Exhibit 10.4

PICO HOLDINGS, INC.

RESTRICTED STOCK UNITS AGREEMENT

PICO Holdings, Inc. has granted to the Participant named in the Notice of Grant
of Restricted Stock Units (the “Grant Notice”) to which this Restricted Stock
Units Agreement (the “Agreement”) is attached an Award consisting of Restricted
Stock Units (the “Units”) subject to the terms and conditions set forth in the
Grant Notice and this Agreement. The Award has been granted pursuant to and
shall in all respects be subject to the terms conditions of the PICO Holdings,
Inc. 2005 long-Term Incentive Plan, as amended to the Grant Date, the provisions
of which are incorporated herein by reference (the “Plan”). By signing the Grant
Notice, the Participant: (a) acknowledges receipt of and represents that the
Participant has read and is familiar with the Grant Notice, this Agreement, the
Plan and a prospectus for the Plan prepared in connection with the registration
with the United States Securities and Exchange Commission of the shares issuable
pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to
all of the terms and conditions of the Grant Notice, this Agreement and the
Plan, and (c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Grant
Notice, this Agreement or the Plan.

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have
the meanings assigned in the Grant Notice or the Plan.

1.2 Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of this
Agreement. 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.

2. ADMINISTRATION.

All questions of interpretation concerning the Grant Notice, this Agreement and
the Plan shall be determined by the Committee. All determinations by the
Committee shall be final and binding upon all persons having an interest in the
Award as provided by the Plan. Any Officer shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, or election
which is the responsibility of or which is allocated to the Company herein,
provided the Officer has apparent authority with respect to such matter, right,
obligation, or election.

3. THE AWARD.

3.1 Grant of Units. On the Grant Date, the Participant shall acquire, subject to
the provisions of this Agreement, the Number of Restricted Stock Units set forth
in the Grant Notice, subject to adjustment as provided in Section 9. Each Unit
represents a right to receive on a date determined in accordance with the Grant
Notice and this Agreement one (1) share of Stock.

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3.2 No Monetary Payment Required. The Participant is not required to make any
monetary payment (other than applicable tax withholding, if any) as a condition
to receiving the Units or shares of Stock issued upon settlement of the Units,
the consideration for which shall be past services actually rendered and/or
future services to be 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 Units.

4. VESTING OF UNITS.

4.1 Normal Vesting. The Units shall vest and become Vested Units as provided in
the Grant Notice. In the event that a vesting date as provided by the Grant
Notice (an “Original Vesting date”) would occur on a date on which a sale by the
Participant of the shares to be issued in settlement of the Units becoming
Vested Units on such Original Vesting date would violate the Insider trading
policy of the Company, such vesting date shall be deferred until the first to
occur of (a) the next business day on which a sale by the Participant of such
shares would not violate the Insider Trading policy or (b) the later of (i) the
last day of the calendar year in which the Original Vesting date occurred or
(ii) the last day of the Company’s taxable year in which the Original Vesting
date occurred.

4.2 Acceleration of Vesting Upon a Change in Control. Subject to Section 4.3, in
the event of a Change in Control, the vesting of the Units shall be accelerated
in full and the total number of Units shall be deemed Vested Units effective as
of the date of the Change in Control.

4.3 Federal Excise Tax Under Section 4999 of the Code.

(a) Excess Parachute Payment. In the event that any acceleration of vesting
pursuant to this Agreement and any other payment or benefit received or to be
received by the 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, unless otherwise provided in the Participant’s
employment agreement, the amount of any acceleration of vesting called for under
this Agreement shall not exceed the amount which produces the greatest after-tax
benefit to the Participant.

(b) Determination by Independent Accountants. Upon the occurrence of any event
that might reasonably be anticipated to give rise to the acceleration of vesting
under Section 4.2 (an “Event”), the Company shall promptly request a
determination in writing by independent public accountants selected by the
Company (the “Accountants”). Unless the Company and the Participant otherwise
agree in writing, the Accountants shall determine and report to the Company and
the Participant within twenty (20) days of the date of the Event 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 Accountants 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

 

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Accountants such information and documents as the Accountants may reasonably
request in order to make their required determination. The Company shall bear
all fees and expenses the Accountants may reasonably charge in connection with
their services contemplated by this Section 4.3(b).

5. COMPANY REACQUISITION RIGHT.

5.1 Grant of Company Reacquisition Right. Except to the extent otherwise
provided in an employment agreement between a Participating Company and the
Participant, in the event that the Participant’s Service terminates for any
reason or no reason, with or without cause, the Participant shall forfeit and
the Company shall automatically reacquire all Units which are not, as of the
time of such termination, Vested Units (“Unvested Units”), and the Participant
shall not be entitled to any payment therefor (the “Company Reacquisition
Right”).

5.2 Ownership Change Event, Dividends, Distributions and Adjustments. Upon the
occurrence of 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 stockholders of the Company of more than fifty
percent (50%) of the voting stock of the Company; (ii) a merger or consolidation
in which the Company is a party; or (iii) the sale, exchange, or transfer of 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 (the”Ownership Change
Event”), a dividend or distribution to the stockholders of the Company paid in
shares of Stock or other property, or any other adjustment upon a change in the
capital structure of the Company as described in Section 4.4 of the Plan, any
and all new, substituted or additional securities or other property (other than
regular, periodic dividends paid on Stock pursuant to the Company’s dividend
policy) to which the Participant is entitled by reason of the Participant’s
ownership of Unvested Units shall be immediately subject to the Company
Reacquisition Right and included in the terms “Units” and “Unvested Units” for
all purposes of the Company Reacquisition Right with the same force and effect
as the Unvested Units immediately prior to the Ownership Change Event, dividend,
distribution or adjustment, as the case may be. For purposes of determining the
number of Vested Units following an Ownership Change Event, dividend,
distribution or adjustment, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after any such event.

6. SETTLEMENT OF THE AWARD.

6.1 Issuance of Shares of Stock. Subject to the provisions of Section 6.3 below,
the Company shall issue to the Participant on the Settlement Date, with respect
to each Vested Unit to be settled on such date, one (1) share of Stock. Shares
of Stock issued in settlement of Units shall not be subject to any restriction
on transfer other than any such restriction as may be required pursuant to the
Company’s Insider trading policy.

6.2 Beneficial Ownership of Shares; Certificate Registration. The Participant
hereby authorizes the Company, in its sole discretion, to deposit for the
benefit of the Participant with any broker with which the Participant has an
account relationship of which the Company has notice any or all shares acquired
by the Participant pursuant to the settlement of the Award. Except as provided
by the preceding sentence, a certificate for the shares as to which the Award is
settled shall be registered in the name of the Participant, or, if applicable,
in the names of the heirs of the Participant.

 

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6.3 Restrictions on Grant of the Award and Issuance of Shares. The grant of the
Award and issuance of shares of Stock upon settlement of the Award shall be
subject to compliance with all applicable requirements of federal, state or
foreign law with respect to such securities. No shares of Stock may be issued
hereunder if the issuance of such shares would constitute a violation of any
applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock
may then be listed. 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 of any shares subject to the
Award shall relieve the Company of any liability in respect of the failure to
issue such shares as to which such requisite authority shall not have been
obtained. As a condition to the settlement of the Award, 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.

6.4 Fractional Shares. The Company shall not be required to issue fractional
shares upon the settlement of the Award.

7. TAX WITHHOLDING.

7.1 In General. At the time the Grant Notice is executed, or at any time
thereafter as requested by a Participating Company, the Participant hereby
authorizes withholding from payroll and any other amounts payable to the
Participant, and otherwise agrees to make adequate provision for, any sums
required to satisfy the federal, state, local and foreign tax (including any
social insurance) withholding obligations of the Participating Company, if any,
which arise in connection with the Award, the vesting of Units or the issuance
of shares of Stock in settlement thereof. The Company shall have no obligation
to deliver shares of Stock until the tax withholding obligations of the Company
have been satisfied by the Participant.

7.2 Assignment of Sale Proceeds; Payment of Tax Withholding by Check. Subject to
compliance with applicable law and the Company’s Insider Trading policy, the
Company may permit the Participant to satisfy the Participating Company’s tax
withholding obligations in accordance with procedures established by the Company
providing for either (i) delivery by the Participant to the Company or a broker
approved by the Company of properly executed instructions, in a form approved by
the Company, providing for the assignment to the Company of the proceeds of a
sale with respect to some or all of the shares being acquired upon settlement of
Units, or (ii) payment by check. The Participant shall deliver written notice of
any such permitted election to the Company on a form specified by the Company
for this purpose at least thirty (30) days (or such other period established by
the Company) prior to such Settlement Date. If the Participant elects payment by
check, the Participant agrees to deliver a check for the full amount of the
required tax withholding to the applicable Participating Company on or before
the third business day following the Settlement Date. If the Participant elects
to payment by check but fails to make such payment as required by the preceding
sentence, the Company is

 

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hereby authorized, at its discretion, to satisfy the tax withholding obligations
through any means authorized by this Section 7, including by directing a sale
for the account of the Participant of some or all of the shares being acquired
upon settlement of Units from which the required taxes shall be withheld, by
withholding from payroll and any other amounts payable to the Participant or by
withholding shares in accordance with Section 7.3.

7.3 Withholding in Shares. The Participant may elect to satisfy all or any
portion of a Participating Company’s tax withholding obligations by requesting
that the Company deduct from the shares of Stock otherwise deliverable to the
Participant in settlement of the Award a number of whole shares having a fair
market value, as determined by the Company as of the date on which the tax
withholding obligations arise, not in excess of the amount of such tax
withholding obligations determined by the applicable minimum statutory
withholding rates.

8. [RESERVED].

9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

Subject to any required action by the stockholders of the Company and the
requirements of Section 409A 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 stockholders of the Company in a
form other than Stock (excepting normal 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 of Units subject to the
Award and/or the number and kind of shares to be issued in settlement of the
Award, in order to prevent dilution or enlargement of the Participant’s rights
under the Award. 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.” Any fractional share resulting from an adjustment
pursuant to this Section shall be rounded down to the nearest whole number. Such
adjustments shall be determined by the Committee, and its determination shall be
final, binding and conclusive.

10. RIGHTS AS A STOCKHOLDER OR EMPLOYEE.

The Participant shall have no rights as a stockholder with respect to any shares
which may be issued in settlement of this Award until the date of the issuance
of a certificate for 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 certificate is issued, except as
provided in Section 9. If the Participant is an Employee, the Participant
understands and acknowledges that, except as otherwise provided in a separate,
written employment agreement between a Participating Company and the
Participant, the Participant’s employment is “at will” and is for no specified
term. Nothing in this Agreement shall confer upon the Participant any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Participant’s
Service at any time.

 

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11. LEGENDS.

The Company may at any time place legends referencing any applicable federal,
state or foreign securities law restrictions on all certificates representing
shares of stock issued pursuant to this Agreement. The Participant shall, at the
request of the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to this Award in the possession of the
Participant in order to carry out the provisions of this Section.

12. MISCELLANEOUS PROVISIONS.

12.1 Termination or Amendment. The Committee may terminate or amend the Plan or
this Agreement at any time; provided, however, that except as provided in
Section 8 in connection with a Change in Control, no such termination or
amendment may adversely affect the Participant’s rights under this Agreement
without the consent of the Participant unless such termination or amendment is
necessary to comply with applicable law or government regulation, including, but
not limited to, Section 409A. No amendment or addition to this Agreement shall
be effective unless in writing.

12.2 Nontransferability of the Award. Prior to the issuance of shares of Stock
on the applicable Settlement Date, neither this Award nor any Units subject to
this 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 the Award
shall be exercisable during the Participant’s lifetime only by the Participant
or the Participant’s guardian or legal representative.

12.3 Further Instruments. The parties hereto agree to execute such further
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.

12.4 Binding Effect. This Agreement shall inure to the benefit of the successors
and assigns of the Company and, subject to the restrictions on transfer set
forth herein, be binding upon the Participant and the Participant’s heirs,
executors, administrators, successors and assigns.

12.5 Delivery of Documents and Notices. Any document relating to participation
in the Plan or any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Agreement provides for effectiveness only upon actual receipt of such notice)
upon personal delivery, electronic delivery at the e-mail address, if any,
provided for the Participant by a Participating Company, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or
with a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address shown below that party’s
signature to the Grant Notice or at such other address as such party may
designate in writing from time to time to the other party.

(a) Description of Electronic Delivery. The Plan documents, which may include
but do not necessarily include: the Plan, the Grant Notice, this Agreement, the
Plan Prospectus, and any reports of the Company provided generally to the
Company’s stockholders, may be delivered to the Participant electronically. In
addition, the Participant may deliver electronically the Grant Notice to the
Company or to such third party involved in administering the Plan as the Company
may designate from time to time. Such means of electronic delivery may include
but do not necessarily include the delivery of a link to a Company intranet or
the Internet site of a third party involved in administering the Plan, the
delivery of the document via e-mail or such other means of electronic delivery
specified by the Company.

 

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(b) Consent to Electronic Delivery. The Participant acknowledges that the
Participant has read Section 12.5(a). of this Agreement and consents to the
electronic delivery of the Plan documents and Grant Notice, as described in
Section 12.5(a). The Participant acknowledges that he or she may receive from
the Company a paper copy of any documents delivered electronically at no cost to
the Participant by contacting the Company by telephone or in writing. The
Participant further acknowledges that the Participant will be provided with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. Similarly, the Participant understands that the Participant
must provide the Company or any designated third party administrator with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. The Participant may revoke his or her consent to the electronic
delivery of documents described in Section 12.5(a) or may change the electronic
mail address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or
electronic mail. Finally, the Participant understands that he or she is not
required to consent to electronic delivery of documents described in
Section 12.5(a)

12.6 Integrated Agreement. The Grant Notice, this Agreement and the Plan,
together with any employment, service or other agreement between the Participant
and a Participating Company referring to the Award, shall constitute the entire
understanding and agreement of the Participant and the Participating Company
Group with respect to the subject matter contained herein or therein and
supersede any prior agreements, understandings, restrictions, representations,
or warranties among the Participant and the Participating Company Group with
respect to such subject matter other than those as set forth or provided for
herein or therein. To the extent contemplated herein or therein, the provisions
of the Grant Notice, this Agreement and the Plan shall survive any settlement of
the Award and shall remain in full force and effect.

12.7 Applicable Law. This Agreement shall be governed by the laws of the State
of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.

12.8 Counterparts. The Grant Notice may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

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