (1) year after such shares of Stock are transferred upon exercise
of your Option.

10.Transferability. Except as otherwise provided in this Section 10, your Option
is not transferable, except by will or by the laws of descent and distribution,
and is exercisable during your life only by you.

(a)Certain Trusts. Upon receiving written permission from the Committee or its
duly authorized designee, you may transfer your Option to a trust if you are
considered to be the sole beneficial owner (determined under Section 671 of the
Code and applicable state law) while the option is held in the trust. You and
the trustee must enter into transfer and other agreements required by the
Company.

(b)Domestic Relations Orders. To the extent your Option is a Nonstatutory Stock
Option, upon receiving written permission from the Committee or its duly
authorized designee, and provided that you and the designated transferee enter
into transfer and other agreements required by the Company, you may transfer
your Option pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation instrument as
permitted by Treasury Regulation 1.421-1(b)(2) that contains the information
required by the Company to effectuate the transfer. You are encouraged to
discuss the proposed terms of any division of this Option with the Company prior
to finalizing the domestic relations order or marital settlement agreement to
help ensure the required information is contained within the domestic relations
order or marital settlement agreement. If this Option is an Incentive Stock
Option, this Option may be deemed to be a Nonstatutory Stock Option as a result
of such transfer.

(c)Beneficiary Designation. Upon receiving written permission from the Committee
or its duly authorized designee, you may, by delivering written notice to the
Company, in a form approved

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by the Company and any broker designated by the Company to handle option
exercises, designate a third party who, on your death, will thereafter be
entitled to exercise this Option and receive the Stock or other consideration
resulting from such exercise. In the absence of such a designation, your
executor or administrator of your estate will be entitled to exercise this
Option and receive, on behalf of your estate, the Stock or other consideration
resulting from such exercise.

11.Option not a Service Contract. Your Option is not an employment or service
contract, and nothing in your Option will be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of any
Participating Company, or of any Participating Company to continue your
employment. In addition, nothing in your Option will obligate any Participating
Company, their respective stockholders, boards of directors, officers or
employees to continue any relationship that you might have as a Director or
Consultant for any Participating Company.

12.Withholding Obligations.

(a)At the time you exercise your Option, in whole or in part, and at any time
thereafter as requested by the Company or any applicable Participating Company,
you hereby authorize withholding from payroll and any other amounts payable to
you, and otherwise agree to make adequate provision for (including by means of a
“same day sale” pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of any applicable Participating Company which arise in
connection with the exercise of your Option.

(b)If this Option is a Nonstatutory Stock Option, then upon your request and
subject to approval by the Company, and compliance with any applicable legal
conditions or restrictions, the Company may withhold from fully vested shares of
Stock otherwise issuable to you upon the exercise of your Option a number of
whole shares of Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law (or such lower amount as may be necessary to avoid
classification of your Option as a liability for financial accounting purposes).
If the date of determination of any tax withholding obligation is deferred to a
date later than the date of exercise of your Option, share withholding pursuant
to the preceding sentence shall not be permitted unless you make a proper and
timely election under Section 83(b) of the Code, covering the aggregate number
of shares of Stock acquired upon such exercise with respect to which such
determination is otherwise deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of your Option. Notwithstanding
the filing of such election, shares of Stock shall be withheld solely from fully
vested shares of Stock determined as of the date of exercise of your Option that
are otherwise issuable to you upon such exercise. Any adverse consequences to
you arising in connection with such share withholding procedure shall be your
sole responsibility.

(c)You may not exercise your Option unless the tax withholding obligations of
the Company and/or any Participating Company are satisfied. Accordingly, you may
not be able to exercise your Option when desired even though your Option is
vested and exercisable, and the Company will have no obligation to issue a
certificate for such shares of Stock or release such shares of Stock from any
escrow provided for herein, if applicable, unless such obligations are
satisfied.

13.Tax Consequences. You hereby agree that neither Company nor any Participating
Company has any duty to design or administer the Plan or its other compensation
programs in a manner that minimizes your tax liabilities. You will not make any
claim against any Participating Company, or any of its officers, directors,
employees or affiliates related to tax liabilities arising from your Option or
your other compensation.

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In particular, you acknowledge that this Option is exempt from Section 409A of
the Code only if the exercise price per share specified in the Grant Notice is
at least equal to the “fair market value” per share of the Stock on the Date of
Grant and there is no other impermissible deferral of compensation associated
with your Option.

14.Notices. Any notices provided for in this Award Agreement or the Plan will be
given in writing (including electronically) and will be deemed effectively given
upon receipt or, in the case of notices delivered by mail by the Company to you,
five days after deposit in the United States mail, postage prepaid, addressed to
you at the last address you provided to the Company. Notwithstanding the
foregoing, the Company may, in its sole discretion, decide to deliver any
documents related to participation in the Plan and this Award by electronic
means or to request your consent to participate in the Plan by electronic means.
By accepting this Option, you consent to receive such documents by electronic
delivery and to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by
the Company.

15.Governing Plan Document. Your Option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your Option, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In
addition, your Option will be subject to recoupment in accordance with any
clawback policy that the Company has adopted or any clawback policy that the
Company is required to adopt pursuant to the listing standards of any national
securities exchange or association on which the Company’s securities are listed
or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act or other applicable law. No recovery of compensation under such a
clawback policy will be an event giving rise to a right to resign for “good
reason” or “constructive termination” (or similar term) under any plan of or
agreement with the Company or any Participating Company. Except as expressly
provided in this Award Agreement, in the event of any conflict between the
provisions of your Option and those of the Plan, the provisions of the Plan will
control.

16.    Other Documents. You hereby acknowledge receipt of and the right to
receive a document providing the information required by Rule 428(b)(1)
promulgated under the Securities Act, which includes the Plan prospectus. In
addition, you acknowledge receipt of the Trading Compliance Policy in effect
from time to time.

17.    Effect on Other Employee Benefit Plans. The value of your Option will not
be included as compensation, earnings, salaries, or other similar terms used
when calculating employee benefits under any employee benefit plan sponsored by
the Company or any Participating Company, except as such plan otherwise
expressly provides. The Company and each Participating Company expressly
reserves its rights to amend, modify, or terminate any of the Company’s or any
Participating Company’s employee benefit plans.

18.    Voting Rights. You will not have voting or any other rights as a
stockholder of the Company with respect to the shares to be issued pursuant to
this Option until such shares are issued to you. Upon such issuance, you will
obtain full voting and other rights as a stockholder of the Company. Nothing
contained in this Option, and no action taken pursuant to its provisions, will
create or be construed to create a trust of any kind or a fiduciary relationship
between you and any Participating Company or any other person.

19.    Severability. If all or any part of this Award Agreement or the Plan is
declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity will not invalidate any portion of this Award
Agreement or the Plan not declared to be unlawful or invalid. Any Section of
this

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Award Agreement (or part of such a Section) so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such Section or part of a Section to the fullest extent possible
while remaining lawful and valid.

20.    Miscellaneous.

(a)    The rights and obligations of the Company under your Option will be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder will inure to the benefit of, and be enforceable by the
Company’s successors and assigns.

(b)    You agree upon request to execute any further documents or instruments
necessary or desirable in the sole determination of the Company to carry out the
purposes or intent of your Option.

(c)    You acknowledge and agree that you have reviewed your Option in its
entirety, have had an opportunity to obtain the advice of counsel prior to
executing and accepting your Option, and fully understand all provisions of your
Option.

(d)    This Award Agreement will be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

(e)    All obligations of the Company under the Plan and this Award Agreement
will be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.

* * *

This Agreement will be deemed to be accepted by you upon your acceptance of the
Grant Notice to which it is attached.

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Notice of Exercise
PICO Holdings, Inc.
Attention: Stock Plan Administrator
Date of Exercise: _______________
This constitutes notice to PICO Holdings, Inc. (the “Company”) under my Option
that I elect to purchase the below number of shares of Stock of the Company
(the “Shares”) for the price set forth below.
Type of Option (check one):
Incentive        
Nonstatutory        
Option Date of Grant:
_______________
_______________
Number of Shares as to which Option is exercised:
_______________
_______________
Certificates to be issued in name of:
_______________
_______________
Total exercise price:
$______________
$______________
Cash payment delivered herewith:
$______________
$______________
[Value of ________ Shares delivered herewith as Stock Tender Exercise1:
$______________
$______________]
[Value of ________ Shares pursuant to net exercise2:
$______________
$______________]
[Cashless Exercise3:
$______________
$______________]

                                                                   
1 Shares must meet the public trading requirements and other terms set forth in
the Option. Shares must be valued in accordance with the terms of the Option
being exercised, and must be owned free and clear of any liens, claims,
encumbrances or security interests. Certificates must be endorsed or accompanied
by an executed assignment separate from certificate.
2 The option must be a Nonstatutory Stock Option, and PICO Holdings, Inc. must
have established net exercise procedures at the time of exercise, in order to
utilize this payment method.
3 Shares must meet the public trading requirements and other terms set forth in
the Option.

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By this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the 2014 Equity Incentive Plan, (ii) to provide
for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this Option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
Shares issued upon exercise of this Option that occurs within two (2) years
after the date of grant of this Option or within one (1) year after such Shares
are issued upon exercise of this Option.
Very truly yours,
                                                                                                       

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PICO Holdings, Inc.
Restricted Stock Unit Award
Grant Notice
2014 Equity Incentive Plan

PICO Holdings, Inc. (the “Company”) hereby awards to Participant the number of
Restricted Stock Units specified and on the terms set forth below (the “Award”).
The Award is subject to all of the terms and conditions as set forth in this
Restricted Stock Unit Award Grant Notice (the “Grant Notice”), in the Restricted
Stock Unit Award Agreement (the “Agreement” and, together with the Grant Notice,
the “Award Agreement”) and in the Company’s 2014 Equity Incentive Plan (the
“Plan”), all of which are attached hereto and incorporated herein in their
entirety. Capitalized terms not explicitly defined herein but defined in the
Plan or the Award Agreement shall have the meanings set forth in the Plan or the
Award Agreement, as applicable. In the event of any conflict between the terms
of this Grant Notice, the Agreement or the Plan, the terms of the Plan shall
control.
Participant:
[Name]
 
Date of Grant:
[Date]
 
Vesting Commencement Date:
[Date]
 
Number of Restricted Stock Units:
[_______]
 
Settlement Date:
For each Restricted Stock Unit received, and subject to any adjustment pursuant
to Section 3(a) of the Agreement, one share of Stock of the Company will be
issued for each Restricted Stock Unit that vests at the time set forth in
Section 6 of the Agreement.
Vesting Conditions:
[_________________] subject to the potential vesting acceleration described in
Section 2 of the Agreement.

Additional Terms/Acknowledgements: By their signatures below, the Company and
the Participant agree that the Award is governed by this Grant Notice and by the
provisions of the Agreement and the Plan, both of which are attached to and made
a part of this document. The Participant acknowledges receipt of copies of the
Agreement, the Plan, and the stock plan prospectus for this Plan and represents
that the Participant has read and is familiar with their provisions. As of the
Date of Grant set forth above, this Grant Notice, the Agreement and the Plan set
forth the entire understanding between Participant and any other Participating
Company regarding the Award and supersedes all prior oral and written
agreements, promises and/or representations on that subject, with the exception
of (i) restricted stock units or other stock awards previously granted and
delivered to Participant, (ii) any compensation recovery policy maintained by
the Company or Participating Company or otherwise required by applicable law and
(iii) any written employment or severance or change in control (or similar)
arrangement between the Participant and the Company or any Participating Company
that would provide for vesting acceleration of this Award upon the terms and
conditions set forth therein.

The Participant hereby accepts the Award subject to all of the terms and
conditions of this Notice, the Agreement and the Plan. Participant consents to
receive such documents by electronic delivery and to participate in the Plan
through an on-line or electronic system established and maintained by the
Company or any other Participating Company or another third party designated by
the Company or any other Participating Company.

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PICO Holdings Inc.

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     
Participant:

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     

Attachments:
Restricted Stock Unit Award Agreement, 2014 Equity Incentive Plan and Prospectus

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PICO Holdings, Inc.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”)
and this Restricted Stock Unit Award Agreement (the “Agreement”, and together
with the Grant Notice, the “Award Agreement”) and in consideration of your
services, PICO Holdings, Inc. (the “Company”) has awarded you a Restricted Stock
Unit Award (the “Award”) under its 2014 Equity Incentive Plan (the “Plan”) for
the number of Restricted Stock Units indicated in the Grant Notice (the “Stock
Units”). Capitalized terms not explicitly defined in this Agreement or in the
Grant Notice but defined in the Plan will have the same definitions as in the
Plan.
The details of your Award, in addition to those set forth in the Grant Notice
and the Plan are as follows:
1.Grant of the Award. This Award represents your right to be issued on a future
date one share of Stock for each Stock Unit indicated in the Grant Notice that
vests. As of the Date of Grant specified in the Grant Notice, the Company will
credit to a bookkeeping account maintained by the Company for your benefit (the
“Account”) the number of Stock Units subject to this Award. This Award was
granted in consideration of your services to the Participating Company Group.
Except as otherwise provided herein, you will not be required to make any
payment to Participating Company Group (other than services to a Participating
Company) with respect to your receipt of the Award, the vesting of the Stock
Units or the delivery of the Stock to be issued in respect of the Award.

2.Vesting.

(a)General Vesting. Subject to the provisions contained herein, your Award will
vest, if at all, in accordance with the Vesting Conditions provided in the Grant
Notice and the potential vesting acceleration provisions of this Section 2.
Vesting will cease upon the termination of your Service for any reason. Upon
such termination of your Service, any Stock Units credited to the Account that
were not vested on the date of such termination will be forfeited at no cost to
the Company and you will have no further right, title or interest in such Stock
Units or the shares of Stock to be issued in respect of such portion of the
Award.

(b) Effect of a Change in Control.

(i)In the event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the case
may be (the “Acquiror”), may, without your consent or the consent of any
Participant, assume or continue the Company’s rights and obligations under your
Award or portion thereof outstanding immediately prior to the Change in Control
or substitute for your outstanding Award or portion thereof a substantially
equivalent award with respect to the Acquiror’s stock, as applicable so long as
you are not adversely affected due to any such substitution. For purposes of
this Section, your Award shall be deemed assumed if, following the Change in
Control, the Award confers the right to receive, subject to the terms and
conditions of the Plan and this Award Agreement, for each share of Stock
issuable under the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective date
of the Change in Control was entitled (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Stock); provided, however, that if such consideration
is not solely common stock of the Acquiror, the

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Committee may, with the consent of the Acquiror, provide for the consideration
to be received upon the exercise or settlement of the Award, for each share of
Stock issuable in respect of the Award, to consist solely of common stock of the
Acquiror equal in Fair Market Value to the per share consideration received by
holders of Stock pursuant to the Change in Control.  If your Award or any
portion of your Award is neither assumed, continued or substituted for by the
Acquiror in connection with the Change in Control nor settled as of the time of
consummation of the Change in Control, and provided that you are providing
continued Services through the date immediately prior to the Change in Control,
your Award or portion thereof, as applicable, shall become vested in full
immediately prior to, and contingent upon, the effective time of the Change in
Control and shall be settled in accordance with Section 6.

(ii)To the extent the Award is subject to the requirements of Section 409A of
the Code, the provisions of this subsection 2(b)(ii) shall apply and shall
supersede anything to the contrary set forth herein and in the Plan to the
extent required for the Award to comply with the requirements of Section 409A of
the Code. In a Change in Control the Award must be assumed, continued or
substituted by the Acquiror and any shares of Stock may not be earlier issued
unless the Change in Control is also a “change in the ownership or effective
control of the corporation”, or a “change in the ownership of a substantial
portion of the assets of the corporation” with respect to the Company in each
case within the meaning of Treasury Regulation Section 1.409A-3(i)(5) and an
exemption is available and elected under Treasury Regulation 1.409A-3(j)(ix)(B)
or such earlier issuance of the shares of Stock is otherwise permitted by
Section 409A of the Code. The Company retains the right to provide for earlier
issuance of shares of Stock in settlement of any vested portion of the Award to
the extent permitted by Section 409A of the Code.

(c)Acceleration of Vesting Upon a Termination Without Cause. If your Service
terminates at any time as a result of (1) your termination by the Company or
Participating Company, as applicable, without Cause (excluding your death or
Disability) or (2) your Resignation for Good Reason (as defined below), then
effective as of the date of such termination of Service, the vesting of your
Award shall accelerate in full.

(i)“Resignation for Good Reason” means the voluntary resignation from employment
with the Company within a period of 180 days after the initial occurrence,
without your express written consent, of any of the following conditions (each,
a “Good Reason”) which remains in effect for thirty (30) days after your
delivery of written notice of the occurrence of such condition(s) to the Board
within sixty (60) days following your knowledge of the initial occurrence of
such condition(s): (i) a material diminution in your authority, duties or
responsibilities; (ii) a material reduction in your base salary; (iii) a
material reduction in the health and welfare insurance, retirement or other
benefits available to you as of the Grant Date (except for reductions in such
benefits applicable to senior executive employees of the Company generally) and
provided that such material reduction shall only be deemed “Good Reason” if it
constitutes a material reduction in your base compensation; (iv) the relocation
of you to a facility or a location more than fifty (50) miles from La Jolla,
California; or (v) the failure of the Company or Acquiror to honor any material
term of the employment, severance or other similar agreement under which you
provide Services.

3.Number of Stock Units & Shares of Stock.

(a)The Stock Units subject to your Award will be adjusted for any changes in
Stock effected without receipt of consideration by the Company, as provided in
Section 4.4 of the Plan.

(b)Any additional Restricted Stock Units and any shares, cash or other property
that become subject to the Award pursuant to this Section 3, if any, will be
subject, in a manner determined by

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the Committee, to the same forfeiture restrictions, restrictions on
transferability, and time and manner of delivery as applicable to the other
Stock Units and shares covered by your Award.

(c)No fractional shares or rights for fractional shares of Stock will be created
pursuant to this Section 3. Any fraction of a share will be rounded down to the
nearest whole share. The Committee may, in its discretion, determine an
equivalent benefit for any fractional shares or fractional shares that may be
created by the adjustments referred to in this Section 3.

4.Securities Law Compliance. You will not be issued any Stock in respect of your
Award unless either (i) the shares are registered under the Securities Act or
(ii) the Company has determined that such issuance would be exempt from the
registration requirements of the Securities Act. Your Award also must comply
with all other applicable laws and regulations governing the Award, and you will
not receive such shares if the Company determines that such receipt would not be
in material compliance with such laws and regulations.

5.Transfer Restrictions. Your Stock Units are not transferable other than by
will and by the laws of descent and distribution. Prior to the time that shares
of Stock have been delivered to you in respect of your Award, you may not
transfer, pledge, sell or otherwise dispose of any portion of the Stock Units or
the shares in respect of your Stock Units. In addition to any other limitation
on transfer created by applicable securities laws, you agree not to assign,
hypothecate, donate, encumber or otherwise dispose of any interest in any of the
shares of Stock in respect of your Award until the shares are issued to you in
accordance with Section 6 of this Agreement. After the shares have been issued
to you, you are free to assign, hypothecate, donate, encumber or otherwise
dispose of any interest in such shares provided that any such actions are in
compliance with the provisions herein and applicable securities laws.
Notwithstanding the foregoing, upon receiving written permission from the
Committee or its duly authorized designee, you may, by delivering written notice
to the Company, in a form provided by or otherwise satisfactory to the Company
and any broker designated by the Company to effect transactions under the Plan,
designate a third party who, in the event of your death, will thereafter be
entitled to receive any distribution of Stock or other consideration to which
you were entitled at the time of your death pursuant to this Award Agreement. In
the absence of such a designation, your legal representative will be entitled to
receive, on behalf of your estate, such Stock or other consideration.

6.Date of Issuance.

(a)To the extent that your Award is exempt from the application of Section 409A
of the Code, the issuance of shares of Stock in respect of the Stock Units is
intended to comply with Treasury Regulation Section 1.409A-1(b)(4) and will be
construed and administered in such a manner.

(b)Subject to the satisfaction of the withholding obligations set forth in
Section 11 of this Agreement, in the event one or more Stock Units vests, the
Company will issue to you, on the vesting date, one share of Stock for each
Stock Unit that vests and such issuance date is referred to as the “Original
Issuance Date.” If the Original Issuance Date falls on a date that is not a
business day, delivery will instead occur on the next following business day. If
you are permitted to elect to defer delivery of the shares of Stock to be issued
in respect of your Award beyond the vesting date, your Original Issuance Date
will instead be determined in accordance with such deferral election.

(c)However, if (i) the Original Issuance Date does not occur (1) during an “open
window period” applicable to you, as determined by the Company in accordance
with the Trading Compliance Policy or other similar applicable policy then in
effect for you, or (2) on a date when you are otherwise permitted

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to sell shares of Stock on an established stock exchange or stock market
(including but not limited to under a previously established written trading
plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was
entered into in compliance with the Company’s policies (a “10b5-1 Plan”)), and
(ii) the Company elects (1) not to satisfy the Withholding Taxes described in
Section 11 by withholding shares of Stock from the shares otherwise due, on the
Original Issuance Date, to you under this Award, (2) not to permit you to enter
into a “same day sale” commitment with a broker-dealer pursuant to Section 11 of
this Agreement (including but not limited to a commitment under a 10b5-1 Plan)
and (3) not to permit you to pay the Withholding Taxes in cash or from other
compensation, then the shares that would otherwise be issued to you on the
Original Issuance Date will not be delivered on such Original Issuance Date and
will instead be delivered on the first business day when you are not prohibited
from selling shares of the Company’s Stock in the open public market, but in no
event later than December 31 of the calendar year in which the Original Issuance
Date occurs (that is, the last day of your taxable year in which the Original
Issuance Date occurs), or, if and only if permitted in a manner that complies
with Treasury Regulation Section 1.409A-1(b)(4), no later than the date that is
the 15th day of the third calendar month of the year following the year in which
the shares of Stock under this Award are no longer subject to a “substantial
risk of forfeiture” within the meaning of Treasury Regulation Section
1.409A-1(d). The form of delivery of the Shares in respect of your Award (e.g.,
a stock certificate or electronic entry evidencing such shares) will be
determined by the Company.

7.Dividends. You will receive no Dividend Equivalent Rights or other benefit or
adjustment to your Award with respect to any cash dividend, stock dividend or
other distribution that does not result from a adjustment for changes in capital
structure described in Section 4.4 of the Plan; provided, however, that this
sentence will not apply with respect to any shares of Stock that are delivered
to you in connection with your Award after such shares have been delivered to
you.

8.Restrictive Legends. The Stock issued with respect to your Stock Units will be
endorsed with appropriate legends, if any, as determined by the Company.

9.Award not a Service Contract. Your Award is not an employment or service
contract, and nothing in your Award will be deemed to create in any way
whatsoever any obligation on your part to continue in the employ or service of
any Participating Company or on the part of any Participating Company to
continue your employment or service. In addition, nothing in your Award will
obligate any Participating Company, their respective shareholders, boards of
directors, officers or employees to continue any relationship that you might
have as an Employee, Director or Consultant for any Participating Company.

10.280G Best After Tax. If any payment or benefit you would receive from the
Company or any other Participating Company or otherwise in connection with a
Change in Control or other similar transaction (a “280G Payment”) would (i)
constitute a “parachute payment” within the meaning of Section 280G of the Code,
and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”)
shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x)
the largest portion of the Payment that would result in no portion of the
Payment (after reduction) being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment, whichever amount (i.e.,
the amount determined by clause (x) or by clause (y)), after taking into account
all applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results in
your receipt, on an after-tax basis, of the greater economic benefit
notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax. If a reduction in a Payment is required pursuant to the preceding
sentence and the Reduced Amount is determined pursuant to clause (x) of the
preceding sentence, the reduction shall occur in the manner (the “Reduction
Method”) that results in the greatest economic benefit for you. If more than one

--------------------------------------------------------------------------------

method of reduction will result in the same economic benefit, the items so
reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

Notwithstanding the foregoing, if the Reduction Method or the Pro Rata Reduction
Method would result in any portion of the Payment being subject to taxes
pursuant to Section 409A of the Code that would not otherwise be subject to
taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the
Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid
the imposition of taxes pursuant to Section 409A of the Code as follows: (A) as
a first priority, the modification shall preserve to the greatest extent
possible, the greatest economic benefit for you as determined on an after-tax
basis; (B) as a second priority, Payments that are contingent on future events
(e.g., being terminated without cause), shall be reduced (or eliminated) before
Payments that are not contingent on future events; and (C) as a third priority,
Payments that are “deferred compensation” within the meaning of Section 409A of
the Code shall be reduced (or eliminated) before Payments that are not deferred
compensation within the meaning of Section 409A of the Code.

Unless you and the Company agree on an alternative accounting firm, the
accounting firm engaged by the Company for general tax compliance purposes as of
the day prior to the effective date of the change of control transaction
triggering the Payment shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor
for the individual, entity or group effecting the change of control transaction,
the Company shall appoint a nationally recognized accounting firm to make the
determinations required hereunder. The Company shall bear all expenses with
respect to the determinations by such accounting firm required to be made
hereunder. The Company shall use commercially reasonable efforts to cause the
accounting firm engaged to make the determinations hereunder to provide its
calculations, together with detailed supporting documentation, to you and the
Company within fifteen (15) calendar days after the date on which your right to
a 280G Payment becomes reasonably likely to occur (if requested at that time by
you or the Company) or such other time as requested by you or the Company.

If you receive a Payment for which the Reduced Amount was determined pursuant to
clause (x) of the first paragraph of this Section 10 and the Internal Revenue
Service determines thereafter that some portion of the Payment is subject to the
Excise Tax, you shall promptly return to the Company a sufficient amount of the
Payment (after reduction pursuant to clause (x) of the first paragraph of this
Section so that no portion of the remaining Payment is subject to the Excise
Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant
to clause (y) in the first paragraph of this Section 10, you shall have no
obligation to return any portion of the Payment pursuant to the preceding
sentence.

11.Withholding Obligations.

(a)On each vesting date, and on or before the time you receive a distribution of
the shares in respect of your Stock Units, and at any other time as reasonably
requested by the Company or any applicable Participating Company in accordance
with applicable tax laws, you hereby authorize any required withholdings from
the shares of Stock issuable to you and/or otherwise agree to make adequate
provision, including in cash, for any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of any applicable
Participating Company that arise in connection with your Award (the “Withholding
Taxes”). Specifically, any applicable Participating Company may, in its sole
discretion, satisfy all or any portion of the Withholding Taxes relating to your
Award by any of the following means or by a combination of such means: (i)
withholding from any compensation otherwise payable to you by the Participating
Company; (ii) causing you to tender a cash payment; (iii) permitting or
requiring you to enter into a “same day sale” commitment with a broker-dealer
that is a member of the Financial Industry Regulatory

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Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of
the shares to be delivered in connection with your Stock Units to satisfy the
Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward
the proceeds necessary to satisfy the Withholding Taxes directly to the
applicable Participating Company; or (iv) withholding shares of Stock from the
shares of Stock issued or otherwise issuable to you in connection with your
Stock Units with a Fair Market Value (measured as of the date shares of Stock
are issued to you) equal to the amount of such Withholding Taxes; provided,
however, that the number of such shares of Stock so withheld will not exceed the
amount necessary to satisfy the applicable Participating Company’s required tax
withholding obligations using the minimum statutory withholding rates for
federal, state, local and, if applicable, foreign tax purposes, including
payroll taxes, that are applicable to supplemental taxable income; and provided
further, that to the extent necessary to qualify for an exemption from
application of Section 16(b) of the Exchange Act, such share withholding
procedure shall be subject to the express prior approval of the Committee.

(b)Unless all applicable Withholding Taxes are satisfied, the Company will have
no obligation to deliver to you any Stock or other consideration pursuant to
this Award.

(c)In the event a Participating Company’s obligation to withhold arises prior to
the delivery to you of Stock or it is determined after the delivery of Stock to
you that the amount of the Participating Company’s withholding obligation was
greater than the amount withheld by the Participating Company, you agree to
indemnify and hold the all Participating Companies harmless from any failure by
such Participating Company to withhold the proper amount.

12.Unsecured Obligation. Your Award is unfunded, and as a holder of vested Stock
Units, you will be considered an unsecured creditor of the Company with respect
to the Company’s obligation, if any, to issue shares or other property pursuant
to this Award Agreement. You will not have voting or any other rights as a
shareholder of the Company with respect to the shares to be issued pursuant to
this Award Agreement until such shares are issued to you. Upon such issuance,
you will obtain full voting and other rights as a shareholder of the Company.
Nothing contained in this Award Agreement, and no action taken pursuant to its
provisions, will create or be construed to create a trust of any kind or a
fiduciary relationship between you and the Company, any other Participating
Company or any other person.

13.Other Documents. You hereby acknowledge receipt of and the right to receive a
document providing the information required by Rule 428(b)(1) promulgated under
the Securities Act, which includes the Plan prospectus. In addition, you
acknowledge receipt of the Trading Compliance Policy in effect from time to
time.

14.Notices. Any notices provided for in this Award Agreement or the Plan will be
given in writing (including electronically) and will be deemed effectively given
upon receipt or, in the case of notices delivered by mail by the Company to you,
five days after deposit in the United States mail, postage prepaid, addressed to
you at the last address you provided to the Company. Notwithstanding the
foregoing, the Company may, in its sole discretion, decide to deliver any
documents related to participation in the Plan and this Award by electronic
means or to request your consent to participate in the Plan by electronic means.
By accepting this Award, you consent to receive such documents by electronic
delivery and to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by
the Company.

15.Governing Plan Document. Your Award is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your Award, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to

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the Plan. In addition, your Award will be subject to recoupment in accordance
with any clawback policy that the Company has adopted or any clawback policy
that the Company is required to adopt pursuant to the listing standards of any
national securities exchange or association on which the Company’s securities
are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. No recovery of compensation
under such a clawback policy will be an event giving rise to a right to resign
for “good reason” or “constructive termination” (or similar term) under any plan
of or agreement with the Company or any Participating Company. Except as
expressly provided in this Award Agreement, in the event of any conflict between
the provisions of your Award and those of the Plan, the provisions of the Plan
will control.

16.Severability. If all or any part of this Award Agreement or the Plan is
declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity will not invalidate any portion of this Award
Agreement or the Plan not declared to be unlawful or invalid. Any Section of
this Award Agreement (or part of such a Section) so declared to be unlawful or
invalid will, if possible, be construed in a manner which will give effect to
the terms of such Section or part of a Section to the fullest extent possible
while remaining lawful and valid.

17.Effect on Other Employee Benefit Plans. The value of the Award subject to
this Award Agreement will not be included as compensation, earnings, salaries,
or other similar terms used when calculating employee benefits under any
employee benefit plan sponsored by the Company or any Participating Company,
except as such plan otherwise expressly provides. The Company and each
Participating Company expressly reserves its rights to amend, modify, or
terminate any of the Company’s or any Participating Company’s employee benefit
plans.

18.Amendment. Any amendment to this Award Agreement must be in writing, signed
by a duly authorized representative of the Company. Notwithstanding the
foregoing, this Agreement may be amended solely by the Committee by a writing
which specifically states that it is amending this Award Agreement, so long as a
copy of such amendment is delivered to you, and provided that no such amendment
adversely affecting your rights hereunder may be made without your written
consent. Without limiting the foregoing, the Company reserves the right to amend
this Award Agreement in any way it may deem necessary or advisable to carry out
the purpose of the grant as a result of any change in applicable laws or
regulations or any future law, regulation, interpretation, ruling, or judicial
decision.

19.Compliance with Section 409A of the Code. To the maximum extent possible,
this Award is intended to be exempt from the application of Section 409A of the
Code, including but not limited to by reason of complying with the “short-term
deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and any
ambiguities herein shall be interpreted accordingly. However, if this Award
fails to satisfy the requirements of the short-term deferral rule and is
otherwise not exempt from, and therefore deemed to be deferred compensation
subject to, Section 409A of the Code, this Award shall comply with Section 409A
of the Code to the extent necessary to avoid adverse personal tax consequences
and any ambiguities herein shall be interpreted accordingly. To the extent this
Award is subject to Section 409A of the Code and if you are a “Specified
Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as
of the date of your separation from service (within the meaning of Treasury
Regulation Section 1.409A-1(h)), then the issuance of any shares that would
otherwise be made upon the date of the separation from service or within the
first six months thereafter will not be made on the originally scheduled dates
and will instead be issued in a lump sum on the earlier of: (i) the fifth
business day following your death, or (ii) the date that is six months and one
day after the date of the separation from service, with the balance of the
shares issued thereafter in accordance with the original vesting and issuance
schedule set forth above, but if and only if such delay in the issuance of the
shares is necessary to avoid the imposition of taxation on you in respect of

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the shares under Section 409A of the Code. Each installment of shares that vests
is a “separate payment” for purposes of Treasury Regulation Section
1.409A-2(b)(2).

20.No Obligation to Minimize Taxes. Neither the Company nor any other
Participating Company has any duty or obligation to minimize the tax
consequences to you of this Award and neither the Company nor any Participating
Company will be liable to you for any adverse tax consequences to you arising in
connection with this Award. You are hereby advised to consult with your own
personal tax, financial and/or legal advisors regarding the tax consequences of
this Award and by signing the Grant Notice, you have agreed that you have done
so or knowingly and voluntarily declined to do so.

21.Miscellaneous.

(a)The rights and obligations of the Company under your Award will be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder will inure to the benefit of, and be enforceable by the
Company’s successors and assigns.

(b)You agree upon request to execute any further documents or instruments
necessary or desirable in the sole determination of the Company to carry out the
purposes or intent of your Award.

(c)You acknowledge and agree that you have reviewed your Award in its entirety,
have had an opportunity to obtain the advice of counsel prior to executing and
accepting your Award, and fully understand all provisions of your Award.

(d)This Award Agreement will be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

(e)All obligations of the Company under the Plan and this Award Agreement will
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.

*    *    *
This Restricted Stock Unit Award Agreement will be deemed to be accepted by you
upon your acceptance of the Restricted Stock Unit Award Grant Notice to which it
is attached

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PICO Holdings, Inc.
Restricted Stock Unit Award Deferral Election Form
(For Awards Granted in 2015)

Please complete this Election Form and return a signed copy to [Name], [Title]
of PICO Holdings, Inc. (the “Company” or “PICO”) no later than 5:00 p.m. Pacific
Time on December 31, 2014 (the “Election Deadline”).

The Board of Directors (the “Board”) of PICO Holdings, Inc. (the “Company” or
“PICO”) has decided to permit you to make an irrevocable election to defer
receipt of all (but not less than all) of the shares that may vest under any
Restricted Stock Unit Award granted to you in 2015 (the “RSU Award”). The RSU
Award will be subject to the terms of the Company’s 2014 Equity Incentive Plan
(the “2014 Plan”) and its forms of Restricted Stock Unit Grant Notice and
Restricted Stock Unit Agreement (together, the “Award Agreement”).
 

I, _________________________, hereby make the following election with respect to
my RSU Award:
No Deferral. I hereby elect to be issued all of the shares that vest under my
RSU Award as and when they become vested, in accordance with the terms of the
applicable Award Agreement and the 2014 Plan.
Deferral. I hereby elect to be issued all of the shares that vest under my RSU
Award on the earliest to occur of the following dates/events:
•
On ______________ (Date, Month) of the following calendar year: _______(Year)

◦
(Date selected must be no earlier than January 1, [______]1 and no later than
[___, _________]2).

•
The 5th business day after my “separation from service” (as defined under
Treasury Regulation Section 1.409A-1(h)) for any reason, including by reason of
death, disability, resignation or retirement. However, if I am a “specified
employee” (as defined under Treasury Regulation Section 1.409A-1(i)) as of the
date of my separation from service, then the vested shares will be issued on the
earlier of (i) the 5th business day after the date of my death and (ii) the date
that is 6 months and one day after my separation from service.

 
•
A Change in Control (as defined in the 2014 Plan) that also constitutes a
“change in the ownership or effective control of the corporation”, or a “change
in the ownership of a substantial portion of the assets of the corporation” with
respect to the Company in each case within the meaning of Treasury Regulation
Section 1.409A-3(i)(5).

                                                      

1 Minimum deferral date should be first calendar year following the last year in
which the RSU is fully vested.
2 Maximum deferral date should be set at not more than 5 years following the
grant date (or anticipated grant date).

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This deferral election is intended to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and the regulations and other
guidance promulgated thereunder. Notwithstanding any deferral election made
herein, as described in Section 6 of the Award Agreement, the distribution of
vested shares may be delayed as provided therein, but only if and to the extent
such further delay is permissible without penalty under Section 409A of the Code
and the regulations and other guidance promulgated thereunder. In addition, the
Company reserves the right to terminate this deferral election at any time to
the extent permitted by Section 409A of the Code and the regulations and other
guidance promulgated thereunder, in which case, any vested shares of common
stock granted pursuant to the RSU Award may be issued immediately.
This Election Form shall be construed and administered according to the laws of
the State of California, without regard to its conflicts of laws principles.
By completing and executing this Election Form, I authorize the Company to defer
or not defer, as indicated, the issuance of the vested shares subject to the RSU
Award. I acknowledge that the Company has not made any representations to me
concerning the future performance of the Company’s common stock. Further, I have
not relied upon advice from the Company in making my election. By executing this
Election Form, I acknowledge my understanding of and agreement with all the
terms and provisions set forth herein.
I understand that the Election Deadline is December 31, 2014, and that after
such deadline this election shall be irrevocable (i.e., after such deadline, I
cannot withdraw or change this election). This election is effective only if
received by [____________] on or before 5:00 p.m., Pacific Time, on December 31,
2014.
 
 
 
Signature of Participant    
 
Date